1. Management Civil I
Module 6 – Cash Flows

2. CASH FLOW STATEMENTS A DOCUMENT WHICH MODELS THE FLOW OF MONEY
INTO AND OUT OF THE PROJECT
THE TIME FRAME IS USUALLY MONTHLY
THE SAME INFO IS USED IN THE BANK STATEMENT
THEIR COULD BE DIFFERENT ACCOUNTS (IE WAGES)

3. We use a cash flow statement in a tabular format to produce the cash flow statement
CASH FLOW ITEMS
JAN
FEB
MARCH
APRIL
MAY
JUNE
BRUGHT FORWARD
INCOME
TOTAL AVAILABLE
TOTAL EXPENSES
COSTING BALANCE

4. Using the following info we create the cash flow statement from Jan to June
JAN BROUGHT FORWARD R 5000
SALES EACH UNIT CLIENT TAKES 2 MONTHS TO PAY
NOV 1000units MAR 500units
DEC 1500units APR 1200units
JAN 1600units MAY 1300units
FEB 900units JUN 1400units
COST OF SALES
1 OVERHEADS R 300 / MONTH
2 MATERIALS R2 /UNIT SUPPLIER GIVES ONE MONTH CREDIT
3 LABOUR R1 /UNIT PAID ON MONTH OF USE
4 LOAN REPAYMENT FEB R14000
APRIL R16000
MAY R15000
JUNE R2000

5. STEPS TO FOLLOW FOR JANUARY
JAN BALANCE IS PUT INTO B/F SECTION
JAN INCOME FROM NOV DUE TO 2 MONTH DELAY IN
CLIENT PAYMENT (1000 *10)= EXPENSES
OVERHEADS = R300
USE DEC UNITS FOR JAN AS SUPPLIER GIVES 1 MONTH CREDIT R1500*2=3000
LABOUR OCCURS THE SAME MONTH 1600*1 =1600
LOAN ONLY STARTS IN FEB
FILL IN ALL COLUMNS USING THE SAME METHOD
CLOSING BALANCE = TOTAL AVAILABLE –TOTAL EXPENSES
SOMETIMES WE HAVE A –VE BALANCE WHICH IS PLACED IN BRACKETS

6. CASH FLOW ITEMS
JAN
FEB
MARCH
APRIL
MAY
JUNE
BRUGHT FORWARD
 5000
 10100
 6700
 20100
 10600
[ 3400]
INCOME
 10000
 15000
16000 
9000 
 12000
TOTAL AVAILABLE
15000 
 25100
 22700
 29100
 15600
 8600
EXPENSES : Overheads
 300
Material R2 / unit
 3000
3200
1800 
 1000
 2400
 2600
Labour R 1 / unit
 1600
900
 500
 1200
 1300
 1400
Loan Payments  0
 14000
 16000
 2000
TOTAL EXPENSES
4900 
 18400
 18500
 19000
 6300
COSTING BALANCE
[3400]
 2300

7. EXERCISE 2
FOR A CONTRACT THE CURRENT INTEREST RATE ON BORROWED CAPTIAL IS 14%
PROFIT MARGIN IS 8% OF THE CONTRACT VALUE
RETENTION IS 10%
THERE IS A ONE MONTH DELAY IN PAYMENT
RETENTION MONEY IS PAID BACK 6 MONTHS AFTER CONTRACT COMPLETION
MONTH 1 2 3 4 5 6 7 8 9
VALUE
3000
4000
6000
8000
2000

8. THE FOLLOWING HEADINGS ARE USED IN THE CASH FLOW TABLE
MONTH 1 2 3 4 5 6 7 8 9 10 11 12
BALANCE BF
INCOME
COST
RETENTION
CUMM RET
BALANCE
INTEREST DB CR
AMOUNT IN BANK

9. MONTH 1
MONTH 1
BALANCE BF
INCOME
COS
2778
RETENTION
CUMM RET
BALANCE
(2778)
INTEREST DB 32 CR
AMOUNT IN BANK
[2810]
THERE IS NO BALANCE BF AT THE START OF THE CONTRACT
NO INCOME DUE TO ONE MONTH DELAY
COST = VALUE/1.08 IE SUBTRACTING THE PROFIT
INTEREST IS 14% OF DEBT /12 =R32
AMOUNT IN BANK IS –VE HENCE IN
BRACKETS

10. MONTH2 2 [2810] We carry the value from month 1 forward [2810] 3000
We use the cost of month / 1.08= 2778
We use ret from income =300
We use the income from month
1 due to 1 month delay
Balance is [ B BF + COS +RET]
- INCOME = 2888
We add the interest which is
-ve due to the overdraft
We take the [ 2922] forward to month 3
MONTH 2
BALANCE BF
[2810]
INCOME
3000
COS
(2778)
RETENTION
(300)
CUMM RET
BALANCE
[2888]
INTEREST DB 34 CR
AMOUNT IN BANK
[2922]

11. Retention We do all the months in the same manner
As we are getting back the retention
We keep the project account open until month 16
And then we add the retention

12. Month 1 2 3 4 10 16
B/Bfwd
[2810]
[2922]
[3972]
[3491]
[1711]
Value
3000
4000
6000
Cost
[2778]
[3704]
[5556]
Payment rec
2000
Retention deducted
[300]
[400]
[200]
Retention released
4400
Cumulative ret
600
1000
Nett payment rec
Total Cost
[2888]
[3926]
[5928]
[1691]
Total
Interest DB
[32]
[34]
[46]
[69]
[20]
  CR
Cash in bank
[5997]
2689

13. CASH FLOW EXAMPLE GIVEN COST
MONTH 1 2 3 4 5
COST
1600
2600
6900
4730
1550
10% RETENTION TO AMAX OF 4% CONTRACT VALUE PAID BACK 2 MONTHS AFTER COMPLETION
4%=
PROFIT =12%
DELAY IN PAYMENT = 30 DAYS
INTREST 11% DB 10% CR
Payment received 1 month after sales

14. Month 1 2 3 4 5 6 8
B/Bfwd
1170.0
Value
1792
2912
7728
5297.6
1736
Cost
-1600
-2600
-6900
-4730
-1550
Payment rec
Retention deducted
-179.2
-291.2
Retention released
778.62
Cumulative ret
179.2
470.4
Nett payment rec
Total Cost
Total
-570.3
1160.4
Interest DB
-14.67
-23.85
-63.29
-39.2
-5.23
  CR
9.67
Cash in bank
1948.6