As part of our ongoing Customer Knowledge Share series, we gathered participants from BJC Healthcare, Mercy Health, Cleveland Clinic, CommonSpirit Health, and UCSF Benioff Children’s Hospital to talk about how they’re using Projecto’s cash flow module to simplify their cash flow predictions.
Here’s what they had to say.
How does your organization prepare its cash flow models and schedules?
“We generally use the standard cash flow model and then rely on our project management team to make sure the data is always up to date in Projecto, and together they get us really close.”
“We have several different cash flow models to choose from in Projecto. A lot of times we use the bell curve or increase-decrease. There are several others that we don't use as often. The nice thing is that you can use each of these models for individual types of spending if it needs to be more specific than for the entire project.”
“Cash flow is more of an art and less science or accounting. I’ve been around construction, cash flows, and finance my entire career, and it’s a hard thing to teach. Sometimes companies are not going to bill on time, they're not going to get their invoicing in when they think they are, or they're not going to get as far ahead in the build. There's an art to pushing the schedule out or saying, ‘No, the dollars aren't going to come then; they're going to come later.’ And that's a part of the marriage, if you will, between the project management side and the finance side. It's not all just math.”
What level of accuracy do you try to achieve with your cash flow forecast?
“We're definitely trying to get it as close and as accurate as we can, but if it's off by 1% out of $200 million, I don't think we're going to worry too much. But we don't want it to become that we're 5-10% off because that’s obviously more significant. We're not checking to make sure we're down to the exact dollar; we're somewhere in the middle with that.”
“We try to forecast as accurately as possible. We do look at the detail on all of the individual cash flow reports before we export and send them out to our leaders. However, sometimes you’ve got to let it go a little bit. We look at managing the cash flow as the sum of its parts. We report on more of a spreadsheet on an overall project level when we're reporting to our leaders. They don't want to see all that individual detailed data.”
How often do you forecast and how often do you report the forecast?
“We run the cash flow readiness report on a monthly basis. We use this to identify if there are any errors on individual projects that would keep it from either being included in the project or from forecasting correctly. The errors we see most often are when the project spend is projected to be more than the budget amount, there's been no schedule input into Projecto by the project manager, or there's no estimate for the complete amount.”
“We would like to generate reports on a monthly basis. The frequency of reporting is something that we go back and forth about. We historically have tried to report on a quarterly basis, but obviously there's a lot more emphasis on cash flow within our organization. So, I think we are definitely trending more towards wanting to do this on a monthly basis.”
“The biggest thing that we use the cash flow model for is informing our long-term forecast and spend. We're really looking at this as a yearly view. Very rarely are we looking at it monthly.”
What information do you show in your cash flow reports and how do you show it?
“We show the monthly for each fiscal year we're reporting and then roll it up into a summary per fiscal year and then as a project total. We use almost 100% of the Excel export for forward-looking reports. I start at the first of the year for that year because we're looking annually. We do a lot of other standard reporting, but cash flow is not one that goes out on a regular basis.”
“When we report to our leadership, we use the export function under the 12-month cash flow forecast and we run it by fiscal year. We report the project total, what has been previously spent, what we're going to spend this fiscal year, and what we're going to spend next fiscal year—some projects go further than that even. We show a total spending per project and show all of our projects as a set. So, we report on all of them at the same time to our leaders.”
Do you include projects that are in feasibility status?
“We use active status, which means anything that’s funded—even if it’s at a very early or feasibility stage. We would like to be able to use ROM (rough order of magnitude) to know directionally where a project is going and for rough cash flow. Right now, anything that is funded and has a schedule is reported on.”
How important are the current month’s actuals in your forecast?
“We have within the individual projects in Projecto the cashflow data that includes the actual spend to date and the future spending forecast. So this is a one-stop shop, if you will, that has all that information together. You can see all the actuals are designated in one color, and then another color is the forecast. And it's also split out in other tabs on the screen so you can look at them separately.”
“Current month actuals are definitely important for us, and it's something we've tried to get a handle on for a while. Based on the timing of when certain amounts were paid, if it's showing a forecast and there were actuals, it wouldn't be showing the right number. Wizard added a column in the complete cash flow report that has the actual. Even if the current month is still being forecasted, you can compare them. And if you need to make any adjustments for any large spent amounts, you can.”
Do you forecast contingency?
“If we have a project with contingency, we do project and forecast on the overall project budget, which includes contingency. But we may push that out, towards the end of the project or the second half of the project, depending on the project itself and the project schedule.”
How do you forecast for the closeout phase?
“We have to go through and work those POs and anything without an outstanding balance and say, ‘Okay, did we get this?’ And if we did, we need an invoice for it. We push that stuff out a little bit, because we want to show the actual flow of cash and when it's going out the door. So, there's a lot of things that affect how timely that can occur when we're trying to wrap up and close out.”
“It depends on the definition of closeout. We have the occupancy phase and the post occupancy phase in Projecto that we forecast for if there are outstanding items, but there isn't necessarily a closeout phase that we're incorporating right now. But it’s comforting to hear others have the same challenges when it comes to closing out projects and getting things paid or closed within 90 days.”
“We definitely have spend that goes through the end of closeout in certain categories. And we are using Projecto’s decreased spread because it is significantly less. We count on our project teams to make sure their schedule is accurate so we're getting it down to the end.”