Project Management Institute

Financial planning in a project-oriented industry

A financial plan is an indispensable management tool for any company. Such a plan is of particular importance for construction companies because the survival of these firms depends on short-term financing. Yet despite this challenge of working in this industry, some construction firms operate without a detailed financial plan. The result of lacking such a plan is a major reason why the construction industry has a high percentage of bankruptcies. This article outlines a computerized cost-flow planning model--known as COSTFLOW--that specifically accommodates the dynamic environment defining the construction industry. It details the eight principles the author used when designing the model and explains the data used when calculating this approach, including the three modes of inputs and the formula for computing cumulative cost-flow forecasts and monthly cost distribution.
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