Webinar Replay: Project Cash Flow Management

Posted March 30th, 2022

Cash flow can make or break the success of your project. It can empower your team to succeed — with the right amount of labor & materials available at the right time — or it can cripple their performance.

Mobilization Funding CEO Scott Peper knows the power of effective cash flow management. Since 2013, he has walked contractors through a cash flow exercise to show them exactly how much cash they need on a project and when they need it, transforming how they think about cash on the project and how it propels their company’s growth.

Now, we’re bringing that exercise to you.


This is the ideal webinar for construction contractors, manufacturers, and any business owner who struggles with balancing cash flow in their business.

1. Why mapping out a project cash flow on a weekly basis BEFORE THE WORK starts can improve performance and profitability on every project.

2. How to use our Cash Flow Projection Tool to estimate and track your project’s cash flow.

3. Why effective project cash flow management is the secret to organizational growth.

Cash Flow Webinar Transcript

Autumn Sullivan 06:49

Let’s go ahead and get started. Thank you. Thanks, everyone, for joining us today, Scott Peper, the CEO of mobilization funding, is going to walk us through our new cash flow management tool and talk to you about why project cash flow management is so important how it can help managing your cash flow on a project week by week can help you increase your profit and profitability, build efficiencies into your schedule and grow your business.

Scott Peper 07:20

Thanks, Autumn. So cash flow is something that’s very important to us. And we speak about all the time here with our clients, we work in the construction world, and anyone that I assume is on this call that’s in the construction world. They don’t need me to introduce them the impacts of cash flow, why it’s important, how it impacts everybody. But what is important today is we’re going to give you a solution that’s going to give you an information and a tool that allow you to actually make proactive decisions, outline exactly what your cash flow is, and then more importantly, be able to see it in a project live. So there’s a few things here I’m gonna just my camera quick, a few things that we’ve noticed over the last seven or eight years and talking to clients is a couple main general themes. One is, clients think that they’re weak at cash flow, they don’t understand it, and there’s something wrong with them. And I’m here to tell you right now that that’s not the case, it is absolutely a function of the industry of construction. More importantly, how the waterfall of monies flow from the top of the project all the way down throughout a project. And what I mean by that is whoever’s financing it the developer, the general contractor, the subcontractors, the subs have subs, all the way through, you do all the work, first, you put a payment in, the work only gets paid for depending on what’s actually been done after an inspection, it takes 30 days to do the work because you can only do it once a female invoice once a month typically. And then it takes 30 or 45 days to inspect the work that you did. And it just takes a long time. So that is the reason for it.

Now, are there people that aren’t great at finance, that working construction? Of course, but that’s like any other industry and business. So like most other industries and business, there’s tools, there’s professionals, there’s roles and responsibilities inside the organization and outside that can help and all those are still available to construction. Now whether they’re used or not, is a different story. But we’ve created a tool. And this tool is going to add the third component to what we’ve also recognized. One of the things that becomes very commonplace that we’ve heard over the years is that we’ve noticed, if you ask any construction company, whether just sub or general contractor, they’re very good at estimating what the work is going to be. They look at a schedule of values. They can look at a set of plant I’m sorry, they look at a set of plans. They can look at a schedule, they can estimate and bid pretty accurately what their general total costs are going to be. In addition to that, they know exactly what the work schedule is going to look like. Of course it changes of course if there’s rain or delay Are other trades and things like that. But at the most part, they have pretty detailed and specific, much more so than most other industries, in my opinion of what their man hours are going to be the labor portion of that the materials, equipment, rentals, costs, they do an extensive amount of work to get bids and estimates for all those things. So they know what their total amount of work is. What I mean by that is, if you did all the work tomorrow, and it was done in one day, and you can invoice it the next day, you probably haven’t really accurate margin dollars.

The problem is construction takes a long time. So it gets spread out over a couple of weeks, or sometimes a couple of months, or sometimes a year or more. And so what we’ve done now is take the third component that’s missing from that equation and marry up, how much cash do you actually need to execute on the schedule that you know, for the expenses, any actual cost that you know, you’re going to incur? Material labor, etc. So you can see week by week, alright, how much cash do I actually need to execute this project on the schedule that I want to work it on, and for which I’ve already bid the project and one, and now you can know, okay, I’m going to need a couple $100,000 Or I need a million dollars. So I’m going to show you what that tool looks like. So it’s, we’ve created an elaborate spreadsheet that we’ve always used here internally, to figure this cash flies we speak to our clients. And what we realized is we could share this spreadsheet with everyone, and it’s on our website, it has been for years, except what we also realize is not everyone’s Excel savvy. Candidly, I’m not our CFO created this spreadsheet. I didn’t I know how to read it. And I certainly know how to input and use it. But that’s but I’m not It’s not intuitive to me until I’ve done hundreds of them. But what is intuitive? And what we can do is anyone can answer questions, we ask you a direct question, you can give us the answer, especially if it’s specifically related to your estimates, and the work schedule. So what we’ve done is we’ve created a tool on our website, on the resources page that anybody can go to you don’t have to be a client mobilization funding, you don’t have to pay for it. You don’t have to get us emailing you every other day and calling everybody in your company to use it. It’s basically we need we don’t need your email, so we can email you the spreadsheet and the inputs. But that’s the purpose of it. We’re not going to use your email to sell it market to it or anything else. Okay. So um, Autumn, what did I miss so far? Anything?

Autumn Sullivan 12:33

No, that’s a great set of I am curious how often when, when you talk to clients, how often is this the first time they’ve ever thought about their projects cash flow in this way? I mean, on like, on a weekly basis to this granular level?

Scott Peper 12:55

It’s a great question, I would say and forget, I’m going to generally speaking here, I would say 95 98% of people know the first two things, they have a great bid, they estimated it well, it had made a ton of thought into it. And it’s probably accurate. If it was one single snapshot of the world, those costs are accurate. I would say on the flip side, and same thing with the schedule, I would say on the flip side, when it marries up to okay, what’s the when I say okay, how much cash is going to take to do that? I would tell you that 98% of the folks that we speak to, and just generally in the construction world, whether our clients or not probably don’t know the answer to that question right offhand. Some measure the cash flow, but it’s more of like, Hey, I know what kind of money they have coming in, it’s across the whole business or project they don’t necessarily know as they before they start a job a project. That said, if a project is only two weeks long, or three weeks long, I would say it’s probably a little higher than most No, I need 5060 grand this week, or this month in order to do it. But when you start having to order materials, now, they have lead times on them, you have different payment terms for materials. And then when you get when they land on the site, you can invoice for them. But sometimes you have to pay for them in different that becomes too complicated of a process to really map into a project. So I would say very few is definitely single digits, in my opinion, less than 10%.

Autumn Sullivan 14:23

And you talked about how contractors know the first two things, right? They know the costs, and they know what the schedule is going to be. But we talk a lot about the things that they might be missing when they’re considered when they’re putting their bid or when they’re thinking about the cash flow of their project. I’m specifically thinking about how you’ve talked about calculating the the real overhead can do you want to talk about that just for a little bit? I know we will get into putting margin down later.

Scott Peper 14:54

Yeah, so it’s a good question. So I know this cash flow tool will specifically out lined the cost of the project, which is really in in the estimate, as well, and it’ll show you how much cash you need to flow through it. But when we’re looking at estimates and bids, most often your your average bid doesn’t include the proper overhead allocation or margin, what it means is that they just sort of get blended in with the cost. Sometimes it’s marked up Oh, at 10% for overhead and profit. And I add 10% For markup. And it depends what your costs are. As soon as your costs go higher, it’s great. If that’s the cost, it’s even better if the costs actually come in lower. But I be surprised at how many folks on here, it’d be great if anyone has questions and want to put it in the in the chat box. But how many people actually end up with less cost on a project than they do more cost, you know, or neutral. So it gets us tough, but the way we’re going to calculate the margin, that’s that’s the biggest issue we see is a lot of times you have overhead costs, those come monthly. But they’re you know, they’re your rent expense. They’re your your payroll for your staff and your salaries, they’re things that are not related to the exact project. And when you pull money off of a project that isn’t cashflow positive to pay for those things, you actually make the project significantly even more cashflow negative. And if you look at if you know what the projects, how the project is going to cash flow itself, prior to using any of those dollars, it can really help you make some good decisions on how you want to use the cash you do have, or the financing that you have in place lines of credit, etc, etc.

Autumn Sullivan 16:33

So in terms of in terms of the schedule, because we all know that construction schedules change quite often, right? They they’re definitely prone to change. So if you have this cash flow spreadsheet that we’re going to show our audience in just a second, how does how does having a cash flow projection help you manage a construction project schedule changes?

Scott Peper 17:00

So great question. So this tool you’ll see goes week by week, what your expenses are, if a schedule changes, and you pull a crew off of that project, the beauty of this projection schedule is as you go week, by week or even over the course of a month, you can update those to actually become actuals. So that week will be an actual expense. And so you can keep track of it in real time. And it allows you to know, okay, this project gets delayed three or four weeks, what does that mean, for me in terms of the pay apps, I’m going to actually submit instead of the ones I plan for, if I move my pair, if I move my a couple crews off of this job, and I put them on a different job, then I can move that cost expense off of that project, too. If my costs are too high, based on what I rent equipment for, versus maybe I want to purchase some equipment, you can see how that’s going to impact things. When you order your materials. If you have to pay for your materials under certain terms, you can see how that will impact your job. That’s a big one. And we’ll share those in detail. Why don’t we go? Why don’t I open up a spreadsheet? And then some of those things will make more sense. And I can answer that too for Yeah, let’s do. So what I’m going to do guys, first I’m gonna show you what the out the final outcomes gonna look like. So you can get a visual cue of what we’re doing. So here’s what this spreadsheet is going to look like. Okay, we’re going to actually fill this out completely on our website. So this is the final output of what you’re going to see. Okay, this is what would get emailed to you along with a PDF that has all the information you submitted. So really quickly here, and I’ll show you this. There’s some important notes here tells you what this all means. But generally speaking, each one of these columns is a week, you can see that the job starts on, you know, eight, in this case, April 8, it goes week by week and automatically contat tabulates. What you input and all the way through your up here is what you’re submitting for your pay apps to your customer. Here’s what your submit, here’s what your actual expenses are. And then down here, you’re going to see what car much cash you need, or explore the surplus or deficit on a weekly basis. And then the cumulative amount of cash you’re going to need over the course of this project until money start coming in from the project. And we’ll show you that. So before we get to here, and then of course at the end it’ll total this up for you and show you okay, you have a $3.9 million project less retainage you’re going to get 3.7 million coming off of this. Here’s your costs all broken down, gives you what your margin percentages gives you what your margin dollars are. This looks awesome 31% project with one point, almost $1.2 million of profit that doesn’t even include the retainage profit. But when I show you what cut much cash you need, which in this particular case, you’re going to need upwards of a million dollars at some point in this project to you’ll need a million dollars over the first Many weeks to actually get this thing going before you actually see this job become cashflow positive.

So let’s go through some of this real quick. And I’ll show you how it works on a website. So, you go to our website, which is mobilization, funding calm. Now you’re on the homepage here, right up here, in the top corner, you’ll see resources. And you’ll see cash flow tool, you click on that. You go down here, you see this little video of myself here kind of explains the cash flow tool and some of the importance of it, I won’t bore you guys with that, when you put your email in. And then you click build my cash flow tool. Alright, so we do fund other types of projects other than just construction and mobilization funding. So purchase, if you’re, if you’re a manufacturer, or you’re doing general assembly or fabrication, or you pretty much, let’s just say you work off of a purchase order more than you work off of construction, this might be the tool, this might be the version for you. They’re all the same, and ultimately, but they have different questions based on it. And if you have inventory in house and you sell a specific product, this might be a better version. But we’re going to go through the construction one here today. So you click on construction. Alright, so I’m just going to type this in here, type, my name, email, company name, the state you’re in, got it the project name, we’re just going to call this 123123 project. The purpose of this is it’ll this will for your caspo. It’ll give you the the project name on the spreadsheet, right? When does the project start? Okay, I got my little cheat sheet here. So this is going to be Oh, 401 2022.

Autumn Sullivan 21:48

And that’s just to stop you for a second. That’s my first question, technically, for the audience here is does the project have to start in the future? Or can they do this where the project has already started?

Scott Peper 22:00

You can definitely use this tool on the projects already started. And like I like I was saying before these sheets, if you’re doing it the beginning before it starts there, they’re your estimates, right. If you’re in the middle of a project, you can actually, if you’re four weeks into a 10 week project, you can use actual costs for your first four weeks, and then your projected costs for the next six weeks so that you can use it completely that way. And again, once you fill this out, it’s a good question. Because once you fill this out, you get a spreadsheet and the spreadsheets pretty easy to see at that point, you can you can clearly edit it and manipulate it and the formulas are all in there. But if you’re familiar with Excel, this is an easy way to get it going. And then the it’s just an Excel file that’s not locked or anything you could do whatever you need to do with it.

Alright, so you’re then here, just Bay, this is just basic information on the project. Here’s your contract value. What’s your direct prayer payroll, again, the idea this is to come right off of your bid sheet. So if you’re looking at your totals on your bitch, so in this case, direct payroll is $410,000. My sub labor is 1,000,008 oh two 310. I have 202,000 of direct materials. This is an actual project cost that we have, by the way for our client happens to be a Makita an H back and mechanical contract. And so some of the a lot of the material big chillers and whatnot are in the subcontract labor includes material. And then that this is this is the direct materials that they have as well. So the equipment rental is 43,000. No bond on this job, and 139,000 in miscellaneous costs. So it’ll tell you right here, total contract value, your total costs added up for 2596. This project has 5% retainage, and happens to be a school in Florida. And in Florida. For those of you that don’t know there’s a lock on government workforce that has 5% retainage instead of 10. Otherwise, it’s typically 10.

Autumn Sullivan 24:04

Why is it important to put retainage in the cash flow spreadsheet?

Scott Peper 24:09

Great question. So retainage is part of your margin. And it’s definitely important, you’re going to make that money. But it’s not you’re there withholding this, this cash back. So if this is a cash flow tool, the reason that you hope that the retainage in here is this is this money is not going to come off this project for you to be able to use so regardless of what you invoice. In this particular example 5% of it is not cash that’s going to be available on this job. But we got weekly, I’m sorry, you submit your paps on a monthly basis. The from the time you submit it put in my zip code there from the time you submit your Pap, in this particular case they get paid in 45 days. The name of your general contractor his or your customer, whoever you’re working for will just Call maybe see GC. And my expected margin on this is 40%, for example, have received no money today, I don’t have any joint checks on this project.

Autumn Sullivan 25:16

And why are joint checks relevant to get to the cash flow of the project?

Scott Peper 25:20

The joint checks are important because if you joint check a supplier for those of you that don’t know what a joint check is a joint check, as defined by us, at least for this example, is when if I’m a general contractor and autumns the subcontractor and I say autumn, I’m gonna give you this contract. But I’m going to join check your material supplier and autumns gonna put up, you know, her material supplier is the supplies that I need to I’m going to sign a joint check agreement with autumn enter supplier, which means, as the general contractor, I’m going to pay her supplier. And when she submits what her pay app is, every month, I’m going to then pay her supplier directly in the form of a joint check to her and the supplier. Why is that important? Well, it’s important because that money is also not going to be available to Hodel, it’s going to, it’s going to go directly to the supplier. So that’s a good thing. But you want to be able to account for that in your project cash flow. So in this case, you might have thought you had a 40% margin, or you estimated it, but it tells you right here, you’re calculating margin, 34 and a half percent, so it gives you the total. And I’ll show you what happens next. Okay, so now it’s a 25 week project broken down, this is going to be six, you’re gonna have six pay apps if it starts in April. So I’m just going to input the pay apps here. First one’s 200,000. The next one’s 400,000.

Autumn Sullivan 26:44

While you’re inserting the pay apps, we have a question from Stephen. He asks, we have one client with multiple projects, do we have to do a separate setup for each project, we have to do this exercise for each project? Or can you roll it all up into one cash flow?

Scott Peper 27:03

You can absolutely roll it all up into one cash flow. As you’re going on, you can see if you if you really want to do that you could total these together. Um, and the spreadsheet is totally functionable to use as all three. Now that said, and I don’t know if the next question is Scott, do you think that’s a good? Do you think that’s a good thing to do or not? If it is, then I’m gonna give you the answer that question I would say don’t do that. Because each project is going to stand on its own, even though they’re a general contractor, you’re gonna, you may have different costs or different expenses or different suppliers. But to get the effect of the projects in the same way rolled up together, once you get a separate spreadsheet file for each project, you can put them in separate tabs on the spreadsheet. And then you can aggregate those tabs all into the one Summary tab that gives you this will give you the same benefit as if you aggregated them all in this exact template form. So I would go through and do this exercise for each individual spreadsheet, I’m sorry, each individual project, you’ll receive a individual spreadsheet for each project, you can then merge those onto a separate tab into one file. And then you can marry through Excel will pull each of those cells from each of those and marry it up into one template and a summary for you. And if you if you didn’t know how to do that, we can certainly show you how to do that we have a few Excel wizards here that if you had those three files, we can put them into one template for you, you run a quick, there’s a functionality to Excel that allows you to pull from each one of those tabs and run a quick and run a quick summary. And then you’ll be able to do everything you want. And then if things change in those individual tabs, you can make individual tab changes in the project and see the impact of that. And in addition, you’ll be able to actually go in and then see how it impacts this the Summary tab tips. You can see him all world. Okay. Alright, so I put my payoff amounts in for each month. I got my total contract here that marries up to what it is. I’m going to click Next. So now do I have direct payroll on this job I do. My direct payroll is weekly. My direct payroll amount weekly, is $16,400. And basically what I did was I know I have 410,000 of direct payroll, I have 25 weeks set up. So I’m just going to divide by 25 to get my to get my at least get this in here. Now sometimes your payroll may not be the same every single week. That’s okay. Once you get the spreadsheet, you can manipulate the weeks that you need to but for the purpose of getting this in and told him correctly. That’s the easiest way to manage that. Do you have sub labor? Yes, we do. We know what that is. Okay. So this is subcontractor pay Myth number one. So as you guys know, here tells you I have $1.8 million of sub labor. That doesn’t mean though, that I’m going to only pay them one time. So I want to input when I need to pay them and what the payment date is. So in this particular case, I’m just going to enter sub one, what’s, let’s say that’s the subcontractors name and scope of work is installation, the total amount of the path to them to start is going to be 450,005 7750. I got to pay them on June. Third, because if they’re starting to work in April, they’re going to work through April, I’m gonna it’s gonna take 30 days or so to get paid, I pay them when I get paid in this particular case, or I pay them 30 days afterwards, in this by agreeing with them to pay them 30 days after they submit. So that’s June third. Okay, so then I’m just gonna go add subcontractor payment two, same thing, I click sub one, everything automatically populates here. Now in this particular case, this is the same amount, I’m going to estimate billing. And so now this payment is going to be not going to be on the 15th of July.

July 5 had subcontractor. So one same thing. This is going to be on August 5, at subcontractor payment number four, that’ll be the last one. And that’s going to be on. Oh, 902. Okay, that’s my sub labor totals up, click Next.

Autumn Sullivan 31:39

So if you had if you had different subcontract labor, if you had different providers for that you can enter multiple subcontract labor. Right, you could do sub two sub three?

Scott Peper 31:53

That’s right. Yeah, if you have 2-3-4 subs, you’re going to put sub one first, when you’re going to Oh, then you’d go to sub to do the same exercise sub three, same exercise, all those payments will track in there. And you’ll see how they flow right into the, into the spreadsheet here in a second. So we I have one, they actually have one material supplier on here, which was for $202,000. But let me look to autumns point here. Let me show you guys what that what that looks like. So this is just going to be material. Now what do I currently owe this material supplier? Right? Let me do this material supplier one, I don’t owe them anything. So this just gives you an idea of you owe the money already, and you want to pay them and it gives you an idea, but otherwise this will be zero. And again, we said the total is going to be 202,000. But instead of me doing this as one material supplier one payment, let me do it as 1023 66. And this is due on ordering it on the fifth and payments gonna be due. I have 30 day terms. So I’m going to pay for on the sixth. Now I’m going to add one more material order. So I’m gonna show you guys how this would come about material. Two. I’m going to add the other 100 grand in here zero amount to pay.

Grand same border day. And my payment day. Is this kind of equipment. Yes. Vendor. Stick with our theme here equipment one equipment. Cash balance is zero. This is 43,000. You guys get the idea here. There’s no bomb on this project. So you can skip that. Do you have miscellaneous expenses? Yes, they do.

What is the name, you can enter these as much as you want. This particular happens to be per diem and travel slash Hotel 139,000. And I’m pretty much going to accrue weekly. So what this will do is spread this out weekly on the model. Like next. Okay, now it’s reviewing. Now what this is going to do is give you a chance to see the spreadsheet here in a little circuit, you can kind of cycle through to make sure it kind of calculates, right and it moves its way through and you have it you get to the end here. You’ll see okay, you got it all and so if anything doesn’t look right to you, you can sort of kind of go through this and figure it out. In summary, it’s going to show you here everything that you input all the way through and this is what you’re going to get a PDF of basically right here and that’s actually what I’m looking at here on this sheet. My little print out that before So it gives you a summary of what you did, you can make sure you did it correctly. If you need to go back and edit anything, you can do that. And then you basically get to the bottom. If it all looks good, you hit submit projection. Boom, you’re done, it was successful, he goes to our underwriting team, they turn around the spreadsheet quickly, and email it over to you. And then we’ll send it to you. And it comes in a nice little email. So let me show you now what you’re getting. Now we’re back to the cash flow. So we come up to the top, let’s start with the Summary tab. Again, just to refresh reminder, each one of these is a week. And if you remember, we started the project on the eighth of April. So each it automatically calculates every week all the way through. Okay, in summary, we’ll go to the end of this shows you here a $3.9 million project. Last 5% of retainage. Here’s the net amount you received from the project before retainage. Yeah, 410,000 in payroll, million eight and subcontract labor, 202,000 in materials, and $43,000, here in equipment, okay, and then your miscellaneous expenses.

Now, this shows materials and only show supply one supplier, I forgot, because it takes a little while to put that spreadsheet together, what I actually input was something I already did. So I already had the output spreadsheet. So but otherwise, it would show you here supplier two, and there’d be another row that would say supplier one, and it would break it down and have a total up here at 202. So my apologies for that. But anyway, go back to the beginning. So what this is going to show you again is here’s where you’re invoicing at the end of April, it takes 45 days to get paid. So you’re not seeing any of this money. So what this is basically showing you here, these are the expenses you have by week. This is the actual expenses you’re incurring this specific week, and you can see payroll, you pay weekly, so you’re gonna have to incur payroll that way, your per diem and hotels, you’re paying for that weekly as well. But you can see the material equipment and bond premiums, you don’t have that yet. Okay. So the spreadsheet automatically calculates two things here for you weekly cash flow deficit or surplus, which means how much money do I have coming in from the project? That’s zero right here? How much money do I have going out on the project, and that’s 21,000. So it keeps it then this is the cumulative total. So each week over the first three or four weeks, you incur your payroll, and your per diem, so you can see this cumulative total of cash that’s needed on this project goes up week by week by those amounts. Okay. So in this particular case, the first seven weeks, 12345678 weeks, I’m sorry. You incur payroll and premium for a total of like, for a total of 175, almost $176,000.

What does that mean? That means that through the first eight weeks of this project, you’re going to need $176,000 of cash in your business to put onto this project before any money’s coming off so far. Okay. Now, here we are, you’ve worked now at this point through eight weeks, you’ve submitted a payout for 200,000 and a submitter, Pam for 400,000. So you are essentially owed less retainage. You’re owed $570,000. Okay. But you have 45 day terms. So you submitted the end of April, they’re going to pay you in 45 days. Well, that means that this $190,000 isn’t getting paid to you for six weeks. Okay, so 123456 Here it is right here at the beginning of that seventh week. Week Seven, you now have that $190,000 comes in, you can see cash received from the project 190,000 cash going out that week, I’m sorry, is only 21,000. So you have a surplus of 168,000 from that path. But here’s what’s important to look at. You’ve you had to pay your material supplier for or your subcontractor $450,000 already because you Oh, that’s that’s what you said. That’s what these are your numbers, you submit it. So that’s there. And you also have to pay for Some other direct material that’s 202,000, and some equipment, not to mention the payroll. So if you look at this cumulative project Cash Flow tab here, by the time you’ve received any money off of this project, you’ve had to invest $915,000 on this job. So you either have to get that money from other jobs or projects, have that money in the business, or have some way to finance that along the way, okay? Or what we would encourage you to do is now that you have this upfront, figure out how you can manipulate some of these numbers here, can you pay your material supplier in 45 days? Well, that would be really helpful because that would move it that would move it farther down the line that would drop this 915 by half. Okay? Or same thing with equipment suppliers, can you get longer terms? And if you can’t, okay, no problem. But you have to know in advance that this is what you’re going to need. So maybe you need to rework the schedule, maybe you need to go back to your customer, see if you can get paid in 30 days instead of 45. If that’s possible, if that’s not possible, okay. Can you get a deposit up front? No, if that’s not possible, Alright, great. Can you get some financing for this? And now you know how much financing you’ll actually need? And more importantly, you’ll know where you’re going to need it. Do you really need not earn? 15,000? All on day one? No, you really need 21 grand a week for the first few I’ve gotten.

Scott Peper 41:33

So going through this tab will show you Okay, boom 915,000. Now it drops the next week. Well, why is that? Well, that’s because you got 168 grand that is surplus between what went out that week and what came in for the project. And now it starts to accumulate again, until the next big one. So the maximum outlay on this job is going to be 1,000,001 million $263,000 of cash that you have to put onto this project. Before you can become cashflow positive through July. If you look here, it’s actually going to get even higher up to 1,000,004. Because it takes till August 12. Before you get your first big pay app in pay do now the project starts to really get better and better by the time this next pap comes in. Six weeks later, you have 400,000 The next one comes in. Now you’re cashflow positive. So here’s the thing. It’s important. This is October 14, okay, based on your schedule and your expenses, you’re starting on April 8. So six months later, this job becomes cashflow positive by itself. And yes, you have a great margin and you make great money you got to get through this period, you got to get through those six months to get to the point where this project can cashflow itself. And then you’ll make you’ll make this money. The problem is a lot of folks are looking at these totals and saying this is great, I got 31% margins gonna work out awesome, blah, blah, blah. But the reality is now you know, do I have 1,000,004 to invest in this project? To get to it? No. Okay, how am I going to execute on it? Now, let me show you guys one thing, just one simple adjustment, here’s the week of August 5, okay, let’s just say you’re able to get your payment terms for 45. All your expenses stay the same, but you’re able to get your payment terms from 45 days down to 30. Okay, remember, this week, this column here, August 5, stop sharing this. Share the 30 day version. Alright, now all I did here was I moved these payments from 45 days to 30. You’ll see here this 190,000 to do 1234, paid Week Five instead of paid week eight. And look at these cumulative cash flow here. As you go on. You don’t have that big $900,000 One, it’s only 769 725. That week of August 4 Fifth where we had that big fat number was 1,000,004. Well, it’s only $623,000. Now. So literally, just knowing that in advance and negotiating that upfront, is critical. It means you literally need in this case $780,000 less money, less real cash on this job to execute this project.

Autumn Sullivan 44:47

So what would you what would you recommend when when you’re looking at this spreadsheet and you see that and you start playing with those numbers and you see how much how much being paid by in 30 days would would help your cash Do you recommend taking this spreadsheet to the GC? And having that conversation? Because I know that some of our audience is going to say, Yeah, I’m not going back to my GC and asking for different pay terms. Because I can’t afford the job, right? They’re, they’re gonna think I’m weak because I can’t afford the job, they’re gonna think I’m bad with money because I can’t afford, like, talk to me about how you present this to the GC.

Scott Peper 45:23

So it’s a good question. So I think you’ve covered a few, you’ve asked a few things there my mind. Um, first thing is, I think this is eye opening. I think a lot of I think a lot of subcontractors will have those feelings, hey, I’m just gonna make me look weak. I can’t finance it. The GC might give it to somebody else. And you know what they might all that’s true. But here’s the thing. Like, who cares? The who cares? If they think you’re weak? First of all, you’re not weak? Because they’re not investing a million dollars into this? I mean, if they want to tell them, Okay, fine. You can pay all my material suppliers, here’s the line items, just pay him, then you pay him? Because like, watch what happens here. If they take on that and pay this instead? And I zero these out here? Well, yeah, now you only need 172. And even if they took it, even if they took the 799, from here, it’s less than you have to pay. So there’s a lot of options that you could go back to. I just simply wouldn’t worry about those things in the same capacity. Because it just the truth, the truth is, it’s not worth losing your business or getting upside down on it or giving away all your profit. I personally think yes, that’s a hard conversation. Yes, it is. It’s, it might make you look bad, they might think you look bad, but you know what, the only person that’s gonna make you look bad is yourself. You You’re not who cares what their opinion is, like people are gonna have that’s their opinion, you say, Look, man, I do great work, you gave me this contract, you actually gave me this contract, because I do good work, and I know how to do it. And let me tell you something, I don’t do work, that that is gonna put me upside down a million dollars. So I need to work something out. Now I can show you how I’ve sophisticatedly put this together using this cash flow tool, I can show you how this expenses, you don’t need to show them what your margin is, you just need to show them Look, I have 30 day terms with them. My suppliers give me 30 day terms, you can use this information, but you don’t need to show them all this you can delete all your margin. Now they don’t need to know your cost. All they need to know is what you have to pay. And what you what you owe and certain periods of time and what you have up here. Maybe you don’t even need to use use this product, you just need to go show him and based on these terms, I need 30 day terms. Why? Because I gotta pay my suppliers in three terms, I got to pay my labor. But basically, here’s here’s what it is Mr. General Contractor in a nutshell, I got to put a million dollar million $1.4 million on this job before I get cashflow positive, and that’s just too much. So we need to figure out how we’re going to work that out. What can you do? Well, you can pay me in 30 days, I can’t do that. Okay, well, what can you do? And get your deposit up front? Okay, cool. What kind of deposit can you get? I mean, you can start to have real conversations. Now, if you don’t want to talk to your general contractor, then what you can do is you just start to leverage your, the, your customer, not your customer, but you can start to leverage your suppliers. Well, you can take it to your supplier, here is a prime example your supplier, you have 30 day terms with right? Well, they’re $900,000, your sub, your sub is 900 grand or million eight of your payments. Well, can you stretch them to 45 days or paid when paid? That’ll make a huge difference. Okay? Can you take your material, provide suppliers and get better terms from them? Those are the types of things you can do with this information in real time. Long before you’re sitting there with a crisis, not wondering why you’ve got these big buildings and, and for anyone that said to yourself, Man, I owe X amount of dollars to my suppliers. I owe 750 grand in my suppliers, and I got my AR I have a million games I have $1.3 million owed to me if I could just get the money owed to be paid to me I’d be square like I’m sure everybody said that themselves. Well, it doesn’t work that way. But yes, you’re right. If you did get that money right away, you would. So what I suggest doing in these cases, then is using this information to figure out how you can manipulate it.

Autumn Sullivan

But this is powerful just to know if they’re talking to me about how how looking at the project, from, from this perspective, from a weekly cash flow perspective, can help you increase your team’s performance.

Scott Peper

Well, if you’re going to run projects, and they’re going to have a major deficit, it’s going to put stress on everybody, right? So if you’re stressed, it’s going to put your team under stress and if you’re the leader of that business, or you’re managing the project on a project When you’re stressed out, it’s going to add stress to everyone else, it’s going to hurt their performance. If you if with this info, it’ll also let you know where you can provide some incentives. You know, like, you know, here’s a perfect example, if you can get this $200,000, invoice up to five or 600,000, how can you do that? I don’t know, maybe there is something you can do, maybe you can pre order some materials to get the materials on site, maybe you can, maybe it makes sense to put three or four crews on this job. Because the payroll is pretty even if you’ve doubled your payroll, it’s pretty negligible here, right? Not too much. But if you could double this first pay app, or get one of these 800,000 or $700,000, pay apps here up front, where you can manipulate your schedule of values into a different reconstruct them in a different manner to get more money up front here. Now you know exactly how that would impact where your cash flow is, which is going to make your team more incentivized, if you give them goals of hey, look, this is what we need to finish. With month one, we have to get this much done. I don’t care if you get it done it let’s work six days instead of that are all authorized some overtime or whatever you need to do. It just gives you a lot of leeway and flexibility to a motivate them. But also be keep yourself out of stress, which is only going to get pushed down to your team.

Autumn Sullivan 51:25

And I know we have the story. We have a customer story from Andrew Ammons where he did exactly that he was looking at the cash flow tool. And yes, he used our financing but but the cash flow tool was was showed him that if he put two crews on the job, and if he had the super additional additional supervisor and ordered the materials in advance, he would save I think it was eight weeks of of payroll, he got the job done eight weeks earlier.

Scott Peper 51:54

Yeah, so instead of using one crew and and he was abused roofing contractor, so instead of using one crew to go in and prep the roof, and then that same crew to go back in and install the roof, he basically put a whole two whole crews on one one of them that one crew went out a couple of days in advance and started the prep and started to rip the roof off and put the put everything together. And the second crew came in this is a big government, a VA hospital. So the second crew went out behind them and started prepping the roof at the same time. Well, why that was important is they had free rein of that site for that first 10 or 12 weeks of the project. And if he spent one crew going out and doing all that, and that took them six or eight weeks, and then he spent sent that same crew back out for another six or eight weeks, they would have not got as much done where he was able to put get it done was while they had free rein in the roof, they were able to get on that roof with double the amount of people and just work right in tandem behind each other. And they got all of it done in basically instead of 12 or 15 weeks, they got it done in six or seven weeks. So to save them a week’s worth of time, and a week’s worth of labor that was budgeted.

Autumn Sullivan 53:05

So my last question and then we can open it up, we have a few minutes, we can open it up to the rest of the to the audience either on a LinkedIn, if you’re on LinkedIn live, please just drop a chat in the message box. Or if you’re on Zoom, drop it in QA or in chat. But my last question is how can you use project cash flow tracking to grow your business?

Scott Peper 53:32

Well, you know, the first that asked before, should they do a separate project for each one? That’s a great question. Because if you’re mapping out these projects, and you take your bid, you map each one out, and you know exactly how much cash it’s going to take to execute on it. You can do to a couple different things, you can start to determine how much financing does my overall business need? I’m going to go get an SBA loan, should I get half a million dollars? Do I need $2 million? Like what do I need? Right? You’ll know because you can map out what you’re working presses you can map it out on on these sheets to see what how much cash you actually need. The second thing is you can make these decisions in advance of starting the project which will give you the ability to think more about being on top of your business instead of every week, just managing crisis’s that are in your business. And if you’re on top of your business, thinking about what’s next and where we’re going to go. You can start to build your growth strategy a lot easier. So it’s really about knowing that the debt cash so you can figure out the right way to finance the growth or do you bring in equity or do you try to get debt Do you want to bring in a partner if you bring in a partner? How much should you bring him in for, you know, these are all the kinds of things that you’re thinking about when you’re going to want to grow and knowing your numbers by project and then aggregating them all together is going to be key for you. So I think that’s really how that works, but also let you know how you want to incentivize your team. If you gotta grow, you want to make sure you have a great team. If you have a great team and everyone’s working hard, then they’ll be they’ll be more motivated. If they if you know how to incentivize them and put things together for them, they’re going to be, you know, more involved and have a more sense of ownership and equity as opposed to, and I wonder if we’re going to be okay, my God, my owner seems stressed, the project manager seems stressed, is everything gonna be alright? Yeah, that’s not just that’s not a good environment to try to grow in.

Autumn Sullivan 55:27

So we have a question that just got dropped into the chat. And I’m guessing it’s a little tongue in cheek, but I do think it’s a it’s a good moment for you to talk about our do your part campaign been asked? And the real question is, why are we contractors instead of developers? Which, right? Which I do think I would love for you to talk about the do recruit campaign to kind of answer that question.

Scott Peper 55:55

So it’s funny, you know, like, again, and I think that I think the part that we’re getting it there is that, you know, you finance the whole job, you’re basically developing it, someone else has the idea. I think you’re right, you know, it’s true, you finance the whole project for the developer, it’s, you do take a ton of risk, and it is a lot of heavy lifting, too. I will tell you, if it’s a private project, and a developer is doing it, the developer definitely has risk in it to make because the banks aren’t going to give them 100% financing. The the general contractors probably offloading their risk more on on you than the developer might necessarily be in those cases. For example, if it’s a $10 million project, and a developer goes out to get financing, they’ve most likely put in at least $2 million of real money real cash before the bank gives them that 80% Or seven, seven and a half million, that example. So I would tell you that they probably have some significant skin in the game beforehand. Now they don’t want to put any more that money off the project, but your general contractor probably the one that is taking a little offloading some of that risk on to you. The other thing I would say is our do your park campaign is there’s been some things I would call them. Stuff that is goes about and construction that’s just accepted. And it shows up in chats, just like you did right now. It shows up in the side conversations, it shows up on the job site, but it doesn’t necessarily show up in the job trailer, or it doesn’t show up when when you have developers and GCS and banks talking. They just accept this. And one of those things are is that subs do finance the whole job. And it’s not right. Why does it take a bank 30 days to come out and inspect the project? Why can’t they just pay people within seven or 10 days, we just showed you that impact of two weeks, 45 days instead of 30. Imagine if that 45 days went down to 15, you would need maybe a quarter of the money or maybe not even maybe maybe even less. So those things are the things that are do your part can be exposed to talk about and do your part is let’s get out of the habit of living in these moments that we have to figure out like, oh, we can’t bring it up to our GC RG GC is gonna think our week well, you’re not we like subs are not weak. I mean, anyone living in this subcontract, and this is cash flow environment is going to suffer, I’m in a restaurant until the pay feed everybody for a month, fill up, fill everybody at the end of the month and wait 30 days get paid, you wouldn’t have a restaurant in sight, they’d be all gone. So does that mean restaurant owners a week that mean restaurant owners suck at finance, that mean owners that make terrible oh, it just means it’s a shitty finance scenario. And that’s the ones that is for construction. So get that out of your heads if thinking like, I’m going to look weak, or it’s going to be bad, or they’re going to give the job to someone else. Look, in this scenario here, if you don’t have a million for to put on this project, despite the fact that you’re gonna make 1,000,002 If everything goes well, you’re not going to make that million two unless you have 1,000,004. We all know that. So it’s not a good project to take doesn’t mean that anything wrong to me, it’s not a good project to take. And you’d be surprised when you start telling general contractors that want to give you the work, that you can’t do it or won’t do it because it just doesn’t meet your doesn’t have the right terms, you’ll be surprised what they’re gonna be willing to do. It’ll be just like, you don’t want to talk to them. They don’t want to talk to the developer. So they take the path of least resistance, which is push it to you. But if you push it back to them, and they look, I’m going to do great work. The way I do great work is I have a finance partner that helps me or B, I don’t take terms like this to do these projects, or C whatever it is. They’re gonna respect that. And it’s really my opinion, it’s more the insecurity that a subcontractor has that they need to get over than it is anything else. And if you’re not willing to have that conversation, do you really deserve different terms? If we’re going to be honest, probably not. So have the tough conversation. Bring it up. You’ll be surprised you’re going to get what you want more often than you’re not

Autumn Sullivan 1:00:00

We have another question. Even Steven asked, Should we go to mobilization funding? What are your general terms?

Scott Peper 1:00:08

Yeah, I think, of course, we’re a great option for many people. We can’t finance everyone. But we do finance a lot. We’re a great option for something like this. I mean, this is a real client of ours that submitted this, we can’t lend them a million for so we let we typically lend up to 20% of projects contract value, our general terms, and when we layer in a finite, so give you an example, we’ll take a sheet like this, and then try to build a loan to essentially fill the cash flow shortages that you saw that that cumulative project cashflow deficit, we try to bridge the gap of cash that’s needed from the start of the job till when it gets cashflow positive. So let’s say for example, this is a $3.9 million job. It’s it’s a big one, but it doesn’t matter if it’s a million or 500,000 Doesn’t matter. So let’s just say in this particular case, we could lend up to $100,000 on this job. And someone said that we it takes a million for and by the way, I have 800,000 I just don’t have a million for Can I borrow 600 from you? Sure. that would that would work and they would put their 800,000 in and we would put our 600,000 in and we bridge that gap from zero to there, we’d show you what the cost of the financing is in that. And so you would know if when you get to the end of that project sheet. You know, I’m just going to show you guys while we’re sitting here on this. When you get to the end of that sheet here, and you’re at the bottom here, and you see what your cost expenses are, just imagine another line item. And just imagine another line item in here that showed you what the financing costs were. So let’s let’s just say the financing costs were $50,000. So instead of 2,596,000 expense, you have $2,646,000 in expense. And then we would show you what the impact is to your gross margin. Instead of 31% gross margin, you end up with 29% or 28, or whatever that math is, but our typical costs on a project are somewhere between one and 3% of the overall gross margin points. So again, that example that’s 31, you might end up with 29.2% of the project, the way we charge is a monthly interest rate on whatever the outstanding balance is, at that specific time. So even though it’s $100,000 loan, you only needed $22,000 a week, well then you’re only paying interest on the amount that cumulative amount as the loan gets trumped, we call it tranches, you kind of think of it like a project line of credit that you can draw down and use again you just draw down but you don’t draw it down and take more payback take more it just it just gets drawn down. So it takes you from the start to cashflow positive, but that gives you a general idea of the of the dollars. The beauty of this is the spreadsheet that we create comes back to you with the actual project and the way the financing would work in it and the exact cost of that financing and dollars and exactly how it impacts the project. So then you can make real good decisions and we don’t have application fees or anything like that too. So someone applies it doesn’t cost you anything to get the information. Like I said we can work we work with law we can work with everybody and now every project is perfect. But um but yeah, we’re certainly a great option.

Autumn Sullivan 1:03:38

So if you want to try the cash flow tool, and I highly recommend that you do you can visit us at mobilization funding.com I did drop a link if you’re on LinkedIn live I dropped it right in on Scott’s LinkedIn. So it’s right there in the chat. We will have a replay of this webinar available on our website if you’re joining us on LinkedIn live I will share it on our mobilization funding LinkedIn platform and Scott watch I’m sure Scott will share it on his personal social as well. And I encourage you if you like what you see here we have lots of cash flow content. Scott’s actually working on a book on cash flow we but we have tons of blogs about it. And the best way to stay in touch with us is to sign up for Scott’s newsletter comes out twice a month has personal letter from Scott and then whatever our most recent content is and our upcoming webinars as well. Scott was there anything I didn’t ask that I should have asked or any closing thoughts.

Scott Peper 1:04:41

If you guys like this, you think it’d be beneficial please, please tell people about it. Share it. It’s it’s not it’s available to everyone. There’s no cost to it. It’s it’s our way of doing our part. We have a mission to do our part in this do your part mission and that do your part mission. As to change these nuances of construction for the better, you know, let it be accepted that you can have a finance partner in construction, let it be accepted that you can have a conversation with your GC that you need different payment terms without looking weak, let it be accepted that you’re not weak, because you can’t finance a project for everybody you know, and that it’s okay to talk about and, and that no one is terrible with finance you actually find with finance, it’s a cash flow scenario, you know, so we want to change those conversations, providing this tool to that we created internally for us to evaluate loans, basically, to give it to everybody to use for themselves is our way of do just one of the ways we want to do our part in changing the way cash flow and construction and stress and is related to construction too often. And we want to eliminate that. And this is a great way to do it by giving information and education. So please share with everybody the best you can and and go out and have a great day basically what all I want to say.

Autumn Sullivan 1:06:05

Thank you so much. Thank you for your time today, Scott. Thank you everyone for joining us. And yeah, try the cash flow tool and then let us know what you think. Have a great rest of your day.

Scott Peper 1:06:17

Thanks everybody and find me find us on LinkedIn and let’s get back there. Appreciate you.