Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition

Project Cash Flow

Part of financial planning for projects is understanding the inflows and outflows of cash that will be created by the project. A cash flow table is the tool that is used to study such cash flows by breaking inflows and outflows down, usually on a monthly basis. The cash flow table also serves as an important tracking tool, creating a baseline against which project spending can be compared (see Exhibit 7.10).

Exhibit 7.10 Cash Flow Table

As we can see in the table, the four months when payments are due on the equipment to be delivered are September 2006 and January, April, and September 2007. At each of these points, the company furnishing the equipment and trucks for the project requires a 25 percent payment. The last payment is made after the equipment is up and running in the recycling center. At times it can be easier to interpret this information with a graph, as shown in Exhibit 7.11. Since this project is being financed mostly with debt, the financial manager of Pontrelli Recycling, Inc. must ensure that the financing is in place at the proper time. In a case like this, many financial institutions arrange for a line of credit that is drawn down over a period of time and then converted to a long-term debt instrument at the completion of the project.

Exhibit 7.11 Cash Flow Table in Graph Format

If a substantial portion of this project were being funded ...