Understanding the interdependency of a project’s budget, program and cash flow:

Any property development project should always start with a comprehensive project feasibility that is converted into a project budget. The project budget determines the financial parameters within which the project must be delivered to be considered a financial success.

The project program or schedule is a time, task and resource-based representative of what needs to happen practically within the legislative framework(s) to turn the project budget into tangible objects, i.e. infrastructure, buildings, etc.

The project cash flow is the financial representation of the program expressed in terms of expenses and income generated to achieve the bottom line as determined by the project budget.

However, compiling a cash flow for any property development project is much more involved than just converting the budget items into the project’s program.  A proper formulated cash flow has a critical impact on the project’s ability to deliver on milestones as determined by the program and thus will have a major influence on the project’s program.

Also Read: When do you achieve the optimal Return on Investment in a property development?

Understanding that a delay in month 5 of a project might only have an impact on month 12 of the cash flow and thus could have a critical impact on the project’s ability to achieve the desired bottom line and subsequent program and cash flow from month 6 onwards is critical.

Understanding the interdependency of a project’s budget, cash flow and program is thus critical in any property development’s success. Contact RedCubed Consulting if you want to avoid the pitfalls of not understanding and appreciating the constant interdependency of a project’s budget, program and cash flow.

RedCubed Consulting is a Development Management and Town Planning firm specialising in providing professional services to prospective property developers. We will consult with you and find the best solution based on your specific development needs. Contact RedCubed Consulting – we look forward to hearing from you. tinus@redcubed.co.za | +27 (0) 82 923 4812