Manage Your Project Cash Flow During the Coronavirus

In an uncertain property market, where property developments are under pressure from slowing sales rates, delayed construction timelines and worsening defaults—properly managing your project's cash flow through the entire lifecycle is critical.

As projects in the design phase are placed on hold across the country, uncertainty around the coronavirus pandemic is expected to impact the development industry for the remainder of 2020.

But for developers with projects already active, the ability to continue building and complete projects on time and on budget is increasingly at risk.

With construction work currently classified as an essential service by the Australian government, construction sites look set to remain open for the foreseeable future with work hours on sites in New South Wales and Victoria now extended.

It is likely project revenues will slow during this period of significant disruption with increased pressure on cash flow requirements, greater probability of default in residential and commercial leases and delayed or deferred loan pay-downs and reduced security.

In times like this, it's critical to accurately manage your real estate development cash flow.

So, what can you do?

According to Altus Group, a provider of software, data and advisory services to the global real estate industry, here are some industry best practices to help ensure your development project stays on track.

Create a solid workflow with your finance team

Involve your finance team early. Give them a sense of the project so they can develop a thorough understanding of the development budget.

From there work with them to develop a strict control of your cost codes and chart of accounts. This will help ensure you have an accurate understanding of project costs.

Once you’ve set your feasibility as the benchmark budget for the project, make sure there’s regular communication between the finance and development team when reviewing your overall project budget.

Focus on your cash flow forecast

As the invoices begin to roll in, stay vigilant and review your actual costs every month. Understanding how much you’ve spent compared to how much you’ve got to spend is an important element of cost control.

But it’s not enough to consider only costs incurred, successful developers focus upon future costs and potential risks.

If you start to recognise that your project is at risk and costs, revenues or timelines are going to be delayed, having an open communication with your finance team. This will allow you to understand the impact of those variances on your cash flow throughout the life of the project.

It’s not all about costs

Being able to understand and manage your project revenue is just as important. What if your pre-sale revenue didn’t exceed the projected timeframe? What if your revenue didn’t exceed the expected goal?

Tracking revenues and costs line by line with your finance team will allow you to do gain a better understanding on how the project is actually performing over the timeframe that you expected it.

With ARGUS Estate Master development management software, developers can easily manage their project cash flow, report on cash flow variances and project financing.

By integrating with any third party accounting software you’ll be able to directly import actual costs and highlight variances on dashboards allowing you to give key stakeholders a clear picture on how the project is progressing.

Click here for more information on Altus Group’s industry leading ARGUS EstateMaster solution.

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