Data to Dollars: What Each Metric Means & How to Use It to Drive More Profits: Series #10 - Projected Cash Flow
When I first started working with builders on their financials, I’d walk into our meetings armed with accurate data, detailed reports, and carefully tracked metrics. I was confident and excited to share what I’d uncovered, knowing these numbers could transform their business.
But there was a problem: I might as well have been speaking another language. It became very clear very quickly that my clients didn’t just struggle to understand the reports—they didn’t know what the metrics meant, let alone what actions to take, if any.
By the time I explained the significance of the metric, I’d already lost their focus. And the worst part? We never got to the best part—the actionable insights that could actually drive their dollars to meet their goals!
Enter: The Data to Dollars Series and The Playbook for Builder Profitability! In this series, we’ve broken down the key metrics residential construction companies need to track, what they mean for your business, and—most importantly—what to do with them to drive profitability and growth. We’re currently taking every metric covered in the series and packaging them altogether into one Playbook especially for Builders. Armed with this Playbook, you’ll know exactly what to do when with what you find in your financial reports.
Let’s dive into this week’s metric and see how it can help you turn some data into dollars.
#10 - Projected Cash Flow
What It Is -
Projected Cash Flow is a forward-looking metric that estimates the inflows and outflows of cash for a specified future period. It’s essentially a roadmap for how cash will move in and out of your business, helping you plan for upcoming expenses, project milestones, and investments.
How we calculate it -
Projected Cash Flow = Projected Cash Inflows - Projected Cash Outflows
The key difference here between Net and Projected is Projected uses the information from Net to forecast what has not happened yet. Projected Cash Flow is predicting future cash flow, which will be extremely valuable whether you’re prepping to scale or just making sure you’re business will stay afloat with the funds to cover operations in 12 months.
Why We Track It -
While Net Cash Flow gives you a snapshot of your current liquidity, Projected Cash Flow ensures you’re prepared for what’s coming. For custom home builders, this is critical because projects often have staggered payments and large expenses tied to specific milestones.
Why You Need to Know It -
Projected Cash Flow answers questions like:
Will you have enough cash to cover payroll, materials, and subcontractor payments in three months?
Can you take on a new project or invest in new equipment without stretching your resources?
Are upcoming draws and receivables sufficient to cover anticipated expenses?
Tracking Projected Cash Flow ensures you’re not caught off guard by cash shortages or overcommitted during high-growth periods.
What Projected Cash Flow Tells You -
Good: If your projections show a positive cash position, you’re in a strong position to meet obligations and plan for growth.
Bad: Negative projections highlight potential shortfalls, giving you time to adjust before problems arise.
Action Steps Based on the Projected Cash Flow -
If Projections Are Positive:
Strategically allocate surplus cash toward growth initiatives, debt reduction, or reserves.
Review project timelines to ensure cash inflows remain consistent with projections.
If Projections Are Negative:
Tighten Payment Terms: Speed up accounts receivable collections or request earlier milestone payments.
Adjust Project Schedules: Spread out expenses where possible to align with expected inflows.
Reevaluate Overhead and Discretionary Spending: Delay non-essential purchases or reduce unnecessary expenses.
If Projections Are Volatile:
Analyze Variances: Identify why cash flow is fluctuating—are draws delayed, or are expenses exceeding forecasts?
Reinforce Billing Practices: Regular, timely billing ensures more predictable cash inflows.
Improve Forecasting Tools: Use technology to integrate real-time data for more accurate predictions.
Conclusion-
Projected Cash Flow helps stay ahead of potential shortfalls and align resources with your goals, so you’ll be better equipped to handle challenges and seize opportunities.
At Catalyst Construction Accounting & Consulting (Catalyst CAC), we specialize in helping residential construction businesses just like yours track and understand key metrics like GPM and more. Whether you need help with construction bookkeeping (data accuracy, essential construction financials), construction controllership (holistic oversight over construction financial processes & strategic financial guidance), or a construction CFO advisor (forward-looking, strategic, big-picture financial guidance), we’ll work with you to eliminate financial chaos and give you the tools to drive profitability and growth.
Let us help you turn your data into dollars. Contact us today to learn how we can become your valued partner in building a stronger, more profitable business.
What’s Next -
Stay tuned for the next episode in the Data to Dollars Series as we uncover yet another metric to help you operate smoothly while driving profitability to scale your business!
