Tips for Managing Job Schedules and Cash Flow

For most small kitchen and bath dealerships, managing cash flow is the most critical element of our jobs as business owners. While time must be spent on the long-term elements of marketing, profit planning, staffing, etc., failure to properly monitor and manage day-to-day cash flow can result in a sudden, catastrophic end to your business.

The remodeling business tends to be one of very uneven cash flow, since payments from clients come in fairly large progress payments. Managing cash flow simply consists of matching the income from such payments with the outflow of payments to staff, subcontractors and suppliers. This month, we will look at scheduling payments with clients, the importance of job scheduling and progress and completion of punch lists, and collecting the final payment.

Scheduling Payments

As a rule, a part of your contract should deal with a payment schedule for your client. A good underlying philosophy for scheduling such payments is to strive for fairness for both you and your client. In other words, you should attempt to have a payment schedule that roughly matches your outflow of cash for their project with the client’s payments.

To help manage your cash flow needs, it’s a good idea to set up the payments so that they are collected prior to when you would need the money to make payments, i.e. collect a payment for cabinets when you deliver the cabinets, so you have the cash on hand when the invoice comes due in a few weeks.

Most remodelers have two categories of projects when it comes to cash flow: small, quick ones and large, long-duration ones. On small projects, which are only going to take a couple of months to complete, three to five payments makes sense. Larger projects that will last several months should probably be broken down into eight to 10 payments.

The payments on smaller projects will usually include a down payment of 30-40% at the time the contract is signed. Since you’re on the hook as soon as you order cabinets from your supplier (and may even be required to make a down payment deposit), this is a reasonable down payment amount.

The next payment should come about the time you deliver the cabinets and would normally be for about 40-50% of the contract. The remaining 20% should be associated with easily identified mileposts, such as fixture installation, punch list and final completion.

On the larger projects, the payment schedule is normally broken down into increments of 10-15%, again matching your costs with the payment schedule and attaching the payments to easily identifiable, non-subjective benchmarks such as the pre-construction meeting, start of framing, electrical meeting, etc. Avoid picking mileposts such as completion of drywall or completion of cabinets, since there can obviously be a difference of opinion as to when these things are actually complete.

Another, equally important, element of payment scheduling is managing your accounts payable. Adopting a “just-in-time” practice of material deliveries to jobs allows you to defer payments to suppliers until the materials are actually incorporated into the project, rather than “inventoried” on the job site.

Scheduling & Progress

Since your cash flow is dependent on progressing from payment milepost to milepost, moving your projects along will keep the cash flowing. The importance of having a project schedule cannot be overstated. Before you start a project, you should create a timeline reflecting the tasks that will need to be completed and in what order they should be performed.

This timeline should be detailed enough to allow your staff (and your client) to envision how the project will progress and flow. Use of a software Pert Chart program is an easy way to do such planning and allows you to link related tasks and plan for lead and lag times. It is possible to use a tool such as this to schedule subcontractors and allocate staff to multiple projects.

Having such a schedule will obviously give your client a sense of confidence that your firm is working with a plan. More importantly, it will provide a road map for your project manager and staff. Using the job timeline, the materials for the project can be ordered on a timely basis and delivered to the job as needed. Without such planning, your staff will be reduced to “fire fighting” when you are late with orders, or late with deliveries. Remember, if the job slows down, you are paying extra for expedited deliveries and your customer is unhappy.

Once your customer senses that the job is not under control, he or she will start to be overly critical of your practices and procedures, further increasing your costs. This, in turn, slows down job progress and receipt of progress payments. A well-planned, organized project,on the other hand, will move quickly from progress payment to payment, your customer will be pleased and, most likely, not be looking for problems.

Finish Strong

There is a tendency to relax when you get a project to the punch list stage. This, however, is not the time to take the pressure off of pushing the project to completion. While there should not be a great deal of money left to collect on the contract, the possibility of incurring significant costs in completing a never-ending string of “punch list” items is real.

The best way to address this is to actually schedule a formal punch list meeting with the client when the project has reached the point where the client has re-occupied the space you have remodeled and prepare a list of all of the things needed to reach completion.

It’s a good idea to use a form for this list that includes a statement for the client to sign acknowledging that the list is complete and final, with any subsequent items covered by your warranty.

Once you have the list, get the items assigned to the appropriate subs or staff and set deadlines for them to clear the items assigned. Your project manager should stay on top of this work and make sure that the deadlines are met and the final check collected.

By leaving as little to chance as possible when it comes to planning your projects and your cash flow, you will be better equipped to stay on top of both.

Read past columns on Business Management by Bruce Kelleran, and send us your comments about this story and others by logging onto Kitchen & Bath Design News’ Web site at