The sector of BTP (Building and Public Works) is particularly demanding in terms of financial management. Businesses in this sector must juggle late payments frequent, large stocks, and supplier debts regular. The calculation of the net cash flow is therefore becoming a crucial tool to ensure the proper management of the activity and the sustainability of the company. This measure makes it possible to know if the company has enough Liquidity to cover his short-term financial obligations and to make informed decisions. This detailed guide will help you understand how to calculate the net cash flow in the construction industry and to optimize its management.
La net cash flow corresponds to the difference between available liquidity (short-term assets) and financial debts at Short-term of a company. In other words, it reflects a company's ability to Dealing with immediate expenses without having to resort to external funding. This calculation is essential to assess the financial health of a company, its liquidity level And her ability to finance its working capital (working capital requirement).
La net cash flow Maybe Positive or Negative. Net cash flow Positive means that the company has enough cash to cover its short-term debts, while net cash Negative indicates that the company could encounter short-term financial difficulties if financing solutions or cash management optimization solutions are not implemented quickly.
The Net cash calculation is based on two key elements: available liquidity and short-term debt.
Cash flow includes:
Short-term debts include:
The formula of the net cash flow is therefore as follows:
Net cash= Cash flow − Short-term financial liabilities
In practice, this operation makes it possible to know if, after having paid all its short-term debts, the company can still have Liquidity to finance its investments or its daily activities.
One net cash flow Positive allows a company to meet its immediate financial obligations without stress. It also reflects a good working capital management and a sound financial strategy. On the other hand, a net cash flow Negative can signal that the company is in a precarious situation and could find itself in difficulty in the event of a decrease in its financial resources or if trade claims are slow to be paid.
The management of the net cash flow allows you to ensure the sustainability of the company by ensuring that the company has resources needed to function. Optimized management of this cash flow makes it possible to make informed decisions oninvestment In theactivity, while ensuring that the financial debts do not compromise the viability of the business.
The working capital requirement (BFR) represents the capital required to finance the activity current affairs of the company (raw material purchases, salary payments, inventory management, etc.). One net cash flow Positive Allows you toinsuring that the company is able to finance this need for working capital without having to resort to expensive external financing.
For example, a company with a high working capital but a negative net cash flow could have difficulties in paying your debts suppliers and its short-term expenses, which could result in a bank overdraft.
By regularly monitoring net cash flow, a company can identify the potential financial difficulties. This makes it possible to put in place solutions to improve the situation, such as negotiating payment terms longer with the vendors, the optimization of Accounts receivable or the use of a short term loan to strengthen the liquidity.
Les Accounts receivable are often one of the main factors that influence a company's net cash flow. If customers do not pay their invoices on time, the company is likely to encounter a difficulty meeting immediate expenses. To avoid this, it is essential to manage customer receivables rigorously, to send Reminders regular and to negotiate adapted payment terms.
One Too high stock may have a negative impact on the net cash flow, as this ties up a significant amount of money in products that do not immediately generate liquidity. A management optimized inventory reduces warehousing costs and improves the availability of cash for other business needs.
Les supplier debts also influence the net cash flow. If a company succeeds in negotiating longer payment terms with its suppliers, it can improve its available liquidity in the short term. However, it is important not to delay payments too much so as not to damage the relationship with suppliers.
THEbalance sheet analysis allows you to check the balance between assets And the Passive of the company. A well-balanced balance sheet, with equity sufficient, can contribute to a positive net cash flow, which testifies to the good financial health of the company.
There are several strategies to improve the net cash flow of a company:
To calculate the net cash flow, it is first necessary to determine the Available cash. This cash flow includes:
Next, it is important to take into account the short-term debts, which are the financial obligations of the company to be paid within a period of less than one year. This includes:
Once the above items have been determined, the calculation of net cash flow is relatively simple. The formula used is:
Net cash = Available cash - Short-term debts
Let's take a concrete example to understand this calculation.
Available cash :
Short-term debts :
The calculation of the net cash flow is therefore the following:
Net cash = €80,000 - €45,000 = €35,000
In this example, the net cash flow of the company amounts to 35,000€. This means that the company has Sufficient liquidity to cover short-term debts, with an excess of 35,000€.
One positive net cash flow means that the company has Sufficient liquidity to meet its short-term debts and to finance its future activities. In the case of the example above, with a net cash flow of €35,000, the company can use these funds to invest in new projects or develop your business without worrying about immediate financial difficulties.
On the other hand, a negative net cash flow Indicates that the short-term debts are superior to Available cash. This can cause serious problems for the business, including difficulties in paying suppliers, of taxes or even wages. In this case, the company may need to consider short-term financing solutions, such as the use of a borrowing or to a bank credit line, or use solutions likefactoring to improve cash flow management.
The sector of BTP presents unique challenges when it comes to cash management. It is essential to have a positive net cash flow to avoid liquidity pressures. Here are some tips for optimizing cash management in a company of BTP :
Businesses in BTP are often confronted with long payment terms from their customers. It is therefore crucial to set up a rigorous monitoring of customer receivables to prevent unpaid invoices from having too much impact on the treasury. One late payment of a few weeks can make it difficult to manage current business expenses.
Construction companies often have material stocks important. It is essential to manage these stocks effectively to avoid immobilizing too much Liquidity. Of excessive stocks can put pressure on the available cash and cause financial stress.
It is possible to negotiate longer payment terms With the vendors, which gives the company more than Time to collect customer receivables before having to pay supplier debts. This makes it possible to maintain a positive net cash flow and to reduce the risk of bank overdraft.
If cash management becomes complex, solutions likefactoring (transfer your trade receivables in exchange for immediate cash) can be used. This makes it possible to improve the availability of liquidity without waiting for the settlement of claims. Additionally, businesses can turn to a bank credit Or a short term loan to cover urgent needs.
Establishing regular cash flow forecasts is an effective way toanticipate needs of future funding and to prepare solutions before difficulties arise. One cash flow planning allows you to manage the flows of Liquidity and to anticipate the times when financing solutions or adjustments will be required.
The calculation of the net cash flow in the construction sector is an essential step to guarantee the financial stability of the company. A positive net cash flow ensures that the company can meet its short-term debts while continuing its development. By adopting a proactive management of customer receivables, of stocks And payment term with suppliers, a company can Optimize your cash flow and prevent the risk of financial tensions.
Les financing solutions, such as the use of bank loans or at thefactoring, can also be levers to maintain a positive net cash flow and insure the sustainability of the company for the long term.
