unning a profitable construction firm is a difficult business.Faced with an unprecedented number of external pressuressuch as eroding profit margins, higher owner expectations,rapidly changing technology, and a dwindling workforce,

only contractors who follow best practices will achieve a higher returnon investment (ROI) and reduce their risk.

The following eye-opening figures illustrate the difficulty of thisindustry:

According to Dun & Bradstreet, more than 10,000 constructionfirms fail annually.

The surety industry lost $3.4 billion between 1998 and 2003.

Most failures are attributable to poor operational execution, nei-ther bad strategy nor the external market.

Many general contractors are just one difficult project away frombankruptcy.

Given the difficulty of the construction market, FMI Corporation andMicrosoft Business Solutions explored what best-of-class generalcontractors use as key performance indicators (KPIs) for businessevaluation and decision-making. KPIs are meaningful yardsticks thatcontractors can see and use to effectively communicate the day-to-dayoperations of the business, supported by the best practices of generalconstruction. FMI has found that the best-of-class contractors havefine-tuned their organizations by aligning people, processes, andtechnology to produce results that are better than the industry aver-age. Best-of-class contractors are in the top 25 percent in profitabilityand ROI relative to their peers.

The construction industry has generally accepted KPIs that indicatethe overall health of a firm. However, the definition and understand-ing of each of these KPIs varies widely since a typical general contract-ing firm has a complex combination of legacy software, disparatesoftware systems, and a proliferation of spreadsheets that are used tooperate the business.

Key Performance Indicators (KPIs)The following are the KPIs identified by FMI and Microsoft BusinessSolutions as used by best-of-class contractors:

1. Liquidity indicator2. Schedule variance indicator3. Work-in-process (WIP) reporting

a. Margin variance indicatorb. Project cash flow indicatorc. Unapproved change-order indicatord. Committed cost indicator

4. Backlog indicator5. Scorecard indicator.

Key Performance Indicators Drive Best Practices for General ContractorsBy Ken Roper and Michael McLin

FMI Corporation

5171 Glenwood AvenueSuite 200Raleigh, NC 27622

Tel: 919.787.8400Fax: 919.785.9320

55 Madison Street

Suite 410Denver, CO 80206Tel: 303.377.4740Fax: 303.377.3535

5301 West CypressSuite 201Tampa, FL 33607Tel: 813.636.1364

Fax: 813.636.9601

Ken Roper

Jerry JacksonMichael McLin

www.fminet.com

R

Key Performance Indicators Drive Best Practices for General Contractors Page 2 of 8

No one single KPI can provide a complete picture ofbusiness performance. Viewing all KPIs as a groupprovides a more accurate total picture. With thisinformation, managers can understand the pulse oftheir business at a glance and determine if action isrequired. Therefore, KPIs prod management to driveorganizational behaviors since they require specificbusiness processes to make them meaningful perfor-mance measurements.

Complete integration of people, processes, andtechnology is an important first step in buildingbest-of-class performance. The increasing sophistica-tion and competition within the industry will forcefirms seeking improved performance and operationalexcellence to be early adopters of technologicalimprovements. This early adoption will drive pro-cesses and produce the best results.

The following details each KPI, including its defini-tion, uses, calculation, and significance to your firm.

Liquidity IndicatorCash is the single most important asset that keeps acontracting business operational; all sins are forgivablebut one, and the unforgivable sin is running out ofcash. The complexity of contracting makes forecastingcash flow difficult at best. Late owner payments,schedule delays, invoice processing, change-orderapproval, vendor/subcontractor payments, labor costs,and numerous other factors affect the timing andultimate receipt and disbursement of cash.

Understanding cash flow is of critical importanceand is discussed in detail in the WIP section. Onekey aspect of cash flow is cash demand or liquiditywhich is discussed here. A manager should have theability to evaluate organizational liquidity and thenbe able to drill down and see which projects areproviding liquidity and which are using liquidity.Once liquidity at the project level is known, anorganization can work to improve it.

The next step toward liquidity improvement is toidentify actions that will improve the cash generationprocess. A project that is losing money may still begenerating positive cash flow. Conversely, a projectthat is making money may produce negative cashflow. A positive cash flow can be achieved improperlyby not paying subcontractors and vendors, for ex-ample. Therefore, causes of both negative and positivecash flow require investigation and analysis.

Looking at cash flow from a contractor’s perspectivereveals six key balance sheet accounts that are largelycontrolled by project managers. A contractor isfunding his WIP with his own cash if the currentasset accounts of accounts receivable, retainage re-ceivable, and under billings (costs and earnings inexcess of billings) exceed the current liability ac-counts of accounts payable, retainage payable, andover billings (billings in excess of cost and earnings

on contracts). The funding can be in the form ofequity or borrowed money.

Conversely, the contractor is funding his WIP withthe project owner’s money if the current liabilityaccounts exceed the current asset accounts. Thedifference in this equation will be one of threepossibilities:

Zero, in which case the funding and asset accu-mulation are in balance.

A positive number, in which case cash is beingapplied to operations. That is, the general con-tractor is financing the WIP.

A negative number, in which case cash is beingprovided by operations. That is, the owner com-bined with subcontractors and/or vendors arefinancing the WIP.

The current asset and liability accounts can beconverted to the equivalency of a number of days’revenue outstanding by dividing annualized revenueby the 365 days in a year producing an averagedaily revenue amount. The average daily revenueamount is also the amount of cash that can begenerated from operations if improvements aremade in the ratio, or relationship, of these keyaccounts of current assets to current liabilities.

Dividing the current asset accounts and currentliability accounts by the average daily revenue pro-duces the days outstanding for each account. Thosenumbers can then be totaled to determine the netimpact. The net impact is the average number of

1.

2.

3.

days of liquidity applied to or provided by WIP byeach account. The accounts receivable and accountspayable days outstanding can be compared to indus-try averages such as that compiled by the Construc-tion Financial Management Association (CFMA) orRisk Management Associates (RMA) for generalcontractors to determine positive and negative com-parisons to similar size general contractors.(See Exhibit 1.)

Exhibit 2 is a general contractor with annual revenueof $86.6 million, which converts to an average dailyrevenue of $237,300. If this contractors is able toaccelerate over billings and improve collections ofaccounts receivable a net improvement of five averagerevenue days or equivalency, $1,186,500 (5 days X$237,300) in generated liquidity would result.Exhibit 2 also compares actual results to RMA data.

The range of days outstanding of accounts receivableand accounts payable for a general contractor withina certain volume range varies significantly within theindustry. The goal for your firm should be to rank inthe top 25 percent of firms in this comparison sur-vey. These firms have best-of-class financial manage-ment practices.

Schedule Variance IndicatorConstruction project owners are demanding fasterconstruction, cutting the typical project durationdramatically. This schedule compression has madescheduling today of crucial importance. General

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contractors with the ability to meet and deliverprojects quickly have a major competitive advantage.The goal of scheduling is to create a tool that can beused to drive the project and build credibility withall the participants, particularly the owner. Quality,safety, communication, planning, coordination, andresource utilization are all enhanced through thescheduling process, which includes updates to it andintegration of input from all project participants.Scheduling and its value in communication to own-ers sets expectations, seeking owner satisfaction withthe project’s execution.

Project schedules represent a detailed plan of indi-vidual activities, sequencing, duration, and interde-pendence. Many project schedules are preparedsimply at the inception of the project. Though mostowners require submission of these schedules as partof the contract, not all general contractors leveragethe full advantage of schedules by using them con-tinuously to drive projects to successful completion.The integration of subcontractors into project sched-ules is critical to effective scheduling.

Schedules that are loaded with costs, resources, andlabor hours help identify cash flow and overall re-source requirements. These schedules are invaluablein developing an aggressive schedule of values thatare then submitted to owners for payments onprogress billings.

Effective scheduling techniques include the integra-tion of subcontractor schedules into a master sched-ule from which project execution is driven. Thisprocess establishes and communicates critical mile-stones, critical paths, and delivery dates.

Most change orders have schedule implications.Change orders can be directed by owners, generatedfrom changes in the field, or necessitated by environ-mental changes in the construction process. Generalcontractors who correctly maintain an updatedschedule that reflects changing conditions increasetheir ability to manage the construction process andscheduled completion dates. Using the schedule toproactively manage change orders increases thegeneral contractor’s ability to identify and commu-nicate favorable and unfavorable performance vari-ances to all project parties. Schedules also documentcompletion dates, which helps minimize the impactof damages.

Schedule performance can be evaluated by simplylooking at the variance in terms of days. The varianceis calculated by taking the original planned comple-tion duration minus the current forecasted comple-tion duration. The difference is the number of daysthe schedule is ahead or behind. But that providesonly a partial perspective.

Contractors should also evaluate what the variancemeans as a function of the remaining duration on

the project. Taking the schedule variance in days anddividing it by the total remaining duration in daysshows the variance as a percentage of remainingduration. This information enables the contractor toevaluate the significance of the schedule variance. Anegative variance of five percent of the total remain-ing duration is clearly easier to make up than a 35percent variance. (See Exhibit 3.)

A well-built schedule saves time and money for allthe parties when used to develop a fully integrated,collaborative solution.

Work-in-Process (WIP) ReportingProject execution is the heart of every constructionbusiness. Measuring and monitoring WIP ensurestimely corrective actions and confirms project execu-tion according to plans. Four of the most importantproject execution results are: gross margin, cash flow,change orders, and project buy-out execution (in-cluding procurement contracts). A KPI is presentedfor each of these critical project execution functions.Together, the status of these indicators gives thegeneral contractor and owner a global project perfor-mance perspective. The stage is set for risks to beminimized and margin enhancement opportunitiesto be leveraged proactively. Positive project cash flowis maximized as well.

Margin Variance IndicatorThe calculations for margin variance compare grossmargins on in-progress projects, completed projects,WIP, and annual business forecasted. This big-pic-ture approach gives the owner an understanding ofhow their total work program is performing relativeto the annual plan. The general contractor can thenanalyze gross margin variances by project, comparingthe actual performance to the estimate for the pe-

riod. Similar comparisons for the cumulative costs onthe project can also be made. (See Exhibit 4.)

The margin variance is calculated by comparingvarious margins. The forecast margin percentage isobtained by taking the forecast gross margin anddividing it by the forecast revenue. The actual grossmargin on closed jobs is divided by the actual rev-enue on closed jobs to get the completed contractgross margin percentage. Work-in-process grossmargin is divided by revenue on WIP to calculatethe WIP gross margin percentage. Finally, all con-tract gross profit for the period is divided by all thecontract revenue for the period to find the total WIPgross profit percentage.

This KPI identifies the company gross margin per-formance, provides a comparison to business planobjectives, and promotes accurate estimates of cost-to-complete on projects.

Project profitability is the core of general contractorprofitability. Timely and accurate tracking of projectprofitability is also critical to success in the field. Agood analogy is that of an airplane cockpit, loadedwith dials and gauges that provide instantaneousfeedback to the pilot. The pilot responds to thefeedback with corrections or maintains the currentcourse and headings. If your field superintendentshad instantaneous feedback information systems,how much better could they perform? Identifyingcurrent and cumulative margin variances and makingimmediate corrections leads to control of projectprofitability.

Project managers must know their estimated costs-to-complete each project phase and throughout theentire project. While knowing this information is animportant part of their job, there is an art to it.

Key Performance Indicators Drive Best Practices for General Contractors Page 4 of 8

A one percent overstatement on percentage ofcompletion for a $5 million project creates a profitoverstatement of $50,000. (See Exhibit 5.) Whenthis error is subsequently identified, there will be acorresponding $50,000 reduction in the nextperiod’s profit.

Project Cash Flow IndicatorProject cash flow is another principal element of theproject manager’s responsibilities. This indicatoranswers the question: Are your projects providingcash or consuming it? A project’s cash position is akey measure of WIP and project profitability.

Net project cash flow is computed by comparing allcash receipts on a project less all cash disbursements.Over billings and under billings affect this result inthe long-term. The KPI is calculated by finding thenet of all positive and negative project cash flows.The result gives the project manager a clear pictureof how his or her work program is directing cashflow for the company. (See Exhibit 6.) It also identi-fies company cash flow from project execution,communicates potential project execution problems,and promotes project billing and collections onprojects.

A common technique for contractors experiencing acash crunch is to fund one project with anotherproject’s cash flow. This practice is a sign of serioustrouble. The same is true for subcontractors; asubcontractor’s positive cash flow is essential to theirability to complete work on time and with quality.Margins in the industry provide little room for collec-tion or credit risk problems with subcontractors.

Unapproved Change-Order IndicatorThe goal of the change-order process is to inform theowner of changing conditions that impact cost andschedule. Costs incurred through unapprovedchange-orders identify possible financial exposure socontractors should be diligent in communicatingthese to owners and seeking early approval. Contrac-tors successful at early notice and timely approvals ofchange orders ultimately reduce their financial riskand increase client satisfaction.

The accumulation of costs incurred on unapprovedchange-orders is separately identified as a KPI. Thesum of these costs represents a significant financialexposure for general contractors. Comparing thesecosts to the total forecasted gross margin dollars forthe work represents the percentage of gross margin atrisk to the business owner. (See Exhibit 7.)

The best time to establish change-order proceduresis at the inception of the contract. Following a stan-dard change-order process increases the percentage ofapprovals. However, delays in processing, meeting

Key Performance Indicators Drive Best Practices for General Contractors Page 5 of 8

notification requirements, and confronting changescauses significant challenges to the successful nego-tiation of changed conditions. Lack of detailedpoint-of-impact documentation on schedules andcosts (contemporaneous records, in legal terms)weakens a general contractor’s legal position. Ownersprefer to do business with contractors who can betrusted to provide timely information and who showsupporting analysis for all schedule and cost implica-tions on their projects.

Change-order management is an integral part ofproject management. Approximately 15 percent ofthe final contract value in this industry comes fromchange orders. The process is known and understoodby general contractors and subcontractors, yet manyfirms still struggle with the process. The unapprovedchange-order indicator serves to alert business man-agers when the process is headed out of control.Senior managers are not always intimately involvedwith the project’s details, and they need an indicatorto promptly capture this data.

General contractors must also track costs on changeorders separately from the base contract and ap-proved change-orders. General contractors need toknow the amount of margin generated by the basecontract vs. that generated through change orders inorder to answer the question: Did gross marginimprove or fade on change-order work?

Committed Cost IndicatorThe final WIP KPI for best-of-class contractors is thecommitted cost indicator. Effective job buy-outincludes executing purchase orders for materials andexecuting contracts with subcontractors. The finan-cial exposure, or contingent liability, comes frommaterial price increases and subcontractor pricingprior to contractual commitment of suppliers. Bothcan escalate out of control if ignored. Contractlength can be several years in duration and materialprice escalations, without supporting contract provi-sions for cost increases, leave the general contractorwith significant financial exposure. Where priceescalators are not feasible, contingent costs must beincluded to provide some protection to the contrac-tor with a fixed-price contract.

Exhibit 8 shows the impact of open commitmentswhen contract buy-out processes have not been fullyexecuted, reflecting the contractor’s potential expo-sure. Corrective actions can be initiated when ownersare aware of these financial exposures and decisionsare made on how to mitigate potential financiallosses.

The calculation of uncommitted costs is the total ofall uncommitted costs in WIP divided by the totalavailable committed costs on all projects, subject tobuy-out on all contracts. The KPI serves to identifycompany exposure to price increases and promoteearly execution of project buy-out procedures.

The KPIs of margin variance, project cash flow,unapproved change-orders, and committed costsprovide a general contractor with a global perspectiveon WIP. The indicators set the stage for risks to beminimized and margin enhancement opportunitiesto be leveraged in a proactive and timely manner.

Bringing all elements of the WIP process togetherallows for timely payments of change-order work forchanging conditions on contracts. Delays caused bymaterial shortages and non-delivery of key compo-nents can be avoided and schedules can be main-tained. Most importantly, project managementpersonnel maintain their communication with own-ers and are assured that the client service is at opti-mal levels.

Backlog IndicatorGeneral contractors adept at backlog managementposition themselves well to select those businessopportunities that will ultimately provide the mostmargin. The reverse is also true since construction-industry cycles dictate that if backlog decreases to apoint where losses are expected, cost reductions haveto occur to maintain profitability.

The KPI for backlog is calculated by adding the totalof all gross margins forecasted for projects minus thetotal earned gross margins on all projects. Grossmargin on awarded but unsigned contracts can beadded to this total. The indicator identifies grossmargins on future projects and serves as an earlywarning indicator of profit fade.

Variations of this calculation exist in the industry,and some include an expected value estimate ofpotential projects using the probabilities for securingthese projects. The total of gross margins in backlogis then compared to selling, general, and administra-tive expenses budgeted for future periods.(See Exhibit 9.)

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Backlog tells a business manager a great deal aboutan organization’s future performance. Backlog in-cludes signed contracts in process, awarded propos-als, and some percentage of outstanding proposalsrelative to the firm’s historical hit rate. The backlogprovides some assurance of future revenue and grossmargin opportunities. The backlog makes a solidfoundation for contractor decision-making.

Contractors with too little backlog will likely acceptwork at lower margins in hopes of just “coveringoverhead.” Conversely, contractors with a strongbacklog can frequently demand pricing premiumssince they have the confidence of a strong businessbook. Contractors’ hit rates may go down with thehigher pricing, but the contractors’ gross marginsincrease.

Backlog management, supported by effective market-ing and business development practices, is critical toa contractor’s success. By understanding what oppor-tunities have been captured and what opportunitiesare on the horizon, a contractor can make informeddecisions about what projects to pursue and how toprice them. Most general contractors consider abacklog of six to 12 months, with adequate marginsto cover overhead and profit, desirable.

It is equally important that general contractorsunderstand their capacity. Growing too quicklywithout trained personnel to execute the work leadsto major financial risk. FMI coined the expression“Volume kills, profit thrills,” to underscore thehazards of rapid growth. Two major causes for busi-ness failure are failure to understand the businessthoroughly and growing too quickly. A key functionof management is to ensure that capacity, bothfinancial and staffing, is not exceeded.

Effective backlog management also allows a contrac-tor to evaluate their performance against the businessplan. A firm should be able to evaluate their revenueand margin performance by business segment. Gen-eral contractors who assess backlog while considering

capacity limitations can make strategic decisionsabout project acquisition, which results in proactivebusiness management.

Scorecard IndicatorBecause most organizations have a tendency to lookonly at objective, quantifiable indicators, it is easy tooverlook the importance of qualitative measures thatare less calculable. Best-of-class organizations realizethe importance of evaluating their qualitative perfor-mance. As a result, many implement a process bywhich they evaluate softer skills. We have termedthis the “Scorecard Indicator.” (See Exhibit 10.)

Identifying the soft skills lacking in project person-nel is challenging. Scorecard indicators provide anon-confrontational way to identify skill gaps. Byevaluating the qualitative performance of the organi-zation, problems can be identified earlier, preventingthe escalation of the “paper war” with owners, sub-contractors, and other project stakeholders.

Organizations that use scorecard indicators generallyhave better safety records, higher productivity, im-proved quality, employee retention, and client satis-faction. The project-delivery scorecard also helpsidentify training and development needs.

The scorecard is a list of important “success factors”that are weighted according to importance andscored according to performance. Such a scorecardrepresents a qualitative assessment of the processesdriving high productivity and margin enhancementon projects by various project team member roles. Ahigh score indicates a higher probability of successfulproject execution.

The scorecard provides a methodology to evaluatekey aspects of organizational performance. The sameprinciples can be applied to numerous other aspectsof a project that are less quantifiable. Examplesinclude project documentation such as submittals,RFIs, and correspondence, along with subcontractormanagement, customer satisfaction, quality, safety,

Key Performance Indicators Drive Best Practices for General Contractors Page 7 of 8

and other productivity drivers such as short-intervalplanning, daily huddles, and performance evalua-tions.

Providing a methodology to evaluate qualitativeperformance is paramount. Purely financial metricsfail to consider such key success elements as processcompliance, culture, and leadership. The scorecardindicator also provides an organizational self-assess-ment and is a key ingredient in continuous improve-ment.

ConclusionWe have discussed KPIs including cash demand,scheduling, WIP reporting, backlog management,and the project-delivery scorecard. Timeliness ofthese measures is critical since early awareness ofproblems provides greater opportunities for correc-tive actions. Equally as important is the ease ofobtaining the data that flows into the timely devel-opment of these indicators. While the numbers arequantifiable, the best practices themselves are thekey to execution and driving these numbers intosuperior performance.

All KPIs need to be viewed in the aggregate total toproperly assess organizational performance. One KPIalone does not provide the total picture. KPIs arealso not a substitute for a firm’s financial statementsor the traditional ratio analysis. The intent of KPIs isto provide meaningful indicators that contractors cansee and use to effectively communicate the day-to-day operations of the business, supported by thebest practices of general construction.

A typical firm’s set of disparate systems makes cap-turing and disseminating critical information diffi-cult at best. The implementation of a fully inte-grated system that captures and disseminates KPIsthroughout all appropriate levels of the organizationallows an organization to make more informed deci-sions.

Fully integrated systems establish processes bywhich information will be captured. Therefore,systems drive behavior within an organization. Alltoo often, excuses are provided as justification forlack of accomplishment. With so much risk and somany variables, what construction firm cannot jus-tify capturing and disseminating information to theright parties, at the right time, to ensure intelligentdecision making?

Recognizing the value of and need for a fully inte-grated solution is only the first step. The commit-ment to implementation is the next. The system isnot only a long-term solution, but also a long-terminvestment that is required to allow a firm to capturethe associated benefits. The commitment will besignificant in time, effort, and capital; however, theROI will be substantial and ensure the success ofyour organization well into the future.

Ken Roper is a director with FMI Corporation. He may bereached at 303.398.7218 or via e-mail atkroper@fminet.com.

Michael McLin is a consultant with FMI Corporation. Hemay be reached at 303.398.7255 or via e-mail atmmclin@fminet.com.

Contributing editors to this article are Microsoft Business Solutions,One Lone Tree Road, Fargo, ND 58104, Solomon@microsoft.com,Steven James Mulka, Partner SIS Software, LLC678.380.2267, ext 110, smulka@sisn.com and Craig Ward,919.698.3162, Industry Consultant, wardcr@bellsouth.net.

© 2005 Microsoft Corporation. All rights reserved. Microsoft and Microsoft BusinessSolutions are either registered trademarks and/or trademarks of Microsoft Corporation inthe United States and/or other countries. Microsoft Business Solutions ApS is a subsidiary ofMicrosoft. The names of actual companies and products mentioned herein may be thetrademarks of their respective owners.

The information contained in this document represents the current view of the author onthe issues discussed as of the date of publication. Because the author and Microsoft mustrespond to changing market conditions, it should not be interpreted to be a commitment onthe part of the author or Microsoft, and the author and Microsoft cannot guarantee theaccuracy of any information presented after the date of publication.

This White Paper is for informational purposes only. MICROSOFT MAKES NOWARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMA-TION IN THIS DOCUMENT.

Complying with all applicable copyright laws is the responsibility of the user. Withoutlimiting the rights under copyright, no part of this document may be reproduced, stored in orintroduce into a retrieval system, or transmitted in any form or by any means (electronic,mechanical, photocopying, recording, or otherwise), or for any purpose, without the expresswritten permission of Microsoft Corporation.

About FMIFounded in 1953 by Dr. Emol A. Fails, FMI providesmanagement consulting and investment banking for theworldwide construction industry.

FMI delivers innovative, customized solutions to con-tractors; construction materials producers; manufacturersand suppliers of building materials and constructionequipment; facility owners, managers, and developers;engineers and architects; surety companies; and industrytrade associations.

FMI's experienced professionals assist businesses withstrategic planning, leader and organizational develop-ment, business development, research, mergers andacquisitions, peer groups, private equity placement,project execution, and training.

Key Performance Indicators Drive Best Practices for General Contractors Page 8 of 8

Key Performance Indicators Drive Best Practices for General Contractors APPENDIX

Liquidity Indicator

Schedule Variance Indicator

Margin Variance Indicator

Cash Flow Indicator

Unapproved Change-Order Indicator

Committed Cost Indicator

Backlog Indicator Key Equations: Sum of Forecasted gross margin – Sum of Earned gross margin = Gross margin in backlog

Key Equation: Sum of Uncommitted costs on contracts in progress = % Uncommitted Costs Sum of All available committed costs

Key Equations: Sum of Costs incurred on unapproved change orders ($) = % of margin at risk Total forecasted gross margin ($)

Key Equations: Forecasted Revenue – Forecasted Direct Costs = Forecasted Gross Margin Actual Revenue of Closed Jobs – Actual Direct Costs on Closed Jobs = Actual Gross Margin on Closed Jobs WIP Revenue – WIP Direct Costs = WIP Gross Margin

Key Equation: Original Duration (days) – Revised Duration (days) = Schedule Variance (%) Total Remaining Duration (days)

Key Equations: Accounts Receivable + Retention Receivable +Underbillings = Cash Conversion Accounts Payable + Retention Payable + Overbillings = Cash Funding Cash Conversion – Cash Funding = Cash Demand Subcontractor Revenue / 365 days = Average Daily Revenue

Key Equation: Sum of Projects Cash Receipts - Sum of Projects Cash Disbursements = Project Cash Position