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Cash Flow Projection
What is a Cash Flow Projection?
A Cash Flow Projection in the construction industry is a financial document that estimates income and expenditure of a project over a specific period of time. This projection tool helps construction managers to anticipate revenues, costs and possible shortfalls. This anticipation is crucial for construction projects, which can be resource-intensive and cost-laden with potentially varying income streams, especially in long-term projects. Utilizing a cash flow projection enables the company to plan and budget funds accordingly. It helps to forecast financial needs, spot potential financing gaps, manage resources efficiently and ensures continuous operations to meet project deadlines. The projection contributes in making informed decisions regarding purchasing materials, subcontracting labor, and managing other direct and indirect costs. Accuracy in these projections can make a significant difference in profitability and sustainability of a construction business.
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Other construction terms
What is an Unconditional Lien Waiver?
An Unconditional Lien Waiver in the construction industry is a signed document from a contractor, subcontractor, materials supplier, laborer, or other party involved in a construction project, which gives up their right to place a lien on the property unconditionally, typically after they have received full or partial payment for their work or materials. It serves as a guarantee to the property owner that they will not face a lien, or legal claim against their property, for this party's unpaid work or supplies, regardless of whether the party is subsequently paid in full or not.
What is the Matching Principle?
The Matching Principle is a crucial accounting concept prevalent in the construction industry. This principle dictates that all expenses must be matched with the revenues they generated in a particular financial period, ensuring that all costs and income for each project are accurately reported on the income statement. For example, if a construction company incurs costs for labor, materials, and equipment in July and August for a project that's completed in September, those costs would be recorded in September when the income is recognized. This principle is essential as it provides a more accurate picture of a company's profitability and financial health for a specific period. It allows construction companies to better manage their cash flows, project budgeting, and financial planning.
What is Davis-Bacon?
Davis-Bacon refers to the Davis-Bacon Act of 1931, a pivotal labor law in the United States that impacts the construction industry. Established by Congress, this act ensures that workers on federal construction projects are paid at least the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. This commonly applies to federally funded or assisted construction projects such as public buildings, highways or dams. The main goal of this law is to prevent non-local or out-of-state contractors from low-balling local firms on wages, providing a level playing field for all contractors and protecting local labor markets.
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