Cash Flow Management

System for Small

Businesses
PROPOSED SOFTWARE DEVELOPMENT PROJECT
BY: AILEEN GRACE A. PORNELA
COURSE: M-ENG IN STRUCTURAL ENGINEERING
Brief Background of the Project
Cash is the heart of every business. To assure that the
business will continue to grow and survive, it should have
the capability to generate money to pay expenses,
employees and bills. To do this, the business should assure
that more money is coming in than goes out. Cash flow
refers to the amount of cash coming in and out of the
business over a period of time. In the construction
industry, money flowing in comes from the collectibles
billed to clients on a scheduled basis. Money flowing out
refers to the payables or operational expenses of the
business.
According to a blog post by Handle Inc., more than 80% of
companies reported that they’re experiencing cash flow
issues. The cash flow reflects the overall business state,
and to manage it well, a close gap between fund collection
and payments shall be maintained to avoid a negative cash
flow.
Brief Background of the Project
From the market research report published by GlobalData,
the Philippine construction industry has been severely
affected by the disruption caused by the COVID-19
pandemic and predicts that the industry's output will shrink
by 9.2% in 2020. In the short term, the industry is expected
to continue to be affected by the disruptions caused by the
containment measures.
From the survey by ADB, “The Covid-19 Impact on Philippine
Business” published last July 2020, during ECQ most
enterprises surveyed relied heavily on their own funds
and/or retained profit to maintain their business, while
exploring external funding to fill gaps in working capital. In
the multiple answer section of the questionnaire, 53.8% of
total respondents reported they used their own funds
and/or retained profit to continue business activities.
Brief Background of the Project
If a business could be likened to the human body, cash would be the oxygen blood transports to
the cells. Like bodies with oxygen, businesses can function without an inflow of money for a little
while; however, a prolonged shortage can cause the whole system to break down. The current
global pandemic has made it incredibly challenging for businesses to maintain their cash flow.
With half of the small businesses claiming that they wouldn’t survive three months of the
pandemic, it can be alarming to consider the hit the business’s cash flow and liquidity may take
from this disaster and the recession it might cause. However, careful planning provides the only
viable solution to this unforeseen catastrophe. (Whinnery, 2020).
PLANNING &
REQUIREMENT
IDENTIFICATION
Environmental Scanning
Ciriaca Construction Services is a small business located at San
Celemente, Tarlac established on March 2, 2020. They offer
services like providing construction plans layout, estimates, civil
works, metal and electrical works, repair, and renovations. It is
owned by Brien Canaria, a civil engineer, and co-owned by Lara
Mariflor Laborera. As a newly established business, the
management staff only involves of Mr. Canaria and Ms. Laborera
who both co-supervise the project planning & execution. Target
clients by the business are mostly small companies and families
looking to construct or renovate their office buildings, apartment
or houses. Their main marketing strategy is through social media
and word of mouth advertising.

Part of the business operations is providing detailed construction

plans to the clients wherein the business use the software
AutoCAD and Sketchup, the most commonly used software on the
industry. For project schedules, accomplishment reports, and other
documentations, they use Microsoft Word. Bill of quantities, fund
preparation and monitoring, & materials inventory is created and
monitored with spreadsheets in Microsoft Excel using manual
system.
Environmental Scanning
Communication with their two foremen and seven construction laborers and other relations is
done through mobile cellular phone. It can be assumed that with this information, CCS
operations with their limited manpower heavily relies on manual system and thus, data
management and monitoring are one of the huge struggles the business is facing.
Mr. Canaria and Ms. Laborera, like any other small business owners, had an early conundrum in
the management of finances. Their financial concerns arise due to lack of anticipations of cash
inflow and timing of payments and cash outflow. Since the business use a manual system/
spreadsheets to track their income and expenses, maintaining data integrity becomes a
downside due to inaccuracies in data entry and often human errors in transfer of
communication from on-site operations and management side. This arises problems on
funding of materials and other unforeseen expenses of the business that also affects the project
duration projections. The owners are looking to boost the productivity and the need to improve
the financial control management arise on the matter.
Goals and Objectives

This study aims to identify a simple and affordable technology that

will help newly established small business like Ciriaca Construction
Services improve their cash flow management.
Scope/ Limitation of the project

This study is primarily focused on determining the

technology that will improve cash flow management and
tracking in small-scale construction business. This study
seeks to answer how this new technology can be adopted
and made doable by the management.
Operations to be improved
According to an article published by The Manila Times, there are five ways owners can control to
improve the cash flow:

1. Keeping tabs on the money going in and out of the business by using an accounting
software or the like.
2. Finding ways to cut down on costs.
3. Optimization of collection process.
4. Getting a credit line with suppliers to cushion owners from paying for big purchases.
5. Giving clients reason to pay sooner.
Operations to be improved
In this study, the primary focus will be the following
operations:
1. Expenditure monitoring – to make a cash flow projection
accurate, detailed knowledge of outflow of cash should be
listed consisting of what items need spending, how to keep
track, and terms and method of payment. Items include of the
following:
1) Accounts Payable to suppliers/ vendors
2) Salaries and wages of workers
3) Taxes
4) Equipment and tools
5) Maintenance
6) Professional fees
7) Office supplies
8) Utilities
9) Others
Operations to be improved
2. Cash Collection & Billing – Cash on hand and collectibles shall be
added to gather information about the inflow of cash from various
sources. Specifically, this operation should identify from whom the
collectibles will come from, how much will be received, and when. This
operation is started by reviewing the following project report/s:

a. Work in Progress Report – it essentially shows whether active jobs are

overbilled or under billed, the difference will boil down on who’s actually
funding the project. The main goal of this report is to ensure that project
cash will come from the client and to avoid under billing.

The following items is then identified:

1. Cash Collection / Billing through:

a. Checks
b. Credit or Debit Payments

2. Bill of quantities:
a. Measured works
b. General conditions and Preliminaries of the active job/ work
package
Operations to be improved
3. Forecasting – this shows the final cash flow
projection at the time. The primary output
should be to provide a projected net cash
flow, the difference between cash inflow and
outflow. With the use of a software, forecast
on the following reports can also be provided:
a. Job Cost Report – In its simplest form, it is a
report that tracks the on-going cost of a
construction project. The primary purpose of this
report is to identify if there are discrepancies in
financial estimates.
b. Job Profitability Report – this report is to show
job balances in detail for a specific date range. This
shows the balance at the start date of the job as
well as the balance at the end date of the job.
DEFINING
Coverage of the project to be developed
1. Timeline Alignment – a schedule is the operation’s timetable. This tells when
a certain payable or receivable should happen within the job’s progress and the
tasks that should be performed by the staff. An effective schedule is to make
sure that there’s a clear identification of the most important work to be
prioritized at the time, and this comes when the management makes sure the
schedule is communicated well among other staff.
Coverage of the project to be developed
2. Expense Tracking – the receipt tracking tasks and a fast way to manage these
receipts on the go. These expenditures should be easily documented through
the accounting platform.
Coverage of the project to be developed
3. Payment Process – a fast way to receive and
validate collection transfer from the clients or other
relations; a secured and convenient method of
settling impending payables to vendors/ suppliers.
The information should be available to be linked or
synchronized to other platforms securely.
Coverage of the project to be developed
4. Accounting Process – a real-time platform
that can hold multiple job information (active
jobs and future transactions) wherein:
a. Revenues, expenses, and profit gross or net
estimates can be provided in summary,
cumulative, or detailed manner.
b. The current information should have the
ability to be accessed by multiple key persons.
c. Imports information of inventory track
d. Should be able to capture and link receipts to
transactions.
Coverage of the project to be developed
e. Has built-in tool reminder of client’s billing
schedule and automatically charge the
recurring collection.
f. Payment platforms or e-commerce tools can
be synchronized to track payment or collection
transfer.
g. Provides forecast of positive, negative and
net cash flow job report (and costs and
profitability)
h. Export reports and information to other
platforms for data sharing or client updates
whenever necessary.
Stakeholders/ Intended Users of the
project

The business owners Mr. Canaria and Ms. Laborera are the intended
primary users of the system. Both owners have direct access to
project contracts, treasury, and project execution details of the
business. Secondary users of the system includes the key staff from
on-site operations.
Expected Project End Results
The cash flow management system will provide fast and accurate
projections of how close is the gap between collections and
payments, allowing the owners to identify the current cash position
of the business.
Expected Benefits and Improvements
The following are the expectations from the project:
1. Fast and accurate projection of the business’ cash position
2. Improved data gathering of expenditures of project on-site and
management operations.
3. Practical look ahead schedule of billing and payables.
4. Convenient process of cash collecting and settling of payments.
5. Improved time management.
6. Data and project information is easily accessible
Identified Business Operational
Importance
It is important to note that cash flow system works independently, meaning it is
free from the challenges ingrained in the construction industry like clients failing
to settle unpaid invoices or the likes. With this in mind, an organized and well-
managed cash flow is only a tool for the owners to see the business in a better
financial standpoint. A carefully planned cash flow management will free the
business owners from the worry of ways on how to retain their profits or on a
worse case, seeking an external funding to continue their operations.
DESIGNING
Development Concept
a. Cloud-based accounting software
This software serves like the general ledger of all
accounts. The key person is to type in the project
milestones, job to complete cost details, detailed
list of item expenditures, & staff and client account
details. All accounts of key staff (e.g. mobile
banking, calendar, and expense tracker) should be
synchronized on the cloud, as well as the client’s
billing bank account. Payment terms and processing
information through an online platform should also
match with the verified payment account registered
on the cloud. Expenditures that charges on a timely
basis (operational expenses e.g. electricity, internet
provider, water, supplies, other applicable utilities)
can be synchronized to the cloud on a fix mode.
Development Concept
The cloud will be updated when receiving
measured work accomplishments, inventory
list update, maintenance and equipment
update, and/or payroll. The cloud will run
reports on the total expenses and pending
collection existing at the time. The system will
then create a forecast report showing the cash
flow days or weeks ahead.
Development Concept
b. Scheduling Application – time tracking software
simplifies the scheduling process and makes
disseminating employee schedules easy and fast. All
key staff is to download and access the application
through their mobile phones. With the use of the
internet, time tables will be disseminated and
synchronized to the key staff calendar schedules
that contains the following:
◦ Inventory update
◦ Work-in-progress update/ Work
accomplishment update
◦ Daily activity update
◦ Payment schedules
Development Concept
c. Expense Tracking Application – the expense tracking simplifies processes of documenting the
receipts of the expenditures and merging it with the mother ledger.
Development Concept
d. Online Payment Platform – payment processing
platforms will allow business to accept payment
from clients, with a card reader attached to a
smartphone or through an online link. Funds can
then be transferred to a business checking account
as needed, potentially speeding up the receivables
process.
Development Concept
e. Mobile Banking Deposit – this is to
eliminate trips to the bank by taking
advantage of mobile deposits. Checks can be
scanned and credited instantly via
smartphone.
Operational Concept
Scheduling Application Expense Tracking Application
(REPORTS AND UPDATES) (EXPENSE DOCUMENTATION)

RECEIVE COLLECTIONS DEPOSIT PAYABLES

Cloud-based Accounting
Software
Online Payment Platform Mobile Banking Deposit

Cash Flow Projection

Operational Concept
Guidelines:
1. The following shall be manually input ahead on the cloud:
Project milestones
Job to complete cost details
Detailed list of item expenditures (including fix items)
Staff and client account details

2. The following should be synchronize ahead on the cloud:

Business and client’s banking accounts
Key staff calendar accounts
Staff’s expense tracker accounts
Operational Concept
3. The cloud-based accounting software built-in calendar tool shall be
synchronized with the scheduling application to ensure that the mother time
table is being communicated on the business operations. This scheduling
application sends out reminders to the key staff handling the work-in-
progress and daily activity reports to give updates about the measured work
of the active job. This tool is also used on the inventory control update
reminder sent out to the key staff as well.

4. Through the expense tracking application, the key staff will sent out receipts
of purchases on expenditures that records to the cloud.
Operational Concept
5. After the measured work, fix expenditures, and inventories have been totaled
on the cloud-based accounting software, a financial value for the billing
statement is shown. This is wherein the personal judgment of the key staff
comes in, the main goal of the cash flow management is to maintain a
positive cash flow, and this means that the business needs to ensure that
they are not under billing the client and the owners are not the one funding
the project.

6. The billing statement is sent and cash collection comes in through the client’s
approved online payment platform. Any transaction made is automatically
tracked and documented on the cloud.
Operational Concept
7. The cash flow projection can be checked at this point. Again, personal
judgment of the key staff comes in. If the projection shows a positive cash
flow, expenditures can be settled using mobile banking. A negative cash flow
will indicate that paying expenditures should be delayed until cash collection
can able to cover this shortage.

8. Deposits made through mobile banking is automatically credited on the

cloud.
Integration Concept
The business is using spreadsheets through Microsoft Excel. Project planning
milestones, bidding estimates, job cost details are accomplished on this platform
for its secured environment. Work-in-progress reports are more convenient to
be done on a spreadsheet too. Spreadsheets can be imported once Excel is
integrated with the cloud.
Organizational Benefit Concept
This proposal will provide accurate and fast projection of the cash position of
the company which becomes very essential during the pandemic. Improved data
gathering of expenditures of project on-site and management operations allows
data integrity within the business. It gives practical look ahead schedule of
billing and payables. Checking of data and project information is convenient and
easily accessible. Better time management is expected and tedious processes of
receipt documentation and recording is avoided. It allows convenient process of
cash collecting and settling of payments.
Improvement Concept
Upon launch of the system, expansion of business can be expected on the near
future. Adaptation can be made by identifying the problems encountered during
the expansion, and integrating the applicable useful tools into the cloud to
improve the operation.

Applicable
Synchronization
Identify the technology to Integration to
to other used
problem improve the Cloud
technologies
operation/s
BUILDING
Available Technology to be used
1. Quickbooks – is an accounting
software geared mainly
toward small and medium-
sized businesses and offer on-
premises accounting
application and cloud-based
versions that accept payments,
manage and pay bills, and
payroll functions.
Available Technology to be used
2. Expensify – automates expense
management and receipt tracking
tasks compatible with Quickbooks.
It handles administrative work
quickly. After snapping photos of
the receipts, these can be uploaded
to quickbook after filling out
necessary details of the receipt.
This application can also be
integrated to the mobile banking
account of the user.
Operational and Integration Plan
Both Quickbooks and Expensify have
mobile versions that to be installed on
the phones of the key users. Tutorial
videos are available online that give an
overview of the application, user
guidelines, and tips on how to use it
effectively.
Cost Considerations
Ms. Laborera wishes to invest on a cash flow managing system for a
price of not more than Php 20,000. Quickbook Online Plus, with
essential features fit for small business, costs Php1500 per month.
THANK YOU!