The cornerstones of a successful project lie in agreeing payment terms with the customer, which ensures positive, or at least neutral, cash flow for the supplier throughout the project.
It requires defining some indisputable milestones for when the supplier is entitled to payment for services provided, as well as analyzing one's own cost process both with significant sub-suppliers and own direct costs.
We can help prepare a project-specific cash flow analyses, as well as assist in defining new and more precise milestone definitions in order to achieve more balanced payment terms between customer and supplier.
As a starting point, you should protect yourself against financial risks on the project by asking for a payment guarantee from the customer's bank or other reliable guarantor or by securing yourself via credit insurance.
If it is not possible to obtain payment security for various reasons, you should make sure that the payment terms reflect the costs incurred on the project until the time when you can contractually terminate the agreement instead.
Where a cash flow forecast shows cash flows in and out during normal execution of the agreement, the committed cash flow provides an overview of the payment obligations you have and continuously undertake from the time you become aware that the customer has failed to make a payment until that time where you can legally terminate the agreement.
It gives a completely different picture and typically requires a significantly more front-loaded payment terms for the supplier.
Mightia Consulting is a consulting company specializing in tender preparation and project management within production, energy and construction works
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