1.1 Introduction Cash flow can be defined as the movement in or out from a business.

Money flow into the business can be termed as positive cash flow while money flow out from the business can be termed as the negative cash flow (Singh, 1990). Amongst all the construction resources, the cash flow planning is one of the most critical task since most contractors failed in their business due to lack of liquidity and inadequate planning towards the cash flow of their business. According to Mawdesley et al. (1997), finance has been claimed as one of the most important resource in the construction process. In such, financial planning is the central to the survival of a construction company. Most of the construction companies in Malaysia especially small company of the Class F contractors do not have a proper way to manage their cost or we can simply say they just have the traditional way to manage them. In all construction company, one of the major methods in financing the cash flow is through the cash flow forecasting. This method enables the timing of financial requirement to be predicted in advance and also as a way to make sure that the financial needs is enough for further unpredictable consequences (Odeyinka et al., 2008). Another reason that leads to the failures in the construction company is that they are lack of cash planning which is due to their nature of the business. Contractors does know that there is a significant time lapse in time they are granted a project, incur labour, material and other cost are actually paid to complete work.Other factors such as retention, decision whether to hire subcontractor or to use own labour, renting versus the buying of the equipments and the timeliness of the clients payment have impact on the contractors cash flow (Tremel, 2009)

1.1.1 General Facts about Cash Flow There are a lot of contractor that do good work but when it comes to taking care of the business, they struggle. During the past decades, especially when economy turndown, many contractors did failed in their business but there are also those who can keep their business throughout the dark are those who manage well their cash flow (Marston, 2009). According to Park et al. (2005), most of the construction projects have their own cash cycle based on the cost of activities related to the project and on payments from clients. Typically, cash flow

on a construction project consists of cash in and cash out. Cash flow at the project level consists of a complete history of all cash disbursement and all earnings received as a result of project being executed. A lot of constructions have negative net cash flow, until the end of the construction when the final payment is received or advanced payment received before begin a project. This is a very typical situation when the final payment consists of retention money and the percentage is greater than the profit percentage of the project. To manage cash flow contractors must begin by setting a budget the company overhead. A fully utilized of manpower must also be taken into consideration on his workload and yet other factors to be considered.

1.1.2 Methods in Cash Flow Projection According to Singh (1990), basically there are two types of cash flow projection method in the construction industry and they are the projection based on planning techniques and the projection based on the Standard S curves. Most of the medium and large construction project they will have their own program developed to assist in the cash flow projection. Some of the convenient planned techniques are such as using the bar charts, Critical Path Method, precedence diagrams and line of balance. From these program developed, they can be assisted in the cost of various resources needed for their operations, credit conditions, sub-contractor, material supplier and so on. Secondly, according to Singh (1990) again, cash flow projection can be assisted based on the development of the Standard S curves. Some of the past cost information and details of completed projects have shown its enormous value in cost planning at the initial stages of design. Such information can be utilized for establishing cash flow in different type of projects. Besides it also can be utilized for the cash flow planning for both the client and the contractors considerations. The standard cumulative value versus time curves based on the past information of the completed project can be developed.

1.2 Current versus future cash needs According to Tremel (2009), analysis of working capital and current cash needs does not provide a signal of a company future cash flow needs and it does not show the ability of a company in handling any cash flow interruption due to any current contract, nor indicates any future cash needs as a result of being awarded a new contract. All this only be able to determine through the preparation of a cash flow projection. The purpose of the cash flow projection is to determine the amount the cash is necessary to handle the anticipated level of a company operation and determine when the cash is needed. We have to always remember that each contract have its own cash flow cycle. At times, a contract will be the user of cash while and at the other times, at the end of the profitable contract, it will be a provider of cash. The ability of a company to supply cash is very much dependent on the cash flow position of its entire project in any time

1.3 Cash flow projection Cash flow projection is a forecast of cash funds that a company which shows that anticipates of receiving and paying out throughout the course of a given duration of time and also the cash situation at specific time during the period being projected. One of the importance of preparing the cash flow projection is to know the shortage or excesses in cash to operate the business during the time in which the projection is prepared. If cash shortage is revealed, there must be a plan to provide more cash until a balance cash flow is obtained.

1.4 Cash flow process

According to Tremel (2009) again, the preparation of the cash flow projection can be divided into three phase and they are as follow: a) Prepare a job operating schedules. b) Prepare the cash flow projection of current and expected contract c) Prepare the company-wide cash flow projection which will include every detail of the jobs.

A job operating schedule is a month by month analysis of expected contract production, progress bills and revenue recognition for each contract. The developing of the schedule since the estimating phase when the contract was first estimated and bid. This schedule should include the timing of the labour, sub-contractors, materials and equipment which be used in the contract. Once the schedule was prepared, the job cash flow projection can be accomplished. This projection indicates the cost incurrence and expecting to be paid and when progress bills are collected. Some of the factors in developing these projections are such as the company payment policies and past history with customer. The job operating schedule and a job cash flow projection must be different in which they are usually different for every contract. This is when the company expects to expand their financial resources or to collect funds during the planning period where this include the current contracts, anticipated work and closed contract with remaining receivable balance. This schedules should be updated monthly in order to shows the changes the contract pricing, costs and timing.