News & Research: Client Successes

Case Study: Capital Program Cash Flow Management Assessment

ScottMadden worked with a southeastern not-for-profit energy transmission cooperative to assess and develop an ongoing 90-day cash flow projection for their capital building program.

• In 2005, the cooperative undertook approximately 250 different capital projects representing approximately $100 million in expenditures. This amount is expected to double in the next five years
• Several different tools were used to manage the scope of these projects, track budgets, and report expenses.  These tools included a variety of software packages and custom applications
• While these systems did a very good job of providing a project management perspective with regard to activities, schedules, and budgets for individual projects, their accuracy in forecasting cash flows for the total program of projects was a potential source for error
• As a result, the cooperative experienced difficulty in estimating both annual and short-term capital costs in 2005.  This difficulty was anticipated to become more severe in future years as the capital program grows significantly
• ScottMadden's role was to analyze the inputs and processes for each expense category that led to an outflow of cash, create a 90-day projection methodology, develop all tools and procedural documentation, roll out the implementation plan, evaluate the operational impact, and transition the projection activities to the client

• Based upon an analysis of cash flows associated with capital projects, ScottMadden recommended a 90-day projection approach that focused on "spend categories", with an emphasis on the seven most "material" and "variable" categories
• Detailed steps included the following:
  • Reviewed and documented current business processes and information flows
  • Summarized process for payment, variables, and controls for each major spend category and validated the timing, cost determinants, and source information
  • Defined the desired future-state projection requirements for seven key spend categories
  • Developed recommendations to implement a 90-day cash flow projection
  • Developed tools and communication support to enable initial implementation
  • Assessed the impact on operational groups to support the methodology and finalized procedures and other documentation to support ongoing operations
  • Conducted training sessions and transitioned projection responsibilities to client

• Developed the projection methodology and implementation plan to estimate 90-day capital program cash flow requirements on an ongoing basis
• Created desktop procedures for 90-day capital projection
• Implemented 90-day capital program cash flow projection with a 95% accuracy rate
• Successfully transitioned ongoing projection activities to client