Discuss what impact will an inaccurate progress estimate have on cash flow? . Discuss the reasons change order work costs more than work in the original scope?
An inaccurate progress estimate can have a significant impact on cash flow for a project. Cash flow is the movement of cash into and out of a business, and it is critical to ensuring that a project has the necessary funding to continue its operations. Inaccurate progress estimates can affect cash flow in the following ways:
- Overstated estimates: If the progress estimates are overstated, it can lead to an overestimation of the funds required for the project. This can result in the unnecessary allocation of resources and cause the project to run out of cash before completion.
- Understated estimates: If the progress estimates are understated, it can lead to an underestimation of the funds required for the project. This can result in a shortage of funds, leading to delays in the project's completion or the inability to pay suppliers and employees.
- Mis-allocation of resources: An inaccurate progress estimate can also lead to the mis-allocation of resources. For example, if a project manager expects a project to be completed earlier than it will, they may allocate resources to another project, leaving the current project without the necessary resources to complete the work.
- Inefficient use of funds: Inaccurate progress estimates can also result in inefficient use of funds. If a project manager overestimates progress, they may continue to spend money on unnecessary resources, which can drain the project's budget.
In summary, an inaccurate progress estimate can have a significant impact on a project's cash flow. It can lead to mis-allocation of resources, inefficient use of funds, and delays in the completion of the project. Project managers must ensure that progress estimates are as accurate as possible to ensure that the project has the necessary funds to operate efficiently.
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