Case Study: Cash flow planning in the real estate sector

The focus of Mitterndorferstrasse GmbH lies in recognising and realising the development potential of projects. We buy plots of land and develop them to a high degree of usability. Our field of activity covers planning and the official approval process, includes reviewing the commercial and tax background, and takes responsibility for site management. From building sustainable residential complexes and subsidised housing through to industrial and commercial construction. From new builds to the renovation of older buildings.

In the course of this work, controlling – and with it cash flow planning – plays a special role. As the interface between clients and banks, we make sure that construction projects are carried out within the agreed project calculation. An essential part of this is recognising deviations from the original plan and informing everyone involved in good time. In construction projects this active communication is particularly important, because in the worst case a deviation from the plan can lead to the construction account limit being exceeded, and thus to the project being unable to pay invoices that are due. The consequences in such a case can range from losing the early payment discount right through to a construction stop.

The old way

All our calculations are prepared and agreed with the help of Excel. The calculation always includes a rough cash flow plan as well, in other words the allocation of all items of the calculation along the time axis, in order to determine the maximum amount of the construction loan required.

Download link to the calculation further below

In the past we had employees with varying levels of Excel knowledge and skill. One of them, Robert, developed a brilliant “cash flow planning Excel” for us. All the entries were exported from the bank as a CSV file, imported into the file and tagged there. These tags correspond to the items of the calculation. That makes an allocation along the time axis possible.

Honestly. When I heard VLOOKUP, I checked out.

We are a small Tyrolean company, and our problem is that we could not keep this know-how in the company and that our successors were unable to operate the file properly. On top of that, smaller formula errors appeared over time. Since the file is the basis for regular reporting to the bank, that is of course problematic.

Using Commitly

We are among Commitly’s first customers and were even able to test features in advance that had not yet been released. With Commitly, cash flow planning and controlling have become considerably simpler. At the start of a project we still prepare the calculation in Excel. Immediately after the loan is granted, however, we now connect to the construction account. That alone has already brought us our first savings.

Whereas in the past we needed a signing authority with read-only access to the client’s account in order to get access to the account transactions, the client can now simply add us in Commitly as an administrator – within two minutes! In the past we usually needed 7 to 10 days to collect all the signatures and send the documents to the bank. And for our own projects we can also add our case handlers. Since Commitly has read-only access to the accounts, there are no security problems.

Connecting to the bank removes the tedious, complicated and error-prone importing and exporting of entries. All transactions are synchronised with a single click and are therefore always up to date. But we do have one problem here. Not all banks deliver “clean” data that can be processed correctly. Volksbank, for example, delivers all transaction data (recipient, sender, IBAN, reference) in a single field. In that case the transactions cannot be processed automatically and the assignment to categories has to be done manually. Interestingly, though, we do not mind the manual work here, because it lets us check all the entries once more.

The categories provided by Commitly as standard are not 100% applicable to our field. We have therefore adapted the categories to the project calculation. That has the additional advantage for us that it achieves a clear allocation and traceability back to the original calculation. And for the bank, the reporting from Commitly is therefore easy to read and to check.

What surprised us a great deal, and what has meanwhile become a daily routine, is searching for entries in Commitly. Questions keep coming up such as “has this invoice already been paid?” or “how many invoices have we already paid to X?”. In the past that was always a simple query in online banking.

Thanks to the faster login in Commitly and the simple search function in the transactions, accessing the bank account is no longer efficient for us. We can also delegate the task to a case handler now. I am already curious to see what advantages Commitly’s global search function will bring later on.

To map the planning, we created a plan and entered the rough cash flow planning from the first Excel file into Commitly. That took about 30 minutes, with a good part of the time going into questioning the assumptions once again. Commitly makes it easy to create plans, to name them and also to fix them – or, as it is called in Commitly, to commit them. That is particularly important because there is a plan agreed with the bank.

Committing to a plan opens up what is perhaps the most important feature for us: the forecast. Put simply, the forecast consists of the actual figures up to the current date plus the committed plan for the future periods. That shows us what would happen if everything ran according to plan from now on. It sounds simple, but it is extremely important that this view includes the deviation we currently have, so that we can see immediately, for example, whether we are going to have a problem with the account limit.

In addition, the forecast enables the controlling function. At the end of the month the actual figures are compared with the plan. Commitly shows the deviations by means of notifications. Over the past months this feature has become the basis for our monthly reviews. We go through the individual items and analyse the deviation. Commitly gives us various options for dealing with a deviation. We can confirm it and thereby record that we are above or below plan and that this will also affect the overall result. Or we can carry the deviation forward into the coming months. This last option in particular is extremely important for us, because in construction there are often delays in timing and deviations result from them.

Our concern at the beginning was that Commitly’s planning methodology would cost us the flexibility of Excel. Especially with new circumstances that require a change to the plan. Commitly, however, has developed an interesting approach for this. You can create a new plan on the basis of a forecast. That is done in no time. The decisions taken in controlling are thereby transferred into a new plan, which can then be agreed with the bank again. The advantage of this approach is that it makes us practically “audit-proof”. All changes are traceable. Discussions based on different versions of the plan are a thing of the past.

Where we have gained the most in terms of external presentation is the reporting function. Our old Excel reports were fine for us, but then again we are not designers, we are construction people. With the reports created by Commitly we can now show the professionalism with which we handle our projects in our reporting to clients and banks as well.

Template for a property developer calculation

The property developer is kind enough to make the Excel file for a developer calculation available to everyone interested. By registering for our newsletter you will receive the download link.