Cashflow Analysis 

Cash Flow Analysis in project management examines when money flows into and out of a project. It helps ensure that the project always has enough funds to meet its obligations during execution. In the context of A Guide to the Project Management Body of Knowledge (PMBOK® Guide), cash flow analysis is part of financial management planning and helps the project manager understand the timing of expenditures and funding requirements.

1. What is Cash Flow Analysis?

Cash flow analysis studies:

1. Cash Inflows  : Money coming into the project

2. Cash Outflows : Money spent by the project

3. Net Cashflows  = Cash Inflows - Cash Outflows 

   1. If inflows > outflows → Positive cash flow

   2. If outflows > inflows → Negative cash flow

The objective is to determine:

1. When the project needs funding

2. Whether the project will face cash shortages

3. When the project starts generating financial benefits

2. Cumulative Cash Flow

Cumulative cash flow shows the running total of cash flow over time.

It indicates:

1. When the project breaks even (Payback Period : The year in which cash inflows equals cash outflows)

2. When profits start appearing
   
   

Cashflow analysis is done at several stages of the project;

1) The first level of cashflow analysis is done before finalizing the project from among a group of potential projects. This is done as part of the portfolio management which involve selection of the best projects which provides maximum value in the shortest possible time. 

2) A more accurate cashflow analysis is performed during the initiation and planning stages 

3) Cashflow analysis is again revised / optimised during stage gate or phase gate reviews (when the project progresses into a new major phase)