Monthly Cashflow

Cashflow is often preferred over simple payback for energy-efficiency investments because payback is irrelevant for projects that must be financed over time. Using monthly cashflow can better determine the value of an investment for several reasons. Oftentimes cashflows are irregular, especially in regard to energy-efficiency investments because savings can vary from month to month.

Using a monthly cashflow analysis provides a more relevant evaluation of the financial status of the building over time. Furthermore, the payback analysis does not account for cashflow beyond the investment payoff. Again, using a monthly cashflow analysis gives a more accurate picture of projected expenses and savings. A cashflow method also enables you to adjust for fluctuating interest and utility rates and include estimated maintenance costs. What can appear as a large initial investment often looks more manageable and attractive when you consider it from the more realistic perspective of actual cashflow. In its most basic form, calculating monthly cashflow involves identifying and summing all the savings and expenses associated with a particular technology or a set of technologies over a certain period of time. Consider the following real-life example of a group home in Washington, D.C.