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Construction Finance Screen Shot 2022-08-25 at 4.50.18 PM, Financial…
Construction Finance
Financial Management
A company’s financial resources
Assets
Cash
Planning and Control
Company-level financial issues
Who's Responsible
Owners
CFO
Project Managers
Estimators
Failures
Poor communication
Constantly borrowing to the limit
Poor project management
Lack of a comprehensive business plan
Ineffective financial management
Poor estimating and record keeping
Accounting
Determine if
projects are over- or- underbilled
Ensure costs are accurately tracked
All accounting systems are
functioning properly
Financial statements have
been prepared
Inline with the industry
Identify potential financial situations
Cost Reporting
Reactive
Provides data after the opportunity has passed for management to respond to and correct the problems
Cost Control
Proactive
Provides data in time for management to analyze the data and make corrections in a timely manner
Components Include: Up to date job cost and equipment tracking
Procedures established
Data is readily available
Purpose
Prepare financial statements
Pay Income and employment tax
Provide data to financial management
Process cash receipts and disbursements
Generally Accepted Accounting Principles
Conservatism
Consistency
Revenue Recognition Principle
Matching Principle
Full Disclosure Principle
Materiality Principle
Time Period Assumption
Financial Managers...
Manage costs and profits
Control project costs
Monitor project and company profit
Develop labor burden markups
Track general overhead
Set a minimum profit margin
Manage cash flows
Match labor to the cash available for use on a project
Ensure the company has sufficient cash to take on an additional project
Choose from their financial alternatives
Decide where the business should invest the company’s limited resources
Determine if renting is more cost effective
Account for financial resources
