Construction Accounting and Financial Management Chapter 12 Cash

  • Slides: 15
Download presentation
Construction Accounting and Financial Management Chapter 12 Cash Flows for Construction Projects Construction Accounting

Construction Accounting and Financial Management Chapter 12 Cash Flows for Construction Projects Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cost of Work n Cost of work performed without profit and overhead markup Construction

Cost of Work n Cost of work performed without profit and overhead markup Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cost of Work Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by

Cost of Work Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Payment n Suppliers q n Labor q n Monthly (preferably when paid) Weekly Subcontractors

Payment n Suppliers q n Labor q n Monthly (preferably when paid) Weekly Subcontractors q q When paid Withhold retention Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Payments Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher

Payments Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Value, Costs, and Receipts n Value q q n Cost q n Value of

Value, Costs, and Receipts n Value q q n Cost q n Value of work based upon contract with the owner (schedule of values) Includes costs and profit and overhead markup Cost of work performed without P&O markup Receipts q Payments from the owner Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Value, Costs, and Receipts Construction Accounting & Financial Management, 3/e Steven Peterson © 2013

Value, Costs, and Receipts Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cash Provided by Contractor n Difference between payments and receipts Construction Accounting & Financial

Cash Provided by Contractor n Difference between payments and receipts Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cash Provided by Contractor Construction Accounting & Financial Management, 3/e Steven Peterson © 2013

Cash Provided by Contractor Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Determining a Project’s Cash Flow n Step 1: Prepare a cost-loaded schedule n Step

Determining a Project’s Cash Flow n Step 1: Prepare a cost-loaded schedule n Step 2: Determine when costs will be paid q q Following week (e. g. , labor) End of month (e. g. , some materials) When paid, paying retention (e. g. , some materials) When paid, holding retention (e. g. , subcontracts) Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Determining a Project’s Cash Flow n Step 3: Determine when payments will be received

Determining a Project’s Cash Flow n Step 3: Determine when payments will be received from owner q q n When will cost be billed When will bills be paid Step 4: Difference in cash flows q Cash required = Payments – Receipts Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Maximum Cash Required n When payments are received at the end of the month,

Maximum Cash Required n When payments are received at the end of the month, the maximum amount of cash required often occurs during the month q Not at months end Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cash Invested on Project with Progress Payments Construction Accounting & Financial Management, 3/e Steven

Cash Invested on Project with Progress Payments Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cash Invested on Project without Progress Payments Construction Accounting & Financial Management, 3/e Steven

Cash Invested on Project without Progress Payments Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Reducing the Cash Required n Increased use of subcontracts that are paid when paid

Reducing the Cash Required n Increased use of subcontracts that are paid when paid n Reduce retention rate n Increase profit and overhead markup n Front-load the schedule of values q Increase value of early work and decrease value of later work Construction Accounting & Financial Management, 3/e Steven Peterson © 2013 by Pearson Higher Education, Inc Upper Saddle River, New Jersey 07458 • All Rights Reserved

Cash Management Chapter 11 Cash Management Cash managementCash Management Chapter 11 Cash Management Cash management
Financial Management Accounting Financial Management Accounting Financial ManagementFinancial Management Accounting Financial Management Accounting Financial Management
Financial reporting financial accounting Financial reporting financial accountingFinancial reporting financial accounting Financial reporting financial accounting
Construction Accounting and Financial Management Chapter 14 CashConstruction Accounting and Financial Management Chapter 14 Cash
CHAPTER7 CASH MANAGEMENT CASH MANAGEMENT Cash is oneCHAPTER7 CASH MANAGEMENT CASH MANAGEMENT Cash is one
CASH MANAGEMENT NATURE OF CASH In cash managementCASH MANAGEMENT NATURE OF CASH In cash management
CASH MANAGEMENT NATURE OF CASH In cash managementCASH MANAGEMENT NATURE OF CASH In cash management
Financial Statement Accounts Cash and Cash Equivalents CashFinancial Statement Accounts Cash and Cash Equivalents Cash
Construction Accounting and Financial Management Chapter 1 ConstructionConstruction Accounting and Financial Management Chapter 1 Construction
Construction Accounting and Financial Management Chapter 2 ConstructionConstruction Accounting and Financial Management Chapter 2 Construction
Construction Accounting and Financial Management Chapter 3 AccountingConstruction Accounting and Financial Management Chapter 3 Accounting
Intermediate Financial Accounting I Financial Accounting and AccountingIntermediate Financial Accounting I Financial Accounting and Accounting
CASH MANAGEMENT Cash Receipts and Payments CASH FLOWSCASH MANAGEMENT Cash Receipts and Payments CASH FLOWS
Cash Management Cash Cash is one of theCash Management Cash Cash is one of the