Download - The Basics of Construction Accounting · 2014-11-12 · CFMA’s BASICS of Construction Accounting Session 4: Participant Guide © 2013 CFMA. All rights reserved. 2 Acknowledgement

CFMA’s BASICS of Construction Accounting Session 4: Participant Guide

© 2013 CFMA. All rights reserved. 1

The Basics of Construction Accounting

1© 2013 CFMA. All rights reserved.

An Introduction to Construction Accounting & Financial Management Principles

Day 4

This presentation and all associated materials (including but not limited to workbooks, handouts, CD-ROMs, etc.) are copyrighted by CFMA and may not be altered, adapted, reproduced, or redistributed in any manner without express written permission from CFMA’s Vice President of Content Management and Education and/or Chief Operations Officer

Copyright Notice

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Management and Education and/or Chief Operations Officer. Unauthorized use of any CFMA copyrighted materials is expressly forbidden by law.

Questions regarding usage and content should be directed to:CFMA, 100 Village Blvd., Suite 200, Princeton, NJ 08540Phone: 609-452-8000 E-Mail: [email protected] Web: www.cfma.org

© 2013 CFMA. All rights reserved.

Special Thanks to…Gordon Marshall, Faith McDermott, Mary Davolt, Jill Stone and Tony StaglianoWe are grateful for their time, talent, and diligencein the creating and updating of this course and materials

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materials.

It is because of the dedication of our volunteer members that CFMA continues to be The Source & Resource for Construction Financial Excellence.

Questions concerning content, etc. should be directed to [email protected].




AcknowledgementCFMA would like to acknowledge…

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as the official sponsor of “The Basics of Construction Accounting” course

and all of CFMA’s WebLive Programs


Program ScheduleDay 1: Thursday, Nov. 14, 2013 - 3:00-5:00 PM EST

Day 2: Monday, Nov. 25, 2013 - 3:00-5:00 PM EST

Day 3: Thursday, Dec. 5, 2013 - 3:00-5:00 PM EST

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Day 4: Thursday, Dec. 12, 2013 - 3:00-5:00 PM EST


Anthony R. Stagliano, CPA, CCIFPNational Director of Construction Industry ServicesCBIZ & Mayer Hoffman McCann P.C.Phone: 610-862-2420Email: [email protected]: www.mhm-pc.com

Session Presenters


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Kevin Foley, CCIFPChief Financial OfficerE. Allen Reeves, Inc.Phone: 215-884-2255 – Ext. #123Email: [email protected]: www.eareeves.com



Section 9 - Financial Statement Analysis

Section 10 - What’s Expected of YOU

Section 11 Industry Benchmarks

Today’s Agenda: Day 4

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Section 11 - Industry Benchmarks


“The Basics”Section Nine: Financial

Statement Analysis


Financial Statement AnalysisThe “Three Cs”

Assess Management Capacity

A L d hi Ch t

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Assess Leadership Character

Evaluate Capital Structure




Financial Statement AnalysisLook at CFMA Basic Construction Co. -

March 31, 2013

Working Capital:

Current Assets – Current Liabilities

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Current Assets – Current Liabilities

$5,000,000 - $4,000,000 = $1,000,000

Current Ratio: 1.25 to 1

Debt to Net Worth:Total Debt $4,500,000

Total Net Worth $1,500,000

Ratio = 3 to 1


Using Key Ratios

Liquidity Ratios

Profitability Ratios

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Leverage Ratios

Efficiency Ratios


“The Basics”Section Ten:

What’s Expected of YOU?




What a Company Expects from the Construction Financial Manager

An Effective Member of the Management Team

13 99© 2013 CFMA. All rights reserved.



A Motivational Administrator

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A Motivational Administrator of the Finance Department




A Motivational Administrator of the Finance Dept

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the Finance Dept.

A Responsible Representative of Employer & a Liaison to Creditors






A Motivational Administrator of the Finance Dept

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the Finance Dept.

A Responsible Representative of Employer a Liaison to Creditors

An Administrator Responsible for Insurance, Income Tax, Legal, HR, Safety & IT




A Motivational Administrator of the Finance Dept.

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A Responsible Representative of Employer & a Liaison to Creditors

An Administrator Responsible for Insurance,

Income Tax, Legal, HR, Safety & IT

A Model of Integrity with High Ethical Standards


Policies & Practices Unique to the Construction Industry

Every contract has unique terms.

Customers may require specific information & format for billing that impacts your system, policies and procedures.

E ti ti i i t l t f j b t &

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Estimating is an integral part of job procurement & revenue recognition.

No two projects are the same. They are impacted by so many variables such as design, location, employees/subs, scope of work, weather, time of year.

The one industry where Change Orders are the “Norm”.




Policies & Practices Unique to the Construction Industry

Certified Payroll Reports

Prevailing Wage

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Lien Waivers with Every Payment

State Sales and Use Tax Requirements


Certified Payroll ReportsEmployee names

Addresses

SSNs

Straight-time & OT by day

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Hourly wage rate

Deductions taken

Net pay received

Fringes paid

Signed “Statement of Compliance”


Polling Question #1:Has your company or construction clients performed prevailing wage work?

a) YES


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b) NO



Prevailing Wage

Publically funded projects

Davis-Bacon ACT

St t F d l

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State or Federal

http://www.gpo.gov/davisbacon

http://www.gpo.gov/davisbacon/allstates.html


State Sales and Use TaxesEach state has different requirements

– Some down to local tax rate differences

Some organizations have exemptions

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g pavailable

Care to be taken not to pay tax more than once in a transaction


Lien WaiversWhat is a lien?

– Who has lien rights?

The Lien Process

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Lien waivers

Remedies for parties with liens

Resources




3rd Party RelationshipsBanker, bonding, insurance

Suppliers & vendors


CCIFP Credential“The difference between an occupation & a profession is certification.”Herb Brownett, CFMA National President (2003)

The ONLY standard for construction financial professionals.

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The ONLY credential that recognizes the unique challenges & specialized knowledge demanded of construction financial professionals.

Exam Information: www.iccifp.org

Study Resources: http://www.iccifp.org/get-prepared/references


“The Basics”Section Eleven:

Industry Benchmarks




Workbook TAB-102012 FINANCIAL SURVEY EXECUTIVE SUMMARY.pdf


Results from CFMA’s 2012 Annual Financial Survey

Balance Sheet

Statement of Earnings

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Key Trends & Challenges

What Best in Class Firms Know


Source: CFMA’s 2012 Annual Financial Survey

Trends in Execution of Work

Use of Building Information Modeling (BIM)

Growth in Lean Construction

U f bil t h l i


Use of mobile technologies

Integrated Project Delivery (IPS)

Modular Construction

Public Private Partnerships (PPP)



• The private sector continues to generate the majority of revenues;

• Primary source of competition is existing contractors pursuing new growth;

Industry Trends

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• Bank credit availability has steadily improved over the past three years;

• Over 50% of companies are relying on external data like financial surveys, benchmarking & peer groups to prepare their P&L budgets



Top 5 Industry Challenges

• Financial condition of federal, state, or localgovernment – 66%

• Sources of Future Work – 87%

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• Shortage of Trained Field Help – 68%

• Healthcare Insurance Costs – 73%

• Banking & Lending regulations – 32%



#1 Challenge

Sources of Future Work – 45%

Shortage of Trained Field Help – 15%

Financial condition of federal, state, or local

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government – 13%

Healthcare Insurance Costs – 9%

Banking & lending regulations – 4%





Best In Class Firms:Build relationships, alliances, networks.

Focus on retaining key employees.

Know that volume kills, profit thrills.

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Identify & effectively manage risk

Use “Do what we do better” strategy

Place a high priority on safety



Best In Class Firms:Use performance-based management systems.

Invest in training their employees.

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Institute & use disciplined marketing programs.

Place a high priority on safety.



Now that you’ve completed The Basics, do you think you can:

Explain the core points of revenue recognition?

Discuss the importance of a job cost system?

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Calculate earned revenue?

Identify what a construction company expectsfrom its financial manager?




End of Section Eleven and Day 4 Final Wrap-Up / Q&A

Anthony R. Stagliano, CPA, CCIFPNational Director of Construction Industry ServicesCBIZ & Mayer Hoffman McCann P.C.Phone: 610-862-2420Email: tstagliano@cbiz com


Email: [email protected]: www.mhm-pc.com

Kevin Foley, CCIFPChief Financial OfficerE. Allen Reeves, Inc.Phone: 215-884-2255 – Ext. #123Email: [email protected]: www.eareeves.com

In financial statement analysis, what about a contractor can be readily assessed?

A. Adequate field staffing levels.

Review Question #1

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B. Contractor’s adherence to project schedule.

C. Contractor’s levels of liquidity.

D. Types of projects which are becoming available to bid.


Which of these is not unique to the construction industry?

A. Lien waivers with payments.

Review Question #2

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B. Prevailing wage projects.

C. Every “sale” involving a contract with unique terms.

D. Use of subcontractors on most projects.




What is a key attribute of a CFM (Construction Financial Manager)?

A. Trusted representative of the firm for bankers and sureties

Review Question #3

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sureties.

B. Membership in Professional Societies (CFMA,AICPA).

C. Strong technological skills.

D. Good relationships with architects and engineers.


Join us for our next CFMA Join us for our next CFMA WebLiveWebLive Program… Program…

SAVE THE DATE for CFMA’s next WebLive educational seminar “Contracts 101” to be presented on January 9 & 16, 2014

Thank you for your participation!Thank you for your participation!


FOR MORE INFORMATION CONTACT:Ariel Sanchirico, Associate Director of Education

CFMA, 100 Village Blvd., Suite 200, Princeton, NJ 08540

Email: [email protected] Phone: 609.945.2433

For registration details visit www.cfma.org