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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].
© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 2
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
© 2013 CFMA. All rights reserved.
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
© 2013 CFMA. All rights reserved.
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
6© 2013 CFMA. All rights reserved.
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Kevin Foley, CCIFPChief Financial OfficerE. Allen Reeves, Inc.Phone: 215-884-2255 – Ext. #123Email: [email protected]: www.eareeves.com
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 3
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
© 2013 CFMA. All rights reserved.
“The Basics”Section Nine: Financial
Statement Analysis
8© 2013 CFMA. All rights reserved.
Financial Statement AnalysisThe “Three Cs”
Assess Management Capacity
A L d hi Ch t
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Assess Leadership Character
Evaluate Capital Structure
91© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 4
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
92© 2013 CFMA. All rights reserved.
Using Key Ratios
Liquidity Ratios
Profitability Ratios
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Leverage Ratios
Efficiency Ratios
93© 2013 CFMA. All rights reserved.
“The Basics”Section Ten:
What’s Expected of YOU?
12© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 5
What a Company Expects from the Construction Financial Manager
An Effective Member of the Management Team
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What a Company Expects from the Construction Financial Manager
An Effective Member of the Management Team
A Motivational Administrator
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A Motivational Administrator of the Finance Department
100© 2013 CFMA. All rights reserved.
What a Company Expects from the Construction Financial Manager
An Effective Member of the Management Team
A Motivational Administrator of the Finance Dept
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the Finance Dept.
A Responsible Representative of Employer & a Liaison to Creditors
101© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 6
What a Company Expects from the Construction Financial Manager
An Effective Member of the Management Team
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
102© 2013 CFMA. All rights reserved.
What a Company Expects from the Construction Financial Manager
An Effective Member of the Management Team
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
© 2013 CFMA. All rights reserved.
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”.
104© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
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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
105© 2013 CFMA. All rights reserved.
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”
106© 2013 CFMA. All rights reserved.
Polling Question #1:Has your company or construction clients performed prevailing wage work?
a) YES
21 63© 2013 CFMA. All rights reserved.
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b) NO
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 8
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
107© 2013 CFMA. All rights reserved.
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
108© 2013 CFMA. All rights reserved.
Lien WaiversWhat is a lien?
– Who has lien rights?
The Lien Process
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Lien waivers
Remedies for parties with liens
Resources
108© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 9
3rd Party RelationshipsBanker, bonding, insurance
Suppliers & vendors
25 109© 2013 CFMA. All rights reserved.
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
110© 2013 CFMA. All rights reserved.
“The Basics”Section Eleven:
Industry Benchmarks
27© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
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Workbook TAB-102012 FINANCIAL SURVEY EXECUTIVE SUMMARY.pdf
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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
112© 2013 CFMA. All rights reserved.
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
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Use of mobile technologies
Integrated Project Delivery (IPS)
Modular Construction
Public Private Partnerships (PPP)
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 11
• 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
© 2013 CFMA. All rights reserved.
Source: CFMA’s 2012 Annual Financial Survey
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%
114© 2013 CFMA. All rights reserved.
Source: CFMA’s 2012 Annual Financial Survey
#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%
115© 2013 CFMA. All rights reserved.
Source: CFMA’s 2012 Annual Financial Survey
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 12
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
116© 2013 CFMA. All rights reserved.
Source: CFMA’s 2012 Annual Financial Survey
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.
117© 2013 CFMA. All rights reserved.
Source: CFMA’s 2012 Annual Financial Survey
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?
120© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
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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
37 31© 2013 CFMA. All rights reserved.
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.
© 2013 CFMA. All rights reserved.
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.
© 2013 CFMA. All rights reserved.
CFMA’s BASICS of Construction Accounting Session 4: Participant Guide
© 2013 CFMA. All rights reserved. 14
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.
© 2013 CFMA. All rights reserved.
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!
41 121© 2013 CFMA. All rights reserved.
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