Understanding Construction Financial Statements

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TAG, Southern California's leading provider of outsourced accounting and software solutions for the construction industry, hosts Construction Financial Management Series to Accelerate Business Productivity.
Review and the use of balance sheets, income statements and work-in-progress reports.

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Understanding Construction Financial Statements

  1. 1. www.teamtag.net Understanding Construction Financial Statements Workshop #1 January 30, 2014 Presented by Rob Scherer
  2. 2. Construction Financial Management Series • Six-Part Series to Cover Best Practices in Financial Statements, Job Costing, Construction Software and other Critical Accounting Areas. La Jolla, CA – TAG, Southern California’s leading provider of outsourced accounting and software solutions, along with the San Diego Chapter of the Associated General Contractors (AGC) announced the launch of a six-part series on Construction Financial Management beginning in January 2014. Robert Scherer, President of TAG will share his financial expertise during each module of the information-rich series. The courses will help building industry executives and finance professionals become more familiar with the best practices and procedures in integral areas such as accounting, budgeting, financial planning, banking, bonding and construction software systems for job costing, project management and tracking.
  3. 3. Beyond the Numbers… TAG provides valued financial and business resources & counsel for companies and individuals on the move. TAG supports and strengthens your company’s accounting department and management with outsourced bookkeeping, controller, and CFO services. Whether you are a CFO who could use a quality controller once a week, a controller who needs bookkeeping assistance, or an office manager looking for higher level finance and accounting oversight, TAG can fill the need. From sales to implementation, training to consulting, TAG’s team of certified consultants work to improve your efficiency and reporting capabilities with the best accounting software for the building industry. TAG is an Authorized Reseller with a team of Certified Consultants for: • Sage 300 Construction and Real Estate (Timberline) • Sage 100 Contractor (Master Builder) • Sage Estimating • Contractor V
  4. 4. January 30, 2014 - Understanding Your Construction Financial Statements February 27, 2014 - Job Costing & Accounting March 27, 2014 – Banking & Bonding Management April 24, 2014 – Tracking your Field Production May 29, 2014 – Best Practices in Construction Accounting Software June 26, 2014 – Construction Financial Management Boot Camp
  5. 5. Association of General Contractors – San Diego www.teamtag.net
  6. 6. Purpose: The overall purpose of today’s workshop is to review the key components of a Construction Financial Statement: Balance Sheet Income Statement Work-In-Progress
  7. 7. TAG presents at the AGC San Diego Chapter Robert Scherer, President of TAG teaches “Construction Financial Management” series for the Association of General Contractors. www.teamtag.net
  8. 8. A Balance Sheet is a snapshot of the company’s Assets and Liabilities valued as of a specific date.
  9. 9. Current Assets Cash Accounts Receivable - Trade Accounts Receivable - Retention Costs in Excess of Billings (under billings) Prepaid Expenses
  10. 10. Fixed Assets Machinery & Equipment Office Fixtures & Furniture Field Vehicles Leasehold Improvements Less Accumulated Depreciation Other Assets Deposits Other Long-Term Assets
  11. 11. Current Liabilities Accounts Payable - Trade Accounts Payable - Sub Accrued Wages & Benefits Billings in Excess of Earnings Line of Credit Current Portion of Long-Term Debt Long-Term Liabilities Long-Term Debt Less Current Portion
  12. 12. Owner’s Equity Common Stock Retained Earnings Current Year Income/(Loss)
  13. 13. An Income Statement provides a measure of the operating performance of a company for some particular period of time.
  14. 14. Billings and Revenue www.teamtag.net
  15. 15. Billings and Revenue Direct Job Costs - Material Direct Job Costs - Labor Direct Job Costs – Sub’s Direct Job Costs - General Direct Job Costs - Equipment Indirect Field Costs General & Administrative Other (Interest Income/Expenses)
  16. 16. Construction Income Statement Example Robert Scherer, President of TAG reviews the use of balance sheets, income statements and work-in-progress reports. www.teamtag.net
  17. 17. A Work in Progress is an overview of the company’s job activity for the current fiscal year. A Contractor’s WIP calculates the percentage completion of each job, and provides the underand overbillings totals entered on the Balance Sheet. It should also reconcile to revenues and costs on the income statement.
  18. 18. Basic Information From WIP Costs & Earnings in Excess of Billings (Asset) Billings in Excess of Costs & Earnings (Liability) Comparison of Open & Closed Jobs Backlog of Work Gross Profit Analysis by Job Underbillings “Flag” Comparison of Jobs by Location, Estimator, Project Manager, Division, Type, etc.
  19. 19. Robert Scherer, President of TAG www.teamtag.net
  20. 20. KPI’s for Construction Financial Management “Cash is King” Rule of Thumb. www.teamtag.net
  21. 21. Key Performance Indicators Cash Working Capital Current Ratio Underbillings as compared to Overbillings Gross Margin % Trends Indirect Field Cost as a % of Overall Field Cost Backlog in Months
  22. 22. January 30, 2014 - Understanding Your Construction Financial Statements February 27, 2014 - Job Costing & Accounting March 27, 2014 – Banking & Bonding Management April 24, 2014 – Tracking your Field Production May 29, 2014 – Best Practices in Construction Accounting Software June 26, 2014 – Construction Financial Management Boot Camp

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