Lecture 18: Finncil Mngement (Continued)/Csh Flow CEE 498 Construction Project Mngement L Schedules A. Schedule.of Contrcts Completed See Attchment # 1 ll. 1. Revenues Erned 2. Cost of Revenues 3. Gross Profit (or loss) B. Schedule of Contrcts in Progress See Attchment #2 1. Totl Revenues Totl Estimted Profit 3. Totl Costs Incurred 4. Billed To Dte 5. Estimted Cost to Complete 6. Cost nd Estimted Ernings in Excess of Billings (Underbillings) 7. Billings in Excess of Costs nd Estimted Ernings (Over billings) c. Vlues in sttements re broken down by fiscl yers; mny projects re constructed over more thn one fiscl period See Attchment #3 D. The csh flow nd profitbility of ech project is combined nd reflected in the finncil sttement. Reltionship of Schedules to Finncil Sttement See Attchment #4 m. Anlysis How do you use the infoniltion to ssess the finncil condition of contrctor? IV. A. Rtios from Blnce Sheet nd Income Sttement B. Schedules verge profitbility, timeliness of billings, bcklog (estimted cost to complete) Csh Flow A # 1 cuse of contrctor filure B. Not only must constructor hve good trdes people, it must lso hve stute business people to monitor csh flow
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project becuse the cumultive costs were higher thn the cumultive pyments during most of the project. Overdrft is the costs minus the income. This is the money tht the contrctor tkes out of its own ccount to finnce the project. Mximum overdrft occurs immeditely before the pyments re mde ech month. For exmple, immeditely before the owner mkes the td pyment, the overdrft is: 185,000 85,000 100,000 More complex clcultions cn be mde to clculte the mount of owner fmncing if the indirect costs, mrkup. retinge. nd interest re considered. These clcultions cn be seen in the Overdrft Clcultions sheet in the hndout Assume no indirect costs for this project
'C Month 1 ' ost 14: \. loooo ) e COSt ($) lo.<xx> 2 65,000 75,(XX) 3 110.000 1 85,<XK> 4 5 6 90.000 275.000 80.<XX> 355,000 35.000 390.000 An income grph cn be compred to the income curve to detennine who is fmncing the project. The income for this pniculr project ws s follows: Month Ihcome($) 1 9,450 2 61.425 3 15.500 4 94,500 Cumultive Income.(S) 9.450 70.87S 186.375 280,87 5 84.000 364.875 6 36.750 401,625 8 7.87S 409.500 These pyments re mde t the end of the indicted monm.
ATTACHMENT #1 To illustrte the Schedule of Contrcts Completed, the vlues in line 4967 (Auburn college of Sir Chrles Brkley) will be described. First. the schedule is essentilly in three groups. The first group (columns 1.2.3) includes vlues from the totl contrct. The second group (columns 4.5.6) consists of the vlues from the beginning of the project up to April 1. 1988. The third group (columns 7.8.9) includes the vlues from April 1. 1988 until the end of the project. Ech of the three groups described bove includes three items; Revenues Erned. Cost of Revenues. nd Gross Profit (Loss). These three vlues re relted s shown: Revenues Erned Cost of Revenues Gross Profit (Loss) (1). (2) (3) 12.070 7.008 5.062 Plus, ech item from one groups is relted to the sme item in the other groups s follows Group 1 Group 2 + Group 3 For exmple, the sum of the Cost of Revenues from Group 2 nd Group 3 equls Cost of Revenues from Group 1 s shown: 6.582 + 426 7.008 (5) + (8) (2) The sme is true for Revenues Erned nd Gross f;rofit(loss). Prove this to yourself. It sure, is fun!
A;TfACHMENT #2 IJ1temrettion of Schedule of Contrcts in Progress Line 5446 will be followed to illustrte the Schedule of Contrcts in Progress. This schedule is broken into 4 groups. Columns I nd 2. Revenue Erned nd Gross Profit (Loss). re vlues from the totl contrct. Columns 3 through 7 re vlues from the beginning of the project until Mrch 31, 1989. Columns 8 nd 9 indicte the underbillings nd overbillings t the time of Mrch 31, 1989. Columns 10 through 12 indicte the vlues from the yer preceding Mrch 31, 1989. Some reltions re shown below: Revenues (Col. I) Estimted Gross Profit (Col. 2) Estimted Cost of Revenues 169,688 37,013 132,675 Estimted Cost of Revenues Totl Cost Incurred (Col. 4) + Est. Cost to Complete (Col. 7) 132.675 122.062 + 10.613 The fct tht columns 3,4, nd 5 equl columns 10,, nd 12, respectively, indictes tht the project ws strted in the yer preceding Mrch 31, 1989. If it hd been strted before tht. the specified columns would not hve identicl vlues. As in. the Schedule of Completed Contrcts, Revenues Enied (Col. 3) Cost of Revenues (Col. 4) Gross Profit (Loss) (Col. 5) 155.292 122.062 33.230 The difference in Billed to Dte (Col. 6) nd Revenues Erned (Col. 3) is found in Billings in Excess of Costs nd Est. Erning (Col. 9), which is lso known s "Overbillings". The reltionship is s follows Billed to Dte Revenues Erned Billings in Excess of Costs nd Estimted Ernings 168.630 155.292 13.338 See for yourself how this cn be ltered to clculte..u nderbillings.. Fscinting. is it not?
A If ACHMENT #4 Revenues Erned The revenues erned for given yer (i.e.. fiscl yer 1989) is the sum of the vlues of the totl Revenues Erned for Yer Ended Mrch 3 I. 1989 on the Schedule of Conttcts in Progress nd the totl Revenues Erned During the Yer Ended Mrch 31,1989 on the Schedule of Completed Projects. Revenues Erned ('89) 258.242 + 1.738.580 1,996,822 ctegory. Cost 0.' Revenues The cost of the revenues erned for given yer is the sum of the vlues of the totl Cost of Revenues for Yer Ended Mrch 31. 1989 on the Schedule of Contrcts in Progress nd the totl Cost of Revenues During the Yer Ended Mrch 31, 1989 on the Schedule of Completed ProjeCtS plus the overhed which is shown on die Sttement of Net Ernings. CosrofRevenues ('89) 770.094... 199.608... 323.663 J 293.365 Revenues Erned ctegory. Gross Profit Gross profit for given yer cn be clculted from the schedules by sununing the vlues of the totl Gross Profit for Yer Ended Mrch 31, 1989 on the Schedule of Contrcts in Ernings.
Gross Profit ('89) 968,486 + 58.634 323.663 703,457 This exct vlue cn lso be found on the Sttement of Net Ernings in the Gross Profit,, ctegory Another reltionship between the schedules nd the finncil sttement is overbillingsnd underbillings. These vlues re clculted in Note 3 of the finncil sttement. Review how these numbers were clculted.
ATTACHMENT 115 (/) 00 0 Q) > ; Overdrft 200 $200 K 150 100 Expense curve" $100 K $180 K $210 K, Retinge $10.5 K "3 E (.J 50 Income Profile $30 K 1 2 3 TIME (months) 4 5 Influence of front or mobiliztion pyment on expense nd income profiles
A Tf ACHMENT #6 Csh Flow Exmple CEE 498 Construction Project Mngement The cost curve from cn be clculted from the Construction Costs by Month digrm with the following steps: First. the cost per month (including both direct nd indirect costs) must be clculted for ech item. Item A $25.000 2.5 months Item B $70,000 2.0 months Item C $120,000 3.0 months Item D $105.000 3.5 months Item E $50,000 2.5 months Item F $20,000 2.0 months $10,OOO/month $35,OOO/month $4O,OOO/month $30,OOO/month $20,OOO/month $10.000/month Next. the costs for ech month must be dded by summing the cost per month for ech item tht occurs in tht prticulr month. Then, the cumultive costs for the project must be clculted for ech month. Smple clcultions re shown here for month 2: (1.0 )*ltem A monthly cost + (1.0 )*ltem B monthly cost + (0.5 )*ltem C monthly cost (1.0)*10,000 + (1.0)*35,000 + (0j5)*40,CKJO The cost for month 2 is 65,000 s seen in the tble below.