Construction Accounting and Financial Management

by Peterson, Steven

• ISBN13: 9780131109391
• ISBN10: 0131109391
• Edition: 2nd
• Format: Hardcover
• Copyright: 2009-01-01
• Publisher: Prentice Hall

Summary

Focusing on the principles of accounting and financial management needed to make construction projects and companies financially successful, Construction Accounting and Financial Management provides the background for prospective and practicing construction managers. Making no assumptions about any special training, Professor Peterson leads the reader step by step through the business practices needed for solid decision making. All applications are related to the construction field. Some of the key features include: bull; bull;Determining the profitability of different construction activities, project types, and potential customers, allowing managers to focus on the best aspects of their business. bull;Projecting costs from the first subcontract and purchase order as well as potential cost overruns so they can be quickly addressed. bull;Projecting cash flow and cash requirements so managers can adjust business practices to avoid cash shortages. bull;Tracking and accounting for heavy equipment costs, allowing managers to fairly charge them to the project and to determine the profitability of equipment use.

Table of Contents

Introduction to Construction Financial Management

Construction Financial Management

Accounting for Financial Resources

Construction Accounting Systems

Accounting Transactions

More Construction Accounting

Depreciation

Analysis of Financial Statements

Managing Costs and Profits

Managing Costs

Determining Labor Burden

Managing General Overhead Costs

Setting Profit Margins for Bidding

Managing Cash Flows

Cash Flows For Construction Projects

Projecting Income Taxes

Cash Flows for Construction Companies

Time Value of Money

Financing a Company's Financial Needs

Making Financial Decisions

Tools for Making Financial Decisions

Income Taxes and Financial Decisions

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

Appendix F

Appendix G

Table of Contents provided by Publisher. All Rights Reserved.

Excerpts

A few years ago I was asked to teach a course on construction accounting and finance. The course was to cover the fundamental principles needed by construction managers to successfully manage the finances of construction companies. In preparing to teach this course I found that these principles were scattered among many disciplines, including business management, engineering economics, accounting, estimating, project management, and scheduling. After I reviewed the available textbooks, two things were apparent. First, the material was often presented in a generic fashion and failed to address how the principles applied to the construction industry. For example, in most accounting textbooks only a few pages were devoted to the accounting procedures for long-term contracts, which comprise a bulk of the projects for general construction companies. Second, with the topics scattered among many disciplines and textbooks, the topic of how the different components of construction financial management were interrelated and interacted was being ignored. Financial management may be defined as the use of a company's financial resources and encompasses all decisions that affect a company's financial health. Many everyday decisions affect a company's financial health. The difference between a marginally profitable and a very profitable company is good financial management. Business schools teach the fundamental principles of financial management; however, because of the many unique characteristics of the construction industry, the usefulness of these financial principles as taught by business schools is limited. To be useful, these principles must be adapted specifically to the construction industry. For example, in the construction industry equipment is mobile and may be needed for multiple jobs during a single month. Traditional accounting methods and financial statements do not allow a company to properly manage and account for its equipment. This book was written to help construction professionals-both those who are working in the construction industry and those seeking a degree in construction management--learn how the principles of financial management can be adapted to and used in the management of construction companies. This book will be most useful for general managers and owners of companies who are responsible for managing the finances of the entire company; however, many of these principles are useful to project managers and superintendents. For the project manager or superintendent who desires to stand out in a company, there is no better way than to improve the profitability of their project through the principles of sound financial management. The book also discusses how owners and general managers can manage construction projects- by sound management of their project managers, superintendents, and crew foreperson. This book explains common financial principles, demonstrating how these principles may be applied to a construction situation and how these principles affect the financial performance of a company. Many of the examples included in this book are based on actual situations encountered by the author. This book is organized in five parts: introduction to construction financial management, accounting for financial resources, managing costs and profits, managing cash flows, and making financial decisions. The first part--comprising Chapter 1-introduces the reader to construction financial management, explains why construction financial management is different than financial management in other industries, and defines the role of a construction financial manager. The second part--comprising Chapters 2 through 6--describes how to account for a company's financial resources. Accounting for these resources is built around a company's accounting system. The third part--comprising Chapters 7 through 11--e