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Financial Management in Construction Contractingby Andrew Ross
Synopses & Reviews
This authoritative text provides a detailed insight into how construction companies manage their finances at both corporate and project level. It will guide students and practitioners through the complexities of the financial reporting of construction projects within the constraints of accepted accounting practice. The book is written for non-accountants and from a contractor’s perspective and is equally relevant to subcontractors and main contractors.
The authors examine the relationship between the external annual accounts and the internal cost-value reconciliation process. CVR is covered in depth and the authors consider issues such as interim payments, subcontract accounts, contractual claims, final accounts, cash flow management and the reporting of the physical and financial progress of contracts.
A broad perspective of all the financial aspects of contracting is taken along with related legal issues and the authors explain how things operate in the ‘real world’. They describe good practice in financial control while at the same time being honest about some of the more questionable practices that can - and do - happen. The approach taken is unique as the financial management of construction projects is considered from the perspective of the contractor’s quantity surveyor. The book deals with the real issues that surveyors have to address when using their judgment to report turnover, profitability, cash flow, and work in progress on projects and the financial problems faced by subcontractors are frankly and pragmatically explored.
The payment and notice requirements of the Construction Act are explained in detail and relevant provisions of JCT2011, NEC3, ICC, DOM/1 and other standard contracts and subcontracts are also covered.
Financial Management in Construction Contracting addresses the wide variety of external factors that influence how construction companies operate, including government policy, banking covenants and the financial aspects of supply chain management. Cost reporting systems are described and real-life examples are used to illustrate cost reports, accrual systems and how computerised systems can be employed to provide the QS with information that can be audited.
Examples drawn from practice demonstrate how work-in-progress (WIP) is reported in contracting. Cost value reconciliation reports are featured and the book demonstrates how adjustments are made for overmeasure, undermeasure, subcontract liabilities and WIP as well as explaining the processes that contractors use when analysing external valuations.
This is the ideal core text for final year degree and post-graduate level modules on Quantity Surveying, Commercial Management, Construction Management and Project Management courses and will provide an invaluable source of reference for quantity surveyors and others who may be engaged in the financial management of construction projects.
The book’s companion website at www.wiley.com/go/rossfinancialmanagement offers invaluable resources for students and lecturers as well as for practising construction managers:
This book is concerned with financial aspects of contracting from the perspective of the authors’ combined experience in the industry of some 70 years. The aim is to explain ‘how things operate’ in the ‘real world’ of contracting to those who wish to understand and if this means opening the ‘black box’ of financial practice both good and bad then so be it. The book is not intended to be an exposé of the ‘evils’ of the industry but is meant to illustrate good practice in financial control whilst at the same time being honest about some of the questionable practices that can and do happen. This text is unique as it considers project financial management from a contractor’s quantity surveyor’s perspective. It deals with the real issues that surveyors have to take into account when using their judgement to report turnover, cash flow, profitability and work in progress on projects.
The book considers the wide variety of external factors that influence how construction companies operate, these include changes to construction markets driven by government policy, how government legislation influences contract conditions and banking covenants. Companies are required to have systems and procedures that comply with accounting regulations and also that provide management with information upon which to base future decisions regarding marketing, tendering and resource allocation.
The textbook considers the financial aspects of supply chain management and how organisations seek to minimise their cash needs. Cost reporting systems are described and real life examples of cost reports are used to illustrate cost reports, accrual systems and how computerised systems provide the QS which information that can be audited. The text also uses examples drawn from practice which demonstrate how work in progress is reported. Cost value reconciliation reports which include adjustments for overmeasure, undermeasure and WIP clearly identify the processes that contractors use when analysing external valuations. The text also considers newer approaches such as earned value analysis to project reporting.
This textbook provides a general introduction to costing and budgeting for construction but in particular it covers CVRs. There is a wide range of approaches to preparing these reports and, without being over-prescriptive, the authors provide a useful framework for students by giving an outline of the key requirements, together with an evaluation of the alternatives.
About the Author
Dr David Hugill, Lecturer, Department of Civil Engineering, University of Manchester, UK
Dr Andrew Ross, Principal Lecturer, School of the Built Environment, Liverpool John Moores University, UK
Table of Contents
Chapter 1 Introduction and Context.
Chapter 2 Principles of Management Accounting.
Chapter 3 Costs – Information and Reporting Chapter 4 Value.
Chapter 5 Cost And Value Reconciliation.
Chapter 6 ‘Softer Issues’.
Chapter 7 CVR – Review of Current Practice.
Chapter 8 Future Issues and New Direction
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