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1.List and describe four consultants who a professional builder may consult to establish a business financial plan.
Financial advisors – able to help you with conflicts which are you not able to solve
Accountant – recommend financial actions and complies with legal requirements
Book keeper – documents financial transactions
Another successful builder – able to give you advice on how to establish a well structured company
Financial backers – lend or provide credit on agreed upon conditions, such as a fixed term contract and interest rate, examples include banks and credit providers.
2.Explain what financial information the aforementioned consultants might provide.
Software used – for accounting/bookkeeping purposes, e.g quick books, cash flow manager.
Advise tailored to the type of business entity: GST information creating/selecting a credit policy; how to manage and monitor cash flows; financial reporting
Types of contracts available : for credit(loans) or services (e.g cleaning, bookkeeping, employee contracts).
How to measure performance indicators, such as:
Gross profit % tests earning capacity
-Stockturn rate
-Staff productivity
-Controlling expenses
-Identifying indirect/overheads costs
-Determining margins and mark ups
Methods of legally minimizing tax:
3.Describe a cash flow estimate
Your best guess at expected cash in and out of the business for a set time period
Which people associated with the business may be asked to assess the cash flow estimate. Explain why
Accountant– most qualified to go over books and where money is going
and successful Builder- helps to you mentor you
4.Define business capital
The financial assets needed for a business to produce its goods and services.
-Equity capital – the net worth of the business
-Loan Capital – assets loaned from a credit provider (e.g a bank) for business use, for example vehicles and equipment.
-working capital: current assets in constant turnover to generate a profit, such as cash at bank/on hand, accounts receivable and stock on hand.
5.Describe the business relationship business operators have with their financial backers
Formal relationship usually with contracts and often considered high risk. Business operators are in debt to their financial backers and are obliged to follow
6.List and describe three tax obligations that a building company will most likely have.
GST – registering for GST and deciding on the appropriate accounting method to use to account for GST
Income tax for workers – accounted for in payroll records, A building company will need to remit payg withholding to the ATO and pay worker’s compensation and superannuation.
Company tax (if operating as a corporation) – capital gains tax, stamp duty(tax)
Capital gains tax – if selling property
Stamp duty (tax) – tax levied on property purchase
7.What is BAS?
Business activity statement that reports and accounts GST in the business operation
8.Describe one method of ensuring that provision is made to have the funds for next BAS.
Separate ‘buckets’ separate bank accounts to ensure that funds are set aside and available for each upcoming BAS
9.Describe one type of client credit policy that a builder will very likely have to establish
Using the standard contracts for building work to establish payment schedules that provide the client with an identified number of days to pay a claim
10.List and describe two problems that can occur with this credit arrangement
Client Failure to pay on time (cash flow issues)before making this arrangement a builder should establish clear policies for failure to pay(refer to the contract) and carefully communicate this to the client.
Offering small discounts for clients that pay on time or in advance. This can lead to cash flow issues if the discounts offered are too generous. It can also make it difficult to account for a margin on the goods/services.
11.List and describe two KPI’s a professional builder will use to monitor his/her financial performance
Time : completing a contract within an agreed upon time frame
Money: staying within a set budget for cost of material and labour to complete a contract toe meet the average gross profit margin.
12.Having completed a business plan who will the builder communicate this to and why?
The builder should communicate this to:
-the financial backers, as this will affect the rate, conditions and length of a credit policy.
-accountants and bookkeepers, so that they can prepare to monitor the finances of the business.
-financial adviser, so that they can prepare appropriate SOA (statements of advice) and revise the advice given from time to time