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No Excuses Financial Management 

Meet the Speaker 

Mike Benshoof

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Session Learning Outcomes

• Set up

• Analyze

• Proactively use

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Purpose

What we’ll cover

• Basics• Reporting• Mastering

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Accounting Basics

Chart of Accounts Accounting Principles

Chart of Accounts

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Chart of Accounts Sales Revenue

Direct Construction Costs

Part D. Direct Construction Costs General Ledger Account 143

1000 Permits and Fees1100 Architectural and Engineering1200 Site Work1300 Demolition1400 Utility Connections1500 Construction Period Financing Costs2000 Excavation and backfill3000 Structural Steel3100 Framing3105 Framing Material

Chart of AccountsGross ProfitOverhead• Indirect Costs• Finance Expense• Sales Expense• G&A ExpenseNet Profit

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Accounting Principles

Completed Contract & Percent Complete

GAAP, Tax & Management Accounting

Percent Complete & Completed Contract

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Management Accounting

Easy to use

Easy to understand

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What we’ll cover

Basics

• Reporting• Mastering

Reports

1. Income Statement2. Cash Flow Statement3. Balance Sheet

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Income Statement 3120 Sales, single‐family custom designed3125 Sales, single family custom, no land3130 Sales, residential remodeling Sales -$

Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

Part D. Direct Construction Costs General Ledger Account 143

1000 Permits and Fees1100 Architectural and Engineering1200 Site Work1300 Demolition1400 Utility Connections1500 Construction Period Financing Costs2000 Excavation and backfill3000 Structural Steel3100 Framing3105 Framing Material

What’s in cost of sales Permits

Sticks & Bricks

Land @ FMV

Anything attributable to a single house

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What’s not in cost of sales Superintendents

Sales Commissions

Finance Expenses

Vehicles

Etc. Etc.,

WHY?

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Land Preference – land in single use entity

FMV is not an exact science

35600 – True cost of lot SF

35560 - Fair market value offset SF

This is for management purposes

Booked correctly, easy Tax & GAAP Adj.,

Watch CAP EX!!!

Income Statement Sales -$ Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

Sales –

Cost of Sales = 

Gross Profit

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Indirect Costs Sales -$ Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

4010 Superintendents

4020 Laborers

4030 Production manager

4040 Architects, drafters, P&E

4050 Other indirect construction wages

4110 Payroll taxes

4120 Workers' compensation insurance

4130 Health and accident insurance

Finance Expense Sales -$ Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

5010 Interest on line of credit

5020 Interest on notes payable

5040 Interest on construction loans

5050 Interest on completed inventory

5120 Points and fees

5130 Appraisal and related fees

5140 Inspection fees

5210 Closing costs

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Sales & Marketing Sales -$ Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

6010 Sales Salaries

6020 In house commissions

6040 Outside commissions

6100 Marketing

6200 Model home expenses

6500 Other marketing expenses

6510 Concessions – Giveaways

6520 Concessions – Closing cost ast

General & Administrative Sales -$ Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

Very similar between TAX, GAAP and Mgmt

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Income Statement Sales -$ Cost of Sales -$

Gross Profit -$

ExpensesIndirect Costs -$ Finance -$ Sales & Marketing -$ General & Administrative -$

Total Expenses -$

Net Profit -$

Gross Profit –

Total Expenses =

Net Profit

Income Statement - $’s & %’s Sales 287,000$ Cost of Sales 237,650$ 82.80%

Gross Profit 49,350$ 17.20%

ExpensesIndirect Costs 4,300$ 1.50%Finance 3,222$ 1.12%Sales & Marketing 5,050$ 1.76%General & Administrative 23,033$ 8.03%

Total Expenses 35,605$ 12.41%

Net Profit 13,745$ 4.79%

Difference between Profit and Margin?

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Cash

1. Your cash2. Other people’s cash3. Change in cash

1/25 2/1 2/8 2/15Cash Inflows

Customer DepositsEstimated Closings 106,946.45$ ClosingsEstimated Draws 80,670.00$ 110,863.00$ 48,608.00$ DrawsFinal Check Register 206,233.56$ Other

Total Cash Inflows 206,233.56$ 187,616.45$ 110,863.00$ 48,608.00$

Cash OutflowsOperating Expenses

PayrollOverheadDeposit Refunds

Other Cash OutflowsPayables 75,937.00$ 87,943.00$ 43,897.00$ Interest & Recurring 14,770.08$ 10,000.00$ -$ Notes payments 44,253.37$ Permits 50.00$ 36,500.00$ 11,649.00$ Other Cash OutflowsFinal Check Register 199,900.09$ Adjustments

Total Outflows 199,900.09$ 90,757.08$ 178,696.37$ 55,546.00$

Beginning Cash 71,049.00$ 77,382.47$ 174,241.84$ 106,408.47$ Net Cash Flow 6,333.47$ 96,859.37$ (67,833.37)$ (6,938.00)$ Ending Cash 77,382.47$ 174,241.84$ 106,408.47$ 99,470.47$

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Acct. DescriptionCurrent Assets

100 Cash110 Short Term Investments120 Accounts and Notes Receivable

Inventories141 Land and Land Development Costs143 Direct Construction Costs150 Finished Units and Other Inventory

Total Inventory160 Other Current Assets

Total Current AssetsFixed Assets

181 Land and Buildings183 Furniture, Equipment184 Motor Vehicles185 Construction Equipment

Total Fixed AssetsAccumlated DepreciationNet Fixed Assets

170 Investments and Other AssetsTotal Assets

Balance SheetCurrent Liabilities

252 Construction Loans Payable220 Notes Payable210 Accounts Payable230 Accrued Taxes Payable201 Contract Deposits240 Other Current Liabilities

Total Current Liabilities250 Long Term Liabilities250 Loan from Officers

Total LiabilitiesEquity

290 Capital Stock292 Retained Earnings

Net Income295 Treasury Stock295 Owners Draws and Distributions

Total EquityTotal Liabilities & Equity

What we’ll cover

Basics

Reporting

• Mastering

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What is a system?

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What is a benchmark?A benchmark is how you quantify an

action or aspect of your business.

Internal & External

Benchmarks

=

How do you use benchmarks?

Business Model

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What is your finish line?

Budgeting Sales

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January Average Sales Price 650,000$ 525,000$ 700,000$ February 1 Average Customer Deposit (per home) 22,500$ 26,250$ 70,000$ March Average Concessions Offered (per home)Q1 Total 0 1 0 In House Commission Rate (as a %)

Second Quarter Outside Commission Rate (as a %) 6.00% 6.00% 6.00%April 1 1 % Co-op Sales 100.0% 25.0% 0.0%MayJune 1 Average Construction Costs (per home) 395,200$ 420,000$ 385,000$ Q2 Total 1 1 1 Average Land Costs (per home) 150,000$ -$ 175,000$

Third Quarter Total Direct Costs 545,200$ 420,000$ 560,000$ July Average Days Under Construction 180 210 190 August 1 Average Construction Loan Commitment 550,000$ -$ -$ September 1 Average Interest Rate 7.50%Q3 Total 1 1 0 Construction Loan Fees (per home) 2,750$

Fourth Quarter Average Appraisal Fee (per home) 500$ October 1 1 Average Daily Interest Rate 68$ -$ -$ November Average Interest Paid Per Home 12,240$ -$ -$ DecemberQ4 Total 0 1 1

Total 2 4 2

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Budgeting OverheadYearly Category

January February Nov Dec Total Total

4,500$ 4,500$ 4,500$ 4,500$ 54,000$ - - -

4,000 4,000 4,000 4,000 48,000 -

8,500$ 8,500$ 8,500$ 8,500$ 102,000$

462$ 462$ 812$ 812$ 7,994$ - - - -

462$ 462$ 812$ 812$ 7,994$

4010 Superintendents 4020 Laborers 4030 Production manager4040 Architects and drafters4045 Estimators 4046 Purchasers

8110 Payroll taxes 8120 Workers' compensation insurance

8100-8190 Payroll Taxes and Benefits

Total Salaries and Wages

8130 Health and accident insurance 8140 Retirement, pension, and profit-sharing plans 8190 Other employee benefits Total Payroll Taxes and Benefits

4000-4090 Salaries and Wages 4000-4990 Indirect Costs

Nittany Builders Fiscal Year: 200- 12

Income Statement Summary Month: May 5

Period Ending: May 31, 200- % of Year: 42%

Actual Budget Variance Actual Budget Variance Actual % Budget % VarianceClosings / Revenues:

Projected Closing 1 2 (1) 4 5 (1) Sales Price 287,000 629,421 (342,421) 1,292,790 1,635,211 (342,421)

Total Sales Revenues 287,000 629,421 (342,421) 1,292,790 1,635,211 (342,421) 100% 100.0%

Less: Cost of Sales 237,650 510,000 (272,350) 1,085,438 1,359,426 (273,988) 84.0% 80.7% 3.3%Gross Profit Margin 49,350 119,421 (70,071) 207,352 275,785 (68,433) 16.0% 16.9% -0.8%

Total Indirect Construction Exps 15,333 12,407 2,926 57,407 55,621 1,786 4.4% 3.4% 1.0%Total Financing Expense 3,222 2,650 572 14,232 13,660 572 1.1% 0.8% 0.3%Total Sales & Marketing Exps 5,050 100 4,950 6,250 1,300 4,950 0.5% 0.1% 0.4%Total General & Admin Overhead 23,033 22,433 600 114,950 111,450 3,500 8.9% 6.8% 2.1%Total Operating Expenses 46,638 37,590 9,048 192,839 182,031 10,808 14.9% 11.1% 3.8%

Net Income from Operations 2,712 81,831 (79,119) 14,513 93,754 (79,241) 1.1% 5.7% -4.6%

Month Year-To-Date Year-To-Date

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What do you see? Nittany Builders Fiscal Year: 200- 12

Income Statement Summary Month: May 5

Period Ending: May 31, 200- % of Year: 42%

Actual Budget VarianceClosings / Revenues:

Projected Closing 1 2 (1) Sales Price 287,000 629,421 (342,421)

Total Sales Revenues 287,000 629,421 (342,421)

Less: Cost of Sales 237,650 510,000 (272,350) Gross Profit Margin 49,350 119,421 (70,071)

Total Indirect Construction Exps 15,333 12,407 2,926 Total Financing Expense 3,222 2,650 572 Total Sales & Marketing Exps 5,050 100 4,950 Total General & Admin Overhead 23,033 22,433 600 Total Operating Expenses 46,638 37,590 9,048

Net Income from Operations 2,712 81,831 (79,119)

Month

Nittany BuildersIncome Statement SummaryPeriod Ending: May 31, 200-

Actual Budget Variance Actual % Budget % VarianceClosings / Revenues:

Projected Closing 4 5 (1) Sales Price 1,292,790 1,635,211 (342,421)

Total Sales Revenues 1,292,790 1,635,211 (342,421) 100% 100.0%

Less: Cost of Sales 1,085,438 1,359,426 (273,988) 84.0% 80.7% 3.3%Gross Profit Margin 207,352 275,785 (68,433) 16.0% 16.9% -0.8%

Total Indirect Construction Exps 57,407 55,621 1,786 4.4% 3.4% 1.0%Total Financing Expense 14,232 13,660 572 1.1% 0.8% 0.3%Total Sales & Marketing Exps 6,250 1,300 4,950 0.5% 0.1% 0.4%Total General & Admin Overhead 114,950 111,450 3,500 8.9% 6.8% 2.1%Total Operating Expenses 192,839 182,031 10,808 14.9% 11.1% 3.8%

Net Income from Operations 14,513 93,754 (79,241) 1.1% 5.7% -4.6%

Year-To-Date Year-To-Date

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What we’ll cover

Basics

Reporting

Mastering

Speaker Contact Information

Mike Benshoof Harrisburg, PABerks HomesRed Door HomesSMA ConsultingMBenshoof@BerksHomes.com