2022-04-05

BLDC 1020
1

Financial Planning and Budget

Management

Residential Builder License Program

Welcome to
BLDC 1020

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We are in this Together

Just Like the Real World

Education
For a complex World

Today s Agenda

Ø Using Zoom and session management

Ø Participants Introduction
Ø Course Introduction
Ø Course Outline review – Evaluation
Ø Learning Hub
Ø Excel
Ø Plagiarism
Ø Review Assignment #1 – Individual Work!
Ø Introduction to Financial Planning

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Using Zoom and Session Management

Participants Introductions

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Pilar Bonilla
P.Eng., M.Eng., MBA, LEED AP Homes
Instructor
E:pbonilla@bcit.ca

Participants Introductions

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Course Introduction

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Course Outcomes

1. Understand what is involved in the financial management

of a home building company

2. Understand the elements of financial planning in home

building business

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https://www.bcit.ca/construction-environment/study/partnership-learning/new-residential-builder-license/

SCHOOL OF CONSTRUCTION AND THE ENVIRONMENT

CONSTRUCTION CAREER PATHWAYS

RELATED EDUCATION REQUIRED PRACTICAL WORK EXPERIENCE

OBTAINED ANYWHERE

UNRELATED EDUCATION MEET FOUR-YEAR YES

OBTAINED ANYWHERE CONSTRUCTION MANAGEMENT
WORK EXPERIENCE
NO BACHELOR OF TECHNOLOGY
M inimum two years REQUIREMENT? BRIDGING Full-time or part-time
COURSES
Part-time
CONSTRUCTION SAFETY
OFFICER TRAINING
Part-time CQ AND IP ‡ RED SEAL
IN A RELATED TRADE
CERTIFICATE OF
QUALIFICATION
FOUNDATION TRADES TRAINING CONSTRUCTION CONSTRUCTION
CERTIFICATES OPERATIONS † SUPERVISION †
Full-time ASSOCIATE ASSOCIATE §

CERTIFICATE CERTIFICATE
Part-time Part-time

APPRENTICESHIP TRAINING LEVELS 1, 2, 3, 4

INTERIOR DESIGN
BACHELOR OF INTERIOR DESIGN
HIGH SCHOOL Full-time/Cooperative
GRADUATES INTERIOR DESIGN CONSTRUCTION ESTIMATING
INTERIOR DESIGN CERTIFICATE
DIPLOMA
or CERTIFICATE Full-time or part-time
Part-time
INDIVIDUALS
SEEKING RESIDENTIAL INTERIORS
NEW SKILLS DIPLOMA
Part-time ENVIRONMENTAL ENGINEERING
TECHNOLOGY
BACHELOR OF TECHNOLOGY
Full-time or part-time

ARCHITECTURAL AND ARCHITECTURAL AND ARCHITECTURAL AND

STRUCTURAL CADD AND STRUCTURAL CADD AND BUILDING TECHNOLOGY ARCHITECTURAL AND ARCHITECTURAL SCIENCE* BRIDGING BUILDING BUILDING
GRAPHICS TECHNICIAN GRAPHICS TECHNICIAN ASSOCIATE CERTIFICATES BUILDING TECHNOLOGY BACHELOR OF TECHNOLOGY COURSES ENGINEERING SCIENCE
(ARCHITECTURAL (STRUCTURAL DRAFTING AND CERTIFICATES DIPLOMA OF TECHNOLOGY Full-time, four-year program Part-time MASTER MASTER OF
LADDERS TO DEGREE
DRAFTING OPTION) OPTION) Part-time Full-time, two-year program OF APPLIED ENGINEERING
CERTIFICATE CERTIFICATE SCIENCE Full-time,
Full-time Full-time Full-time, one-year
BUILDING two-year program
OPTIONAL EXIT FROM DEGREE
ENERGY program
MODELLING
CIVIL TECHNOLOGY GRADUATE
ASSOCIATE CERTIFICATES CIVIL ENGINEERING CERTIFICATE
CIVIL ENGINEERING*
AND CERTIFICATES DIPLOMA Part-time
BACHELOR OF ENGINEERING
Part-time Full-time, two-year program Full-time, four-year program

bcit.ca/construction
* Option to exit after two years and obtain diploma.
† Gold seal approved courses.
‡ Certificate of Qualitification with an Interprovincial Red Seal.

MCD 2646

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Course Outline Review

BLDC 1020
Financial Planning and Budget Management

School of Construction and the Environment

Program: Residential Builder License
Start Date: April 5th, 2022
End Date: June 21st, 2022
Course Credits: 3
Maximum of classes you can miss: 2

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15

Course Evaluation
Mid Term Exam 20%
Assignment #1 10%
Assignment #2 10%
Final Exam 20%
Labs (#9, 2.22%/each) 20%
Quiz (#9, 2.22%/each) 20%
Notes:
Passing grade is 50%
More than 2 class missed means failure of course
Textbook

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17

Course Schedule

Quizzes and Labs

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Learning Hub

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Plagiarism and Student Academic

Conduct
Plagiarism

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Review

Assignment #1

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Excel

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23

15 Minutes Break

Introduction to Construction
Financial Planning and
Management

BLDC 1020
Financial Planning and Budget Management

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25

Lesson Outcomes
Ø Understand the differences and uses of Financial
Management, Financial Planning and Financial
Analysis in the operation of a home building
company

Ø Understand how timely accounting reporting

helps with Financial Management

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Financial Management, Planning and Analysis

Accounting:
Collects, consolidates and presents consistently
information about company’s operation

Financial Management:
Helps builder making decisions based on the
accounting information

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Financial Management
Ø Is use of assets efficient and effective?

Ø Is cash flow enough to meet obligations?

Ø Are accounts payable managed?

Ø Is financing required? When? How much?

Ø Is the company profitable?

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Financial Management

Ø Financial Management => management of

company’s financial resources
Ø Use of cash
Ø Use of other resources (i.e. equipment)

ØEveryday decisions (i.e. to take or not a project)

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Financial Management
ØWhen deciding to take on a project:
Ø Cash resources available?
Ø Is financing required?
Ø Bonding / LC?
Ø Hiring new people?
Ø Additional equipment
Ø Rented
Ø Purchased

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Financial Management
Ø When deciding to take on a project:
Ø What office overhead will be applied to the
project?
Ø What profit/margin is expected

Ø The answers to those questions will affect the

company’s finances

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Financial Management
Ø Construction Financial Management is
different from most other types of companies
Ø Unique challenges
Ø Project based vs process oriented
Ø Decentralized operation (sites)
Ø Payment terms
Ø Heavy use of subtrades

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Financial Management
Ø Who is responsible for financial management?
Ø In small companies usually owner
Ø Some tasks can be delegated to estimators,
superintendents or project managers
Ø It is important to understand principles of
financial success
Ø Goal to increase profitability
Ø Anyone that makes financial decisions

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Financial Management
Ø Use of resources wisely

Ø Areas:

Ø Accounting for financial resources

Ø Managing cost and profits

Ø Managing cash flows

Ø Making financial decisions

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Accounting for Financial Resources

Ø Project and overhead costs are accurately
tracked

Ø Proper construction accounting system in place

Ø Projected additional costs at project completion

time are accurate

Ø Evaluation of projects individually

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Accounting for Financial Resources

Ø Financial statements are prepared
Ø Financial statements review to identify possible
problems
Ø Specific to the construction industry
Ø Systems for reporting are different than systems
used for controlling
Ø Need to understand how depreciation works

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Accounting for Financial Resources

Ø Financial ratios used for analysis of company’s

performance

Ø Identification of problems before they become a

crisis

Ø Identification of required funds

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Timely Reporting

Ø The Timeliness principle in accounting refers

to the need for accounting information to be
presented to the users in time to fulfill their
decision making needs

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Timely Reporting

ØTimely financial reporting creates benefits

during the financial year and when the
accounts are prepared.

Ø It allows to focus on current issues and

develop future plans

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Managing Costs and Profits

Ø Controlling project costs

Ø Monitoring project and company’s profitability

Ø Setting labour load markups

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Managing Costs and Profits

ØDevelopment and tracking general overhead

budgets

Ø Setting minimum profit margins

Ø Analysis and monitoring of profitability

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Managing Cash Flows

Ø In-house manpower vs subcontracting

Ø Cash needed for taking additional projects

Ø Income tax projections

Ø Annual cash projections

Ø Required financing

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Selecting Financial Alternatives

Ø Equipment purchase

Ø Investments

Ø Type of financing

Ø Stockholders

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Financial Reporting
Ø Financial Reporting is the financial results of
an organization that are released

Ø Financial Reporting typically encompasses the

Financial statements, which include the income
statement (statement of operations),
balance sheet, and statement of cash flows

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Financial Reporting
Ø Effective communication of information
in financial statements can contribute
to better investment decisions and a lower
cost of capital for companies.
Ø Managers need to contribute to
making communication of information in
companies' financial statements more effective.
Ø Who? When?

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Financial Planning
Ø Projection of required financial resources to
carry on strategic planning
Ø Profit planning
Ø Expected revenues
Ø Expected costs/expenses – project type
Ø Cash planning
Ø Operating funds
Ø Sources/uses of cash

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Financial Planning
Ø Forecast of profit performance
Ø Forecast of financial position
Ø Relies on Pro-forma financial statements
Ø Proformas can be
Ø Specific project
Ø Operation phase
Ø Specific period

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Pro Forma Income Statement

Ø To develop a proforma we need:
Ø Sales Forecast
Ø Cost and expenses estimates
Ø Direct
Ø Indirect
Ø Company’s historical financial statements
Ø Pro-forma follows the same format as the
historical statements

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Pro Forma Income Statement

Ø Pro Forma cost can be estimated as percentages
of sales (specific method)
Ø General
Ø Administrative
Ø Sales
Ø Marketing
Ø Financing

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Pro Forma Income Statement

Pro Forma cost can be estimated as percentages of
sales (specific method)
Ø Construction Cost
Ø Operating Cost
Ø General
Ø Administrative
Ø Sales
Ø Marketing
Ø Financing

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Pro Forma Income Statement

Ø A Pro-forma statement is a best guess

Ø Underlaying assumptions should be clearly and

explicitly stated

Ø Can be inaccurate if market conditions are

changing

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Cash Flow Planning

Ø Shows timing of incoming and outgoing cash

Ø Allows to anticipate expenses

Ø Tool for projecting cash needs

Ø Helps to identify potential cash problems and

prevent them

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Cash Flow Planning

Ø Planned cash flows must be constantly updated

Ø Helps to plan how to invest/use surplus

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Cash Flow Budget

Ø Monthly to six months in advance

Ø Cash budget for each project + consolidated

Ø Incoming cash form customer payments

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Cash Flow Budget

Ø Payments to employees, subtrades, materials, ,
equipment, etc.

Ø Construction schedules will help to determine

when payments will be due

Ø Indirect cost must be included

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Financial Analysis
Ø Compares actual performance with expected and
past performance

Ø Comparison can be made with other builders and

with industry norms

Ø Benchmarking compares company performance

with a set objective

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Financial Analysis
Ø Allows evaluation of operation

Ø Allows assessment of financial position

Ø Financial statements provide information on

current financial position and operation over a
period of time

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Next Week:
Read chapters 1&2
Be ready for a Quiz

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