Builder's Guide to Accounting 04

Question 1

1. If you experience a gradual increase in volume and CASH profits over a 6 month period, within that increase could be hidden:

Answer 1

the higher cash flow could obscure the slow collection of your accounts. You may be accumulating UNCOLLECTIBLE ACCOUNTS as volume grows.

Question 2

2. The most common way to chart your ACCOUNTS RECEIVABLE TREND is to:

Answer 2

calculate the number of days the average account is outstanding. Over several months, a TREND will emerge.

Question 3

3. How do you keep tab on COLLECTIONS?

Answer 3

by preparing an ACCOUNTS RECEIVABLE AVERAGE LENGTH study.

Question 4

4. How do you prepare the ACCOUNTS RECEIVABLE AVERAGE LENGTH study?

Answer 4

list, by month:

1. Average Receivables……..22,692
2. Twelve Month’s Charge Sales…250,611
3. Divide 1 by 2
4. Multiply 3 by 365.

Ex: 22692/250611= .091
.091 x 365 = 33.2

DO THIS EVERY MONTH.

Question 5

5. One of the MOST CRITICAL TASKS YOU FACE AS A BUILDER is:

Answer 5

the CASH BUDGETING required to prepare FOR MAJOR FINANCIAL COMMITMENTS.

Question 6

6. The fact that you bid major jobs implies that:

Answer 6

you’re prepared to buy or lease equipment you will need, to hire a crew, buy insurance, etc.

Question 7

7. Any growth you expect in the future will be based on:

Answer 7

your ABILITY TO GENERATE ENOUGH WORKING CAPITAL. Having that cash when you need it depends on the EFFECTIVENESS OF YOUR PLANNING AND YOUR COLLECTIONS.