Building Order Cash-Flow Management, Invoicing Lecture was elaborated with the help of grant project of Ministry of Education, Youth and Sports, FRVŠ n. 2005 „Innovation of Subject Financing of Building Order“ Building Order Cash-Flow Management, Invoicing

Basic Principle of Building Order Financing Sources of financing Returns from order Other own sources Advance payments Other foreign resources Material Labour power Delivery of building works (objects) Building order Machines Sub-supplies Inputs (resources) Production process Outputs 3.5.2019 Financing of Building Order

Basic Ways of Building Order Financing Advance payment financing Sequent invoicing From time aspect From technological aspect Financing with own sources of supplier with final invoice 3.5.2019 Financing of Building Order

Advance Payment Financing Investor provides advance payments In time intervals defined in contract of work After finishing of (in contract of work) agreed parts of building realization After finishing of works it is issued a final invoice with: Total price of works without VAT VAT Total price of works including VAT Total price of works is decreased by value of just paid advance payments 3.5.2019 Financing of Building Order

Sequent (Partial) Invoicing Supplier realizes part of building order In (in contract of work) agreed moment the supplier provides to investor partial invoice (tax document) for payment for just realized part of building works In contract agreed moment can be defined as Time (e.g. invoicing per month) Finished technological part of building Invoice is verified by job logging (overview of building works realized during invoiced period) that creates an integral part of invoice. 3.5.2019 Financing of Building Order

Financing with own Sources of Supplier with Final Invoice Supplier obliges to realize whole building order on own account After finishing of realization the supplier provides to the investor the final invoice (including job logging) 3.5.2019 Financing of Building Order

Financing of Orders according to the Character of Investor From the aspect of investor it is possible to differ following kinds of orders (in classification according to the ways – sources – of financing): Public orders Private orders Individual orders Orders in the frame of business sphere 3.5.2019 Financing of Building Order

Management of Cash-Flow of Building Order Main aim of the cash-flow on the building order management is: Assurance of sufficient amount of finances for the efficient coverage of production costs of building order Suitable relation between of capital and other sources used for financing of building order Assurance of liquidity of the company (ability of the company to satisfy own financial liabilities towards suppliers, employees and state 3.5.2019 Financing of Building Order

Planning of Cash-Flows of Building Order Basis for planning of cash-flows of the building order is the timetable of repayments agreed with investor and with sub-suppliers Timetable of repayments is based on: The way of financing of building order – agreed in the contract for work Agreed time harmonogram of construction (part of the construction) and defined milestones Co-ordination of timetable of repayments agreed with investor with timetable of repayments agreed with particular sub-suppliers The output of cash-flow on the building order planning is the creation of plan of cash flow of building order 3.5.2019 Financing of Building Order

Invoicing of Building Works Invoice is acceptable tax document, which involves following appropriateness (law about VAT): Characteristics of the company of supplier and investor (name, firm domicile, identification numbers) Number of evidence Amount and subject of the fulfillment Date of issue Date of realization of taxable fulfillment Unit price without VAT Tax base Tax rate of VAT (basic or decreased) VAT Integral part of the invoice is the job logging agreed by both sides and created in conformity with the budget of the building construction 3.5.2019 Financing of Building Order

General Principles of Invoicing Contract for work (order) Agreed price Way of invoicing, maturity of invoices Term of beginning and finishing of order Subject of fulfillment Time harmonogram, activities INVOICING Issue of invoice including job logging Work realized in monitored time period Site diary

Financing of Building Order Contract Bonds Express invoiced amount of money (usually 10 % from agreed price), which payment is delayed: Till the handover of building and removing of defects Till the end of the guarantee period If the supplier properly and in time does not remove defects, the contract bond can be used for the coverage of costs connected with their removing 3.5.2019 Financing of Building Order

Sub-Supplies from the Financial Aspect Realization of building construction is necessary to divide into particular supplies: Realized by own employees Realized by sub-suppliers In the case of sub-supplies is necessary to realize the selection procedure according to the practice in the company: Creation of groundwork for valuation - budgeting (technical documentation) Sending of groundwork to potential sub-supplies Solution of the suitable sub-supplier according to the usual criterions Creation of contract for work between main supplier of the building and sub-supplier Based on contract for work between supplier and investor id necessary to set the conditions also in the contract for work with the sub-supplier Mainly it concerns about the way of invoicing and the maturity of invoices 3.5.2019 Financing of Building Order

Practical Aspects of Financing of Building Order Description of activities of site engineer in economic area Each month he provides information about realized works in physical and financial form (units) Each month he provides the same information connected with invoicing towards investor Each month he provides the same information connected with sub-suppliers He provides commentary and explains differences He makes presumption of output in next month (plan of invoicing, what works in what amount will be invoiced) He agrees the attendance of workers (based on this information he is able to define costs connected with direct wages) 3.5.2019 Financing of Building Order

Practical Aspects of Financing of Building Order Description of activities of site engineer in economic area He provides overview of consumption of main materials. It is good to check out, if real consumption of material is corresponding to planed consumption The same overview it is necessary to make for renting of machines a machinery From information about time of using and costs for one hour it is possible to find out real costs connected with using of machines and machinery per one month Presumption of higher cited item for next month Creation of job logging 3.5.2019 Financing of Building Order