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Cost Accounting and Financial Management for Construction Project Managers


Author: Len Holm

Publisher: Routledge


Publish Date: August 16, 2018

ISBN-10: 1138550655

Pages: 300

File Type: PDF

Language: English

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Book Preface

All of the construction cost accounting textbooks available are focused on the role of the chief financial officer (CFO) and chief executive officer (CEO) and home office financial management biased aspects. Very few construction management (CM) university graduates will become CFOs or certified public accountants, and although some aspire to become CEOs, those opportunities will only be available for a select few, and will occur many years after graduation. Many CM students already have some practical construction internship experience and their exposure has primarily been out on jobsites. After graduation most will begin their careers as jobsite project engineers or in home office staff support roles such as assistant estimators. Many will achieve their seven- to ten-year goal of becoming construction project managers (PM) and being placed in charge of all operations at the jobsite, especially project financial management. These students have a difficult time connecting with college textbooks focused solely on home office accounting. It is because of their work experiences and the difficulty they have in connecting with traditional cost accounting texts that I routinely have supplemented a standard accounting text with many jobsite financial management topics borrowed from my other estimating, cost control, and project management resources.
Construction project managers are not accountants, but most of what we do is accounting-related. The focus of this book therefore is on the ‘Cost Accounting and Financial Management of Construction Project Managers’ at the jobsite level and the relationship between jobsite financial management and the home office accounting department. The PM is responsible to report to the CFO and CEO for all financial affairs that happen at the jobsite, including estimating, cost control, equipment charges, cash flow, pay requests, change orders, close-out, and many others. These therefore are the financial management subjects this book couples with traditional construction cost accounting topics.
The jobsite financial management team includes the project manager, superintendent, project engineer, and if applicable, a cost engineer and/or jobsite accountant. The construction team manages jobsite general conditions and the home office executive team, including the CFO and CEO, manages home office general conditions, and establishes profit goals for the company.
This book also connects with the cost accounting activities performed by the home office including differences between alternative corporate structures, development of financial statements, equipment depreciation, and taxes and audits. Advanced financial management aspects of earned value, activity-based costing, lean construction techniques, value engineering, supply chain material management, and time value of money are also introduced for the ambitious construction cost accounting student. The pinnacle of this study concludes with a discussion of the real estate developer, who is often the general contractor’s client; including the creation and management of the developer’s cost pro forma model, of which construction cost is only one element.
To supplement typical academic coverage of construction cost accounting, this book includes a practical construction perspective stemming not only from my 40 years of construction experience, but from input of many construction professionals and friends. These practitioners have reviewed chapter drafts and provided input to countless figures, tables, and exercises. Their experience is very much appreciated, for without them this would just be another college textbook. It would be difficult to list all of the people I need to thank, but I especially want to recognize:
UÊSara Angus, Account Executive and former University of Washington lecturer, Lease Crutcher
Lewis, commercial and custom residential general contractor (GC)
UÊJeff Foushée, Founder, retired, Foushée and Associates, commercial GC
UÊRobert Guymer, Chief Operating Officer, Foushée and Associates, commercial GC UÊMark Hanson, Certified Public Accountant, Smith and Dekay, PS
UÊBob Kendall, President, Star Rentals, Inc.
I would also like to thank Jane Holm, Suzanne Bailon-Schubert, and Sam Elliot for their research and contributions to the book and the instructor’s manual. And last, and maybe most important, to all of those University of Washington construction management students who used drafts of this material in their construction cost accounting course as a trial run. Thank you and I hope you enjoyed the process.
There is a complete instructor’s manual available on the eResource with answers to all of the review questions and many of the exercises. The instructor’s manual also includes several case studies borrowed from the third edition of Who Done It? 101 Case Studies in Construction Management which will be re-published by Routledge in 2019 as 101 Case Studies in Construction Management. This is an excellent economical companion book to many construction management topics.
If you have any questions about the material, or recommendations for changes for future editions, please feel free to contact the publisher, Routledge, or me direct at [email protected] I hope you enjoy my connection of home office cost accounting operations to the construction jobsite.
Len Holm

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