Considering Cashflow


There is a requirement for companies to provide a cash flow statement to show movements in cash over the period covered by the statement. This cash flow statement is required in addition to the Profit and Loss account (income statement) and balance sheet


Exercise 4.3  Using the Yorkshire Powerhouse template and guidance to prepare cash predictions over 1 or 2 years from the Case Study Provided


File: Cashflow-forecast-designed-auto-calculate.xlsx


Balance Sheet



Exercise 4.4    Assuming cashflow correct use this to prepare balance sheet


File: Sampleroofingbalancesheet2017.xlsx



 Profit and Loss (Income Statement)


‘Profit and loss account’ was for many years a common term, but it was felt to be less than precise, particularly when, for example, it was used by entities which did not have a profit motive, such as charities.

IAS 1, the international accounting standard which deals with the presentation of financial statements, therefore, introduced the term ‘income statement’, which can be more universally applied.


An income statement shows the total costs subtracted/deducted from total income. If there is an excess of total income over total costs, this is referred to as a profit (sometimes called a surplus, if the entity, like a charity, does not have a profit motive).


If total costs exceed total income, then a loss or deficit (the latter is often used by non-profit-making entities) is said to arise – hence the alternative name for an income statement of ‘profit and loss account’.


By organising, classifying and presenting income and expenses in this way, the income statement makes them into meaningful information because by calculating a profit or loss it becomes possible to determine how well or poorly a business is performing. and P&L for this business



Exercise  4.5 

File: profit-and-loss-template.xlsx




Payment Terms


Article on UK Construction Act regarding payment terms




 Article suggesting review of payment terms  


Exercise 5.6    Take time to reflect and consider these two articles and consider whether any changes should be made to the processes in your business.   Prepare a brief report on what and why you will change, or the reasons why you consider no changes are required.  LINK to upload assignment




Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client.


The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract.


Retention can also be applied to nominated sub-contractors, and the main contractor may also apply retention to domestic sub-contractors.


Half of the amount retained is released on certification of practical completion ('substantial completion' for Institution of Civil Engineers (ICE) contracts) and the remainder is released upon certification of making good defects (or 'final statement' for design and build contracts such as Joint Contracts Tribunal (JCT) DB 16).


In October 2017, the government published the Pye Tait review; Retentions in the Construction Industry, BEIS Research Paper 17. The review sought to assess the costs and benefits of retentions and alternative mechanisms. It found that the average retention was 4.8%.


The report found that reasons for non-payment or late payment of retentions included:

§  Disputes over defects.

§  Contractors becoming insolvent.

§  Non-payment in a higher tier of the supply chain.

§  Contractors not asking for their retention money, with some tier 3 companies pricing work to offset the retention costs, and others keen to maintain good relationships with their main contractor.


This can result in higher overheads, poor relationships, constraints in growth and in some cases, insolvency.


Following the review, the government launched a consultation into 'the practice of cash retentionunder construction contracts'.





Know your Rights - an article from Construction News


Construction (Retention Deposit Schemes) Bill 2017-19