Consulting Accountants, LLC

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3 Give each participant a working knowledge of how to construct a forecast

4 Simple Fast Accurate

5 I. Why is forecasting important II. What information is needed III. Constructing the Forecast

6 AIA s Architectural Billings Index (ABI) remained below 50 at the end of 2009 which indicates a continued decline for design services. Fails Management Institute s Non-Residential Construction Index (NRCI) also stayed below 50 in the 4 th Quarter of Contractor backlogs continue to get shorter.

7 Most important user of the forecast is YOU Overhead Decisions Cash and Investments Hiring/Retention of Talent Fee Decisions Materials Purchases If you don t know where you are going, you will probably end up somewhere else

8 A second user of forecasts is your bank Anything is better than nothing Marc Hendrikson, VP Citywide Banks Lots of companies don t forecast unless they are forced to do it. Banks are asking for more information than ever Give your banker confidence that you know where you business is going

9 Your surety company is another user of forecasts Under promise, Over deliver Work on projects you show consistent success with Give your surety confidence that you know what you are talking about

10 WIP Schedule Project Cash Flows Data From Marketing Efforts Bell Curve vs Straight Line

11 Work In Process Schedule Sample, Inc. Schedule of Contracts in Pr 1/31/2010 Job To Date Calculations A B C C1 C2 D E F G ORIGINAL REVISED BILLING REMAINING COST TOTAL Contract CONTRACT CHANGE CONTRACT TO TO INCURRED ESTIMATED NAME Number AMOUNT ORDERS AMOUNT DATE BILL TO DATE COST Job A 1 289,000 10, , , ,000 Job B 2 132, ,000 66,000 66,000 43,000 89,000 Job C 3 435, , , , , ,000 Job D 4 246, , ,000 61, , ,000 Job E 5 586,000 50, , , ,000 98, ,000 Job F 6 452, , ,000 32, , ,000 2,140,000 60,000 2,200,000 1,223, ,000 1,031,000 1,885,000

12 Work In Process Schedule ample, Inc. Contracts in Process 1/31/2010 GAAP Calculations I J K L M N O P Q R BILLINGS IN COST AND JOB TO CURRENT PRIOR CURRENT EXCESS OF ESTIMATED JOB % JOB TO JOB TO DATE GROSS YEAR YEAR COST AND EARNINGS GROSS COMPLETED DATE DATE GROSS PROFIT GROSS GROSS ESTIMATED IN EXCESS PROFIT TO DATE REVENUE COST PROFIT PERCENTAGE PROFIT PROFIT EARNINGS OF BILLINGS 42.38% 0.0% % % 48.3% 63,775 43,000 20, % 9,800 10,975 2, % 82.9% 360, ,000 40, % 39,000 1,622-34, % 96.0% 236, ,000 46, % 15,000 31,061-51, % 19.5% 124,159 98,000 26, % - 26, , % 76.0% 343, ,000 (36,480) -9.60% 15,000 (51,480) 76,480 - ####### ####### 97,137 78,800 18, ,545 85,682

13 Develop Your Watch List (expertise and capability) Job Name, Start Date, End Date, Fee %, Odds Public Bid Lists Past Clients Architects and Engineers Public Newspapers Subscriber Services such a as Plan Room Attorneys

14 Build a Bell Curve Job 1 Job 2 Job 3 Qtr 1 $200, % $50, % $250, % Qtr 2 $350, % $450, % $350, % Qtr 3 $600, % $750, % $400, % Qtr 4 $800, % $1,000, % $800, % Qtr 1 $750, % $1,000, % $1,500, % Qtr 2 $200, % $1,500, % $2,000, % Qtr 3 $50, % $1,000, % $1,300, % Qtr 4 $0 0.00% $800, % $900, % Qtr 1 $0 0.00% $400, % $750, % Qtr 2 $0 0.00% $0 0.00% $400, % Qtr 3 $0 0.00% $0 0.00% $0 0.00% Qtr 4 $0 0.00% $0 0.00% $0 0.00% Qtr 1 $2,950, % $6,950, % $8,650, %

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16 Separate Jobs into Categories 1.Actual Contracts Underway 2.Commitments 3.Prospects 4.Unknown (may not want to use this)

17 Actual Contracts Underway Use the WIP schedule to determine how much cost is left to place and fee to earn Use project cash flows if available Base on information from Superintendents and Project Managers

18 Committments Contract not signed yet but client is committed to using you Odds no less than about 50% Information from the Watch List

19 Prospects Jobs you have learned about through marketing You have the capacity and ability to do don t waste your time Odds should be set no more than 5% to 10% Be pessimistic with start times

20 Unknown This is the stretch part of your forecast Can be both a positive or a negative Not something that has to be included in forecast Can be used in the 5 th through 8 th quarters to set your goals

21 Sample, Inc Cost and Profit Forcast Contract Fee odds Start End Job Name & Location Value % Date Date Backlog Actual Contracts Job A Cost $950,000 11/30/2009 7/30/2010 $600,000 Profit $40, % $27, % Job B Cost $1,600,000 10/1/ /31/2010 $1,350,000 Profit $48, % $40, % Total Actual Contracts Cost $2,550,000 $1,950,000 Profit $88, % $67, %

22 Remaining Remaining 3/31/2010 6/30/2010 9/30/ /31/2010 TOTAL Backlog 3/31/2011 6/30/2011 9/30/ /31/2011 TOTAL Backlog $ 400,000 $ 150,000 $ 50,000 $ $ 600,000 $ $ $ $ $ $ $ $ 18,000 $ 6,750 $ 2,250 $ $ 27,000 $ $ $ $ $ $ $ $ 400,000 $ 600,000 $ 300,000 $ 50,000 $ 1,350,000 $ $ $ $ $ $ $ $ 12,000 $ 18,000 $ 9,000 $ 1,500 $ 40,500 $ $ $ $ $ $ $ $800,000 $750,000 $350,000 $50,000 $1,950,000 $0 $0 $0 $0 $0 $0 $0 $30,000 $24,750 $11,250 $1,500 $67,500 $0 $0 $0 $0 $0 $0 $0 3.75% 3.30% 3.21% 3.00% 3.46% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

23 Strong Prospects Job C Cost $2,500,000 6/1/2010 3/31/2011 $1,875,000 Profit $125, % 75% $93, % Job D Cost $3,000,000 4/1/2010 5/31/2011 $2,550,000 Profit $85, % 85% $72, % Total Strong Prospects Cost $5,500,000 $4,425,000 Profit $210, % $166, % Likely Prospects Job E Cost $250,000 3/1/2010 5/31/2010 $12,500 Profit $10, % 5% $ % Job F Cost $2,500,000 11/1/ /31/2011 $125,000 Profit $100, % 5% $5, % Total Likely Prospects Cost $2,750,000 $137,500 Profit $110, % $5, % Unknown Cost $3,000,000 $4,000,000 Profit $90, % 100% $120, % TOTAL Cost $13,800,000 $10,512,500 Profit $498, % $359, %

24 $ $ 350,000 $ 500,000 $ 750,000 $ 1,600,000 $ 275,000 $ 275,000 $ $ $ $ 275,000 $ $ $ 17,500 $ 25,000 $ 37,500 $ 80,000 $ 13,750 $ 13,750 $ $ $ $ 13,750 $ $ $ 250,000 $ 500,000 $ 800,000 $ 1,550,000 $ 1,000,000 $ 700,000 $ 300,000 $ $ $ 1,000,000 $ $ $ 7,083 $ 14,167 $ 22,667 $ 43,917 $ 28,333 $ 19,833 $ 8,500 $ $ $ 28,333 $ $0 $600,000 $1,000,000 $1,550,000 $3,150,000 $1,275,000 $975,000 $300,000 $0 $0 $1,275,000 $0 $0 $24,583 $39,167 $60,167 $123,917 $42,083 $33,583 $8,500 $0 $0 $42,083 $0 0.00% 4.10% 3.92% 3.88% 3.93% 3.30% 3.44% 2.83% 0.00% 0.00% 3.30% 0.00% $ 3,000 $ 9,500 $ 12,500 $ $ $ $ $ $ $ $ 120 $ 380 $ $ $ 500 $ $ $ $ $ $ $ $ $ $ $ 15,000 $ 15,000 $ 110,000 $ 35,000 $ 45,000 $ 20,000 $ 10,000 $ 110,000 $ $ $ $ $ 600 $ 600 $ 4,400 $ 1,400 $ 1,800 $ 800 $ 400 $ 4,400 $ $3,000 $9,500 $0 $15,000 $27,500 $110,000 $35,000 $45,000 $20,000 $10,000 $110,000 $0 $120 $380 $0 $600 $1,100 $4,400 $1,400 $1,800 $800 $400 $4,400 $0 4.00% 4.00% 0.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 0.00% $ $ 4,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 4,000,000 $ $ $ 120,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 120,000 $ 0.00% 0.00% 0.00% 0.00% 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 0.00% $803,000 $1,359,500 $1,350,000 $1,615,000 $5,127,500 $5,385,000 $2,010,000 $1,345,000 $1,020,000 $1,010,000 $5,385,000 $0 $30,120 $49,713 $50,417 $62,267 $192,517 $166,483 $64,983 $40,300 $30,800 $30,400 $166,483 $0 3.75% 3.66% 3.73% 3.86% 3.75% 3.09% 3.23% 3.00% 3.02% 3.01% 3.09% 0.00%

25 /31/2010 6/30/2010 9/30/ /31/2010 Total Revenues: Under Contract $830,000 $774,750 $361,250 $51,500 $2,017,500 Prospects $3,120 $634,463 $1,039,167 $1,625,767 $3,302,517 Unknown $0 $0 $0 $0 $0 Total Revenues $833,120 $1,409,213 $1,400,417 $1,677,267 $5,320,017 Less Job Costs $803,000 $1,359,500 $1,350,000 $1,615,000 $5,127,500 Gross Margin $30,120 $49,713 $50,417 $62,267 $192,517 Less Overhead Expenses: 6140 Contributions $ 250 $ 250 $ 250 $ 250 $ 1, Cleaning $ 500 $ 500 $ 500 $ 500 $ 2, Dues, Subscriptions & Training $ 50 $ $ 85 $ $ Licenses & Permits $ 150 $ 150 $ 150 $ 150 $ Postage & Delivery $ 200 $ 200 $ 200 $ 200 $ Printing & Reporduction $ 100 $ 100 $ 100 $ 100 $ Legal Fees $ $ $ $ $ 6650 Accounting $ $ $ $ $ 6270 Professional Fees (Payroll) $ 100 $ 100 $ 100 $ 100 $ Depreciation $ 300 $ 300 $ 300 $ 300 $ 1, Rent $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 6, Vehicle Maintenance $ 200 $ 200 $ 200 $ 200 $ Telephone $ 100 $ 100 $ 100 $ 100 $ Vehicle Allowances $ $ $ $ $

26 6346 Vehicle Allowances $ $ $ $ $ 6347 Fuel $ 300 $ 300 $ 300 $ 300 $ 1, Entertainment $ 50 $ 50 $ 50 $ 50 $ Meals $ 25 $ 25 $ 25 $ 25 $ Travel $ $ $ $ $ 6385 Mileage $ $ $ $ $ 6455 Marketing & Advertising $ $ $ $ $ 6456 Gifts $ $ $ $ $ 6550 Office Supplies $ 350 $ 350 $ 350 $ 350 $ 1, Technology Expense $ 150 $ 150 $ 150 $ 150 $ Salaries $ 27,750 $ 27,750 $ 27,750 $ 27,750 $ 111, Payroll Tax Expense $ 3,205 $ 3,205 $ 3,205 $ 3,205 $ 12, Health Insurance $ $ $ $ $ Total Expenses $ 35,280 $ 35,230 $ 35,315 $ 35,230 $ 141,057 Net Ordinary Income $ (5,160) $ 14,483 $ 15,101 $ 27,036 $ 51,460 Other Income / Provisions for Taxes 7010 Interest Income $ (200) $ 600 $ 600 $ 1,000 $ 2, Other Income $ $ $ $ $ Total Other Income / Provisions $ (200) $ 600 $ 600 $ 1,000 $ 2,000 Net Income Before Taxes $ (5,360) $ 15,083 $ 15,701 $ 28,036 $ 53,460 Provision for Taxes $ (2,144) $ 6,033 $ 6,281 $ 11,215 $ 21,384 Net Income After Taxes $ (3,216) $ 9,050 $ 9,421 $ 16,822 $ 32,076

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28 Tom Davisson Consulting Accountants