Accounting principles and business planning questions
This is the mandatory that catches out candidates who spend their working week on projects rather than on the business. The questions are not hard, but they are asked in a vocabulary you may not use daily. The fastest way to lose it is to know the terms and not be able to say what they tell you.
Accounting principles & procedures
Understand accounting concepts and read a set of management or company accounts - profit and loss, cash flow, balance sheet - well enough that advice given on top of them is sound. Mandatory to Level 1.
What the assessor is listening for
- That you can say what each statement is FOR, not just name it. What decision does a reader make from it?
- That you connect a ratio to a judgement. A number quoted with no interpretation is Level 1 at best.
- That you understand profit and cash are different things, and can say why a profitable business runs out of money.
- Application to your own organisation or your supply chain, which is what turns this from revision into evidence.
Level 1
Knowledge & understanding - you can explain the principle.
- What are the main financial statements, and what does each one tell you?A strong answer covers: The position at a point in time versus performance over a period versus the movement of actual cash. Then the reader's question each one answers.
- What is the difference between profit and cash, and why does it matter in construction?A strong answer covers: Revenue recognised against cash received, the timing gap created by valuation and payment cycles, retention, and why a busy contractor with a full order book can still fail.
Level 2
Application - you have done it yourself and can describe how.
- Which ratios would you look at before recommending a contractor for a tender list?A strong answer covers: A liquidity measure, a gearing or solvency measure, and a profitability measure, with what each would have to show before you were comfortable. Then the limits of published accounts: how old they are, and what they do not show.
- Talk me through a cash flow forecast you have produced or used.A strong answer covers: What it was for, how the profile was built (an S-curve from the programme, or valuation dates against payment terms), what it was checked against, and the decision it informed.
- How is your own business unit or firm measured, and what do you contribute to?A strong answer covers: The measures your organisation actually uses (utilisation, fee recovery, turnover, margin) and where your own work lands in them. Honest and specific beats comprehensive.
Level 3
Reasoned advice & depth of judgement - you have advised others and can justify decisions and trade-offs.
- What would make you doubt a contractor's financial health mid-contract, and what would you advise?A strong answer covers: The signals you would watch (slowing progress, a change in supply chain behaviour, disputed valuations, requests to change payment terms), the checks you would run, and the advice: what the client should do now, and what protections the contract already gives them.
- Your client asks whether they should accept a tender that is well below the others. What do you advise?A strong answer covers: The reasoning: what an outlier usually means, the arithmetic and qualification checks you would run first, the risk transferred back to the client if the contractor fails, and the recommendation you would put in writing.
- How does a business plan differ from a budget, and what would you expect to see in one?A strong answer covers: The plan as the strategy and the assumptions behind it; the budget as one year of it in numbers. Then which assumptions you would test hardest, and why.
How candidates lose this one
Reciting definitions with no application. This competency is where the gap between Level 1 and Level 2 shows most plainly.
Treating it as irrelevant to the day job. Contractor insolvency, cash flow forecasting and payment terms are all this competency wearing project clothes.
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