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General contracting project financial work?
What does the financial work of the general contracting project specifically include? The following Zhong Da consults the bidding teacher to answer your questions for your reference.

The quality of financial work in the early stage of international general contracting project is not only directly related to bidding, but also plays a vital role in the quality, safety and cost control of the project progress after winning the bid.

With the implementation of China's "going out" strategy, international engineering general contracting presents some new characteristics and poses new challenges to financial work. How to adapt to the new project development and contract execution, give full play to professional advantages and better serve the project is a new topic faced by financial personnel.

Main characteristics of general contracting project at present stage

First, the scale of the project has expanded rapidly.

In recent years, it is not uncommon for Chinese-funded companies to undertake international general contracting projects with contract amounts ranging from hundreds of millions to billions of dollars. The strength of Chinese-funded companies to "go global" and seize the large-scale international project contracting market is not what it used to be.

Second, the project financing needs are diverse.

With the increasing number of contracted projects with capital, whether the financing scheme is favorable or not has become the main factor for the owners to choose the winning enterprises, and it has also become the core competitiveness of China enterprises.

Third: the technical content of the project has increased.

The contract project has changed from "labor-intensive" civil engineering to "technology-intensive" manufacturing and mechanical and electrical products engineering projects, and the technical content and complexity of project implementation have obviously increased.

Fourth, the contracting of joint venture projects has increased.

Combining with multinational companies at home and abroad and giving full play to their respective advantages not only greatly improves the probability of winning the bid, but also helps to jointly control and disperse project risks.

Fifth, the project implementation cycle is long.

With the expansion of project scale and the improvement of technical complexity, the possibility of political, economic, technical, cultural and security risks in the process of project implementation is obviously increased. The ability to control the risks of foreign exchange, taxation, labor services, customs clearance and commodity inspection directly affects the realization of project benefits.

Key points of preliminary financial work for international engineering contracting projects

The preliminary stage of international engineering contracting project refers to five stages: project information collection, project establishment, investigation, bid quotation, signing and entry into force.

In the financial work of the project information tracking stage, the financial department can participate in the project information screening work, analyze the qualification of the owner, the source of project funds and the bidding progress from the perspective of financial risk avoidance, objectively evaluate the advantages and disadvantages of the company's projects in this industry field, and put forward reference opinions or suggestions on whether to track the projects in the end.

Through the investigation and analysis of the basic situation of the project, it is judged that if the owner has an urgent need to implement the project, the funds are guaranteed, even financial institutions have a strong interest in project financing, and the company has a certain competitive advantage in the industry, it should be approved through project evaluation. The finance department analyzes the feasibility of the project with key financial indicators to avoid the loss of the company's early investment due to the owner's lack of financial resources and the failure to take effect after the contract is signed.

For the financial work in the project investigation stage, before the formal bidding of the project, the project owner usually invites the contractor to make one or two on-site visits to the project. If the company has a branch in the country where the project is located, it will give full play to the role of the branch and assist the business department to support the inspection or accept the inspection entrusted. Due to the limitation of investigation funds and ignorance of financial work, financial personnel in the past could not directly participate in the preliminary investigation of the project, and some financial personnel were unwilling to take the initiative to participate in overseas investigations due to the limitation of foreign language level. Practice has proved that there are many benefits for financial personnel to participate in the pre-project investigation.

It is conducive to making a more accurate judgment on the politics, economy, culture and laws of the country where the project is located. Financial accounting can work with business departments to collect and analyze relevant information, including: political stability of the country where the project is located, openness of economic policies, integrity of laws and regulations, national economic development plan, GDP growth rate, inflation rate, inflation index, and friendship with China. These are especially important for projects that need our financing. The above information can be obtained by visiting China embassies and consulates abroad, local Chinese-funded companies, project owners, consulting local government announcements, etc., and can also be used to inquire about the background information of the country where the project is located through the Internet.

It is helpful to understand the foreign exchange policy and financial environment of the country where the project is located and lay a solid foundation for the implementation of the project. For example, we should first understand and inspect the foreign exchange management system of the country where the project is located, especially the restrictions on the remittance and remittance of foreign exchange. Countries that implement foreign exchange control usually have strict restrictions on profit remittance, not only requiring tax payment certificates, but also paying a certain percentage of profit remittance tax.

Secondly, examine the financial environment such as banks. Financial accounting focuses on:

The strength and background, management, work efficiency and charging level of banks should pay special attention to banks that have done business with China, and basically determine an alternative cooperative bank.

The stability of the local currency value, the degree of linkage with the world's major currencies, whether it is freely convertible, etc. If the country's currency is a soft currency, it is necessary to be highly alert to the exchange rate risk, carefully analyze the exchange rate of the local currency against the US dollar or the euro in recent years, and the future development trend to find out whether the local banks have relevant hedging products. Investigate the interest rate level of money, whether there is interest tax, etc. If the owner pays all or part of the project progress payment in local currency, the foreign exchange risk of the project income forecast should be fully considered.

Understand the relevant laws and regulations of the country where the project is located on the project contracting business. Such as company law, contract law, bidding law, tax law, insurance law, labor law and so on. Attention should be paid to the legal restrictions on foreign companies, whether it is necessary to register the project company locally, the procedures and conditions for foreign companies to register locally, and the restrictions on foreign workers.

For the understanding of various laws and regulations, financial accountants can not only visit foreign embassies and consulates and Chinese-funded companies, but also go directly to local accounting firms and tax departments for consultation, and pay some consulting fees when necessary to obtain the opinions of certified public accountants in the country where the project is located. For example, in 2002, a country in Africa levied 3% income tax in advance on all projects, that is, the owner deducted 3% from the project price of each measurement payment and withheld and remitted it to the tax bureau for the contractor. After several months of implementation, our company participated in the bidding of a 69-kilometer expressway project. How to understand and treat the issue of prepaid income tax, the companies participating in the bidding have their own views. Some companies think that this tax is hopeless and directly add 3% prepaid tax to the tender price; Some companies think that deducting this part of the tax will make the cash flow of the project more unfavorable, thus increasing the financing cost accordingly. The author went to the local accounting firm to consult tax experts about whether this prepaid income tax can be exempted at present and whether this tax can be deducted for new projects in the future. After receiving a positive reply, he directly consulted the tax officials in State Taxation Administration of The People's Republic of China, People's Republic of China (PRC), and got a reply that he could be exempted from tax or deducted in the future under certain conditions. So the company decided not to consider the impact of this tax when quoting, and finally won the bid with a weak price advantage, and then successfully completed the tax exemption procedures for this project. After calculating the project progress received in advance due to tax exemption. Practice has proved that the positive role played by financial personnel cannot be underestimated.

The investigation on the project site ensures the predictability of financial accounting for the project cost budget. During the on-site inspection, the local main materials, the quantity and price of labor services, the customs declaration and commodity inspection of imported materials and equipment, and other local price levels should be included in the inspection scope and recorded together.

Four, the financial work of the project bidding stage

Compilation of financial part of qualification documents. Companies participating in the bidding generally need to pass the pre-qualification of the project owner, and the contents of its financial part are very important, which often include the audited financial reports of the last three years, credit certificates issued by major business banks, and the personal resume of the project financial manager. The financial department shall ensure the completeness and timeliness of the information provided.

Examination and issuance of bid guarantee. Financial accounting should carefully read the description of relevant clauses in the commercial part of the tender according to the format of the tender guarantee. Special attention should be paid to the key contents of the letter of guarantee, such as the opening method, effective time and failure conditions. If the consortium bids jointly, it shall be clear with the owner whether to accept the letter of guarantee issued by the consortium according to a certain proportion, and distinguish the responsibilities of both parties. If the bid amount of a project subject to tender exceeds US$ 5 million, you can apply for the use of special funds in China Bank to reduce the amount of bank guarantee according to the Interim Measures for the Administration of Special Funds for Foreign Project Guarantee Risks issued by the Ministry of Finance and the Ministry of Commerce. In addition, we should pay attention to the opening time, and the guarantee rate should be agreed with the bank. If opening is necessary, you should contact the alternative bank determined in the inspection stage to agree on the opening rate.

Planning of project financing scheme. In international engineering contracting projects, especially large-scale projects, owners often have financing needs and require contractors to provide competitive buyer's credit schemes; Or require the contractor to contract with capital and implement the project in the form of BT and bot. Financial personnel should make suggestions on the project financing scheme according to the owner's needs, project characteristics and the company's positioning in financing, make clear the financing subject, and determine the financing person in charge, financing method and combination scheme.

Establishment of partners. In order to undertake super-large international general contracting projects, more and more contractors adopt the strategy of strong alliance, form "joint ventures" with other companies, give full play to their respective advantages, bid, win the bid, sign and implement the projects. Before bidding, the "joint venture" shall sign an agreement to clarify their respective responsibilities, rights and obligations. Financial personnel should cooperate with business personnel to participate in the negotiation and drafting of the agreement, and the financial departments of both parties should review the content and operability of the financial part of the agreement in order to enhance mutual trust and understanding.

Formal offer. Foreign quotation needs to gather the wisdom of professionals in relevant departments of the company and give full play to their respective professional advantages to complete it together. This stage is the key stage to decide whether the project can win the bid. Financial accounting should be based on the requirements of the project, cooperate with the business department to complete the preparation of the project cash flow statement. If the project involves multiple currencies, it should be prepared in different currencies; Basic data of exchange rate, interest rate and various bank charges shall be provided; If financing is needed, the financing cost should be calculated. With the continuous appreciation of RMB against USD, how to choose the project currency (some owners provide multiple currencies for contractors to choose from) and how to determine the price comparison among various currencies is a difficult problem. Financial accountants need to master international financial knowledge, always pay attention to the changes in the exchange rate market, consult foreign exchange professionals extensively and make accurate judgments. In September last year, the owner of the Brazilian coking project made an offer to the author's company. The future settlement currency can be US dollars or euros, asking us to determine the requirements as soon as possible. The financial staff immediately consulted the foreign exchange departments of several large banks at home and abroad, made a quick judgment based on the accumulated experience in the past, and suggested choosing the euro as the signing currency. It is suggested that when calculating the quotation, the parity between euro and RMB is 1 to 10. This judgment and the provision of parity conversion benchmark are mainly based on the following considerations: first, most financial institutions predict that the euro will appreciate against the US dollar in the fourth quarter of 2006 and the first half of 2007; Second, the financial accounting analysis shows that the volatility of the euro against the US dollar should be greater than that of the RMB against the US dollar in the short term, so there must be a good exchange point in the future, and the exchange rate risk can be locked through the forward settlement of foreign exchange. The project was signed in June 2006 with a contract value of 270 million euros. The accurate judgment of the trend of the euro exchange rate enables the project to lock the exchange rate between the euro and the RMB through multiple forward and ultra-forward settlement contracts.

Verb (abbreviation of verb) financial work at the stage of contract signing and entry into force

If the owner determines that our company is the winning bidder, the project will enter the stage of signing the contract. Financial personnel need to participate in the negotiation of relevant terms of the contract, assist in signing the financing agreement, issue the project advance payment guarantee and performance guarantee in time, and urge the contract to take effect as soon as possible. And we must pass the following "three levels".

Contract negotiation. Financial accounting should participate in the negotiation of relevant price terms, payment terms and guarantee terms in the commercial part of the contract, and assist in the negotiation of other commercial terms.

Sign a financing agreement. If the project owner is the main body of the financing agreement, the financial personnel should cooperate with the owner to contact the financial institution providing financing and assist in signing the financing agreement. If the project needs to use the export buyer's credit, the financial personnel should communicate and cooperate closely with the financial institutions in time, and strive to sign the financing agreement as soon as possible. If we are the main body of the financing agreement, financial personnel should take the lead in negotiating the contents of the financing agreement with financial institutions and strive for favorable financing conditions and interest rate levels; At the same time, according to the national regulations on export credit insurance projects, financial personnel and business personnel actively cooperate with export credit insurance companies to discuss insurance matters.

Third, the contract came into effect. Financial personnel shall issue advance payment guarantee and performance guarantee in time according to relevant contract terms, and urge the project owner to open a letter of credit or pay advance payment as soon as possible to make the contract effective.

To sum up, financial personnel should fully devote themselves to the preliminary work of the project, use their professional knowledge, play an active role in the analysis and control of foreign exchange, capital, financing, taxation and cost of the project, improve the overall quotation level of the project, and achieve the purpose of controlling and reducing various risks in the execution of the project contract.

Doing well the financial work in the early stage of the project is a new task for financial personnel under the new situation of international engineering general contracting. To solve this problem, we need not only every financial personnel to improve their comprehensive quality, but also a United and cooperative professional project financial management team. The formation of this team requires that every financial personnel not only have a high level of foreign language and excellent financial professional knowledge, but also have their own specialties. Professional fields should cover western finance, laws and regulations of the country where the project is located, taxation, labor protection, international finance, project management and other fields. Only by forming such an excellent professional team can we do a good job in the preliminary work of the project in an all-round way, serve the project well and better meet the new challenges brought to financial personnel by the development and contract execution of international engineering general contracting projects.

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