OperationPeriodThe main account during this period is the Operations Period account. Revenues were the main cash flow items for the year. All recipes are collected from the recipe account. All other cash-inflow items, such as money received from certain insurance claims or liquidated damages or refunds, etc., are received on different sub-accounts (the number of sub-accounts may vary for different types of projects). One of the decisive elements of the periodic operating account is the prioritization of the “Expenditure and Reserves” sub-accounts. Credits in the accruing account are allocated based on the priority of the transaction account payments. Prioritization (also known as the waterfall mechanism) helps to analyze the right cash position over/in deficit. The order of prioritization with the highest priority of the payment to the first place and the lowest rank is as under: 1. Legal payments (including taxes, taxes to the government and other legal administrations) 2. Operating and maintenance costs (including operating costs, regular and significant maintenance costs) 3. Interest payments to lenders 4. Major payments to lenders 5.
Major Maintenance Reserve Account (MMRA) and Debt Service Reserve Account (DSRA) 6. Interest payment on developer loans 7. Dividends Please read our discussions on MMRA and DSRA in the following topics, which have an in-depth analysis of MMRA and DSRA requirements in project funding and calculation method. The cash flow prioritization method will give a better picture of the company`s cash position. It will also help to analyze the management surplus/deficit of the various reserve accounts. In the following topics, a cash flow calculation based on the Escrow waterfall is discussed. A simple single trust account is a simple account through which all means (equity, liabilities, revenue and expenses) are transferred by the company. However, the lender must not have four. A trust account and retention mechanism must be distinguished from an escrow account agreement, although they are a bit alike. A fiduciary account is an agreement to protect the borrower from the risk of payment of goods or services sold by customers to them. This will be achieved by removing control of cash flow from the client`s hands over an independent agent who, in turn, could ensure the appropriation of cash flows in accordance with his mandate.
Escrow`s agreement provides for a predetermined payment flow from the borrower`s clients to a specific account with a designated agent. Payment/deposit by the user/buyer on such an account is considered to be a respect for its responsibility to the supplier of goods/services. A trust agreement involves different parts of the parties within a TRA mechanism. Escrow`s agreement would generally consist of four parties: the lender, the borrower, the borrower`s clients and the trust agent. The mandate to trust agents would generally be underwritten by lenders in agreement with the borrower and his clients.