Fee Income remuneration income expenditure Get it Do

Fee Income remuneration

income expenditure

Get it Do it

INCOME FEES ( MARKET VALUE) EXPENSES INTEREST

EXPENDITURE SALARIES OVERHEADS INTEREST X TIME

HOURS IN A YEAR 8760 WORKING HOURS 1950 AFTER HOLIDAYS 1750 NET HOURS 1500

PREVIOUS RIBA RECOMMENDED CHARGE RATE 18 p/ £ 100 GROSS ANNUAL SALARY 30 000 X. 0018 X 1500 CAN STILL BE USED = £ 54 = 81, 000

CURRENT AVERAGE SALARY £ 45 000 X. 0018 = £ 80 /HOUR X 1500 = £ 120 K HOW COME WE ONLY EARN 62 k AVERAGE ?

MARKET LEVEL FEE 5% £ 1. 08 M CONTRACT VALUE = £ 54, 000 FEE INCOME

CALCULATION METHOD SALARY 30 000 HOURS WORKED =1 500 SALARYCOST/HOUR = £ 20 OVERHEADS 30, 000 /1500 OVERHEADS PER HOUR = £ 20 SALARY+O/HEAD RATE = £ 40 PROFIT 35% OF COSTS (26% OF FEE INCOME ) =£ 14 CHARGE RATE =£ 54

MARKET LEVEL FEE = £ 54, 000 CHARGE RATE = £ 54 HOURS AVAILABLE =1000

HOURS WORKED 1250 X £ 54 charge rate 25% ABOVE TARGET = 1250 =£ 67 500 1250 X 40 cost rate =£ 50 000 £ 4, 000 BELOW FEE INCOME

DOES THE CLIENT CARE ?

HOURS WORKED 750 X £ 54 = 750 =£ 40, 000 20% BELOW TARGET 750 X 40 = £ 30, 000 £ 24, 000 BELOW FEE = 45% PROFIT

DOES THE CLIENT CARE ?

How ? • Improve market branding position • M+S v Louis Vuiton • Widen market engagement • stage 0 and 7 • Construction management • Developer • PFI • Multiple chargeble services • Bdp, party wall, breeam, planning • Recover all variations and extra fees. • Success fees • Net cost + kpi profit • Stake holder – share of profits • Commission based fee • Consultancy

Accounting Business overheads and profits vary according to the type of business and how it is calculated Different business and accounting structures Comparisons can be difficult Simple way is to compare Fees earned / technical staff member

RATIO OH 40/40/20 SAL PROFIT RATIO SAL OH 50/30/20 PROFIT RATIO SAL 55/25/20 OH PROFIT

MANUFACTURING IS DIFFERENT TO SERVICE IS DIFFERENT TO RETAIL ETC But they all need to be sufficiently profitable And carefully planned/declared

Accounts management Generally good to have a set of accounts for tax purposes , and a separate set for management purposes Cash can be retained. By careful calculation of WIP and debtors, by assessment of forward payments, by use of Ltd Company, group trading, and selling assets Cash flow is not just about But also about how much when

CAPITAL 1. SHARE CAPITAL FROM INVESTORS – YOU AND PARTNERS PAID BY REGULAR DIVIDENDS AND EVENTUAL SHARE SALES 2. LOAN CAPITAL FROM BANKS REGULAR INTEREST AND CAPITAL REPAYMENTS 3. TRADING RESERVES RETAINED PROFIT AFTER COSTS DIVIDENDS AND TAX

EXPENDITURE INVESTMENT TO PRODUCE SALES • FIXED ASSETS = Premises/ equipment/plant • WORKING CAPITAL = Technical wages/ materials/ equipment EXPENSES DONT PRODUCE SALES • ADMIN COSTS = rates/rent/phone Admin/support staff/

DAY 1 BALANCE SHEET SHARES LOANS RESERVES PROFIT Totals 15 000 0 0 30 000 FIXED ASSETS WORKING CAPITAL 20 000 10 000 30 000

ACCOUNTS 1. PROFIT AND LOSS STATEMENT based on accurate record of transactions • Money in ledger Minus • Money out ledger Equals • Profit/loss for the period • ( usually less tax ) • LESS DIVIDENDS

MONTH 1 PROFIT AND LOSS SALES PRODUCTION COSTS MATERIALS 3 000 WAGES 5 000 OVERHEADS 1 000 TOTAL 9 000 Gross profit Admin costs Net profit ( before tax ) 11 000 (9 000) 2 000 (1 000) 1 000

MONTH 1 BALANCE SHEET MONEY AVAILABLE SHARE CAPITAL 15000 LOAN CAPITAL 15000 RESERVES 0 PROFIT 1000 ( not necessarily cash !) TOTALS 31000 MONEY INVESTED FIXED ASSETS WORKING CAPITAL 31000 20000 11000

Debtors/creditors AFFECT THE WORKING CAPITAL REQUIREMENT • CREDITORS PEOPLE YOU OWE ( FOR AS LONG AS POSSIBLE) • DEBTORS PEOPLE WHO OWE YOU ( FOR AS SHORT AS POSSIBLE) STRATEGY Keep stocks (WIP) to a minimum, delay payments, speed up receipts

MONTH 1 PROFIT AND LOSS ( INC DEBTORS) SALES ( DEBTORS) PRODUCTION COSTS MATERIALS 3 000 WAGES 5 000 OVERHEADS 1 000 TOTAL 9 000 Gross profit ADMIN COSTS Net profit ( before tax ) NOT NECESSARILY CASH 11 000 (9 000) 2 000 (1 000) 1 000

MONTH 1 BALANCE SHEET ( Inc Debtors ) MONEY AVAILABLE SHARE CAPITAL 15 000 LOAN CAPITAL 15 000 RESERVES 0 MONEY INVESTED FIXED ASSETS 20 000 WORKING CAPITAL ( DEBTORS ) 11 000 PROFIT 1000 ( not necessarily cash !) TOTALS 31 000

MONTH 1 BALANCE SHEET ( debtors and creditors) MONEY AVAILABLE SHARE CAPITAL 15 000 LOAN CAPITAL 15 000 RESERVES 0 PROFIT 1000 ( not necessarily cash !) TOTALS 31 000 MONEY INVESTED FIXED ASSETS WORKING CAPITAL STOCK DEBTORS CREDITORS 20 000 4 000 11 000 ( 4 000) 31 000

MONTH 1 BALANCE SHEET ( debtors and loans) MONEY AVAILABLE MONEY INVESTED SHARE CAPITAL 15 000 FIXED ASSETS LOAN CAPITAL 19 000 WORKING CAPITAL (DEBTORS) 11 000 STOCK PROFIT 1000 ( not necessarily cash !) TOTALS 35 000 20 000 RESERVE 4 000 35 000 0

WIP calc change 1997 tax man year 96 97 98 99 salary 47 53 57 47 o/h 24 35 43 26 profit 27 30 T/O . 7 m . 73 m. 6 m . 65 m. 57 m. 71 m. 63 m. 75 . 6 . 7 Assets 23 30 8 35 . 75 10 35 . 54

DV Ltd and DVP 2001 year salarys o/h profit T/O Assets tax man 00 52 34 22 30. 88 m 1 m tax man tax 01 02 55 50 25 11 26 25 1 m 1. 12 1. 20 m . 7 . 9