PC4 Practice and Management Flashcards
VAT
A consumption tax on final consumer. Not a charge on businesses. Charged as a percentage of price, which means the actual tax burden is visible at each stage in the production and distribution chain. UK increased to 20% on January 2011 (from 17.5%).
RIBA Business Benchmarking Survey
provides vital business knowledge about how your chartered practice compares to others across criteria measuring: profit, turnover, marketing spend, hourly rates, salaries, client types and sectors. Also provides historical trend data to help shape future of profession. Most recent one 2021: assessed effect of covid-10 pandemic on practices; revenues fallen significantly by 15%; staff numbers fell by 11% than year before; practices have adapted business and so maintained consistent levels of profit.
Research & Design Entrepreneurship
Pre& Post Occupancy Evaluation; Embracing and leading technological advances from BIM to carbon data; Improve research and become knowledge advancers; Management and improve feedback loop from buildings.
Strategic Management
The Vision/mission; Strategic Plans (5-10 year views); Business Plans (detailed 1-3 year plans); Succession Plans; Setting SMART objectives (Specific, Measurable, Achievable, Realistic, Timely)
Quality Management
Every RIBA Chartered Practice required to have Quality Management System (QMS) in place to demonstrate practice is run effecitlvey. Large Chartered practice (over 51 staff) must adopt almost universal quality assurance standard: ISO 9001. Small Chartered Practices (up to 10 staff) only required to prepare Project Quality Plan (PQP) for each project. Medium ones must use PQP but must have QMS.
Mission Statement
A simple statement about the goals, values, and objectives of a company. Who it serves, what it does, its objectives, and its approach to reaching those objectives.
Vision Statement
A description of the desired future state of the company.
Turnover
Accounting concept that calculates how quickly a business conducts its operations. How quickly a company collects cash from accounts
Cashflow
Movement of money in and out of a company. Cash flow statement is financial statement reporting on company’s sources and usage of cash over some time.
Overheads
Premise costs; non-productive or non fee earning salary costs; marketing and website costs; IT,hardware and software costs; Insurance including PII, legal finance and accountancy charges; any other expenditure BUT tax such as VAT, Corporation Tax.
Total Expenses
Sum of all the total gross cash expenditures plus any subsidiary pending
Productive Expenses
Salaries of all professional staff and associated ‘on-costs’; printing of drawings, models, presentation materials, travel costs to site, costs of subcontractors or contract staff.
Charge Out Rate
typically used to allocate costs of a resource that is shared among multiple users. In construction it is often used to calculate fees for a labour resource including unproductive and non-chargeable hours.
Percentage Fee
calculated as a percentage of construction costs; based upon publish data; based upon office’s own historical information
Lump Sum
A fixed figure; based upon how many person days it takes to complete commission; might do a sanity check against percentage fee.
Time Charge
based upon actual number of person days taken to carry out work; use office charge our rates (vary for different levels of staff); sometimes include fee ceiling.
Invoicing
invoicing affects cash flow; identify invoice points at the outset; ideally invoice monthly; danger of RIBA work stages completed; include other milestones; project time scales; subconsultants; surveys and other fees.
Project Resource Programme
To provide adequate resoucres in place to provide clients with a professional service. RIBA Code 2.4: ‘the appropriate competence, skills, and resources to meet requirements of the work for which they are bidding ‘and 4.4. ‘should not provide services they know are beyond their competence or resources’. ARB Code Standard 4: Competent management of your practice
RIBA Fee Scale
Mandatory until 1982. Advisory until 1992. Abolished by RIBA in 2009. Set the architects fees; the idea being you choose an architect on the basis of aptitude and availability rather than price. Fees were calculated according to size and complexity of projects and calculated as percentage of construction cost. Since then we are encourage to calculate fees on a resource-based, time-charge, or value-added basis as appropriate.
Sole Trader
- Simplest form of practice structure. Requires the least form filling and you are directly in charge and responsible for everything with regards to the business’s operations. Personal Possessions are at risk should you be unable to pay your debts (unlimited liability).
- Tax status is most likely ‘self-employed’ but always confirm with a competent accountant – require the filling out of a Self Assessment Tax Return
- Can hire employees
- Can be made bankrupt
Advantages: Low Cost, Easy to set-up, Full Control Retained, Minimal Management Structure, No public disclosure of Accounts
Disadvantages: Full personal liability for debt.
Partnerships
- Formed of two or more people. All partners have unlimited liability and are also jointly and severally liable (any one Partner can be liable for all the debts of the business, should others be unable to pay and regardless of their contribution to the debt)
- Liability can remain after a partnership is dissolved.
- Partnership Act 1890 doesn’t make an agreement or ‘deed of partnership’ a requirement, but is good practice, covering issues such as: Individual responsibilities, Apportioning of profits and losses, Repayment and interest on capital invested, Retirement of and pension arrangements for partners, Admission of new partners, Dispute Resolution
Advantages: Easy to form, manage and run; More potential to Raise Finance; Minimal Management Structure; No public disclosure of Accounts
Disadvantages: full personal liability, affecting all partners; Partnership disagreements
Limited Liability Company (Ltd)
liability, avoiding the risk of personal responsibility for debts. Company has a formal structure and a board of directions, as well as a secretary. Directors are required to show a duty of care to the company.
- Capital can be raised by selling shares to external investors, non-shareholders can be appointed directors to bring in fresh ideas and avoid stagnation.
- Annual accounts are submitted to HM Revenue and Customs, Corporation Tax is payable upon receipt. A memorandum of association and articles of association need to be prepared covering fundamental company decisions and submitted with fees and forms to be registered with Companies House.
Advantages: Less personal financial exposure, Limited Liability Protection
Disadvantages: Involved set up costs, Annual accounts and financial reports are available within the public domain.
Limited Liability Partnerships (LLP)
- Brought about through introduction of Limited Liability Partnership Act of 2000, providing a combination of aspects between partnerships and limited liability companies.
- Partners have limited liability to only the amount each partner has invested.
- A ‘Deed of Partnership’ is still strong recommended.
- Partnership operates as a separate legal entity
- Annual accounts submitted to the Registrar of Companies and available for public scrutiny
- Two partners required to operate in roles comparable to Director and Secretary in company’s.
Advantage: Flexibility (Can be incorporated in members agreement); Advantages of limited company and partnership combined
Disadvantage: Partners must disclose income; LLP must start to trade within a year of registration or be struck off
Community Interest Company
Strictly set up as a type of company designed for social enterprises that want to use their profits and assets for public good. An ‘Asset Lock’ is submitted in the UK as a legal promise to use the company’s assets only for its social objectives and setting limits on the money that can be paid to shareholders.
Charity
Must have approved charitable purpose; Must meet Public Benefit requirement; Strict Rules of Governance – Governing Document; Run by a Board of Trustees made up of volunteers; Charity Bank account; Minimum income 5000pounds per annum; not permitted to make profits; Registered by the Charity commission.
Employee Benefit Trust
Encourages employees to become individual shareholders (directly or indirectly), typically managed on their behalf by the EOT. The Board of Directors of company now become directly accountable to the trustee board.
A commonly cited advantage of Employee-Ownership Trusts is the simpler, tax-efficient means of transferring ownership to others within a shared enterprise culture as well as tax incentives on shares and bonuses established by the Finance Act 2014.
Cultural shift away from the ‘star architect’ and to reinvest in giving greater voice to employees of practice. Aim to transfer ownership to all employees for a more egalitarian, accessible workplace where profits can be put back in practice.
