PC4 Practice and Management

Question 1

What is Working Capital?

Answer 1

Value of all current assets minus current liabilities

Question 2

What are current assets?

Answer 2

Cash balance in bank, value of money owed to practice from debtors and invoices

Question 3

What are current liabilities?

Answer 3

Money owed to other people, eg staff salaries, trade suppliers, tax

Question 4

What is a profit and loss account?

Answer 4

The annual statement of income and expenditure - shows if the practice has made an overall gain

Question 5

What is a balance sheet?

Answer 5

Statement of the total assets and liabilities at a particular point in time (usually at end of financial year). Assets are divided into fixed and current. BS shows net asset position and who owns them.

Question 6

What are Key Performance Indicators?

Answer 6

Turnover or profit per director/ partner or project

Question 7

What is a cash flow forecast?

Answer 7

A rolling statement of all the predicted income and expenditures for the practice, that predicts end of month cash balance

Question 8

What is current ratio?

Answer 8

A liquidity ratio that measures the ability of a practice to pay off its short term liabilities with its current assets

Question 9

What should be included in a 5 year plan?

Answer 9

USPs, target market, SMART annual benchmarks (Specific, Measurable, Achievable, Relevant, Time-based

Question 10

What is annual budget?

Answer 10

The plan for spending in the upcoming year, initial based on previous spending and added inflation

Question 11

What is Capital Expenditure?

Answer 11

The money spent on items that will remain in the practice for longer than the current financial year

Question 12

How would you calculate the cost of employing a member of staff?

Answer 12

Base salary, national insurance, RIBA/ ARB subscriptions, employer’s pension contribution, life insurance premium, health insurance premium

Question 13

What financial information should be recorded daily?

Answer 13

money received, payments made, invoices raised, invoices received

Question 14

What financial information should be recorded weekly?

Answer 14

Staff timesheets collected, petty cash, payroll, staff expenses, bank reconciliation

Question 15

What is bank reconciliation?

Answer 15

The process of checking/ ensuring that your accounting records matches your bank balance

Question 16

What are different ways to express/ calculate the project fee?

Answer 16

• Percentage (of the overall construction cost)
• Lump sum
• Time charge (based on charge-out rate of staff which is staff hourly rate + profit)
• Percentage ceiling fee (time charge up to a maximum percentage fee)
• Unit price fee and fee for repetition (for projects where a designed unit will be replicated)

Question 17

What typical events might call for fee adjustment?

Answer 17

• Revision of client brief/ instructions
• Acceleration
• Omission of work in original brief
• Client variations during construction
• Research into additional facilities

Question 18

What are ‘captive fees’?

Answer 18

The fees that the practice plans to invoice in the next 6 months

Question 19

What is a ‘combined fees forecast’?

Answer 19

captive fees + possible fees

Question 20

What is a ‘resource forecast’?

Answer 20

A forecast of people that will be required on future jobs vs the total number of people

Question 21

What is ACB (Authorised cost budget)?

Answer 21

The amount of fee to be spent, at different stages of the project (eg staff charge out rates, expenses, percentage profit)