PcM Basics - Accounting Flashcards
Direct Salary
The portion of the salary attributed to work on a project. Calculate by multiplying the base salary by the utilization rate
Indirect Salary
The portion of the salary attributed to work outside of a project (office management, admin, model making, marketing, etc.).
Calculate by subtracting direct salary from base salary
Direct Salary Expense Multiplier
How much you multiply the direct salary by to determine how much you charge the client in order to cover overhead and profit
Billable Revenue
Money earned from work performed on a project. Direct Salary * Direct Salary Multiplier
Overhead Rate
How much you need to charge a client to cover your overhead.
Overhead/Direct Salary
Break Even Multiplier
How much you need to charge a client to break even (overhead and direct salary)
Overhead Rate Plus 1
Revenue Factor
A measure of firm profitability. Utilization Rate * Direct Salary Expense Multiplier. If it’s high, you are billing more money than you’re paying (employees, overhead, etc.)
Increase it by decreasing salary (increases both values) or increasing profit (increases DSE). Decreasing Chargeable Hours will increase DSE but lower UR
Utilization Rate
A measure of firm productivity - direct labor/total labor. You want to keep this high, around 80% or higher. If lower, there are too many people with non billable hours.
Quick Ratio
A measure of firm liquidity. Total Assets Divided by Liquid Assets
Schedule Performance Index (SPI)
A measure of overall firm health. Takes into account profitability and productivity
Earned Value/Planned Value. A number between zero and one (can be greater than one if you’re ahead of schedule).
If it is too low, you are not billing your clients on time, they’re not paying you on time, or you’ve worked over your planned hours
If it is high, it means you are keeping up with your billing, or you are working faster than planned (i.e. you billed for 100% of the work even though it took you 90% of the time)
Net Operating Revenue
What is going in minus what is immediately coming out (immediately meaning direct costs of doing the work before employee salary i.e. consultant cost, non reimbursable fees like printing and driving, etc)
What is a liquid asset? Give Examples.
Assets that are currently or can easily be turned into cash.
Furniture (can easily be sold)
Cash (already cash)
Computers (can easily be sold)
What are examples of non liquid assets?
Software subscription (cannot be sold)
