NOR definition AHPP
NOR or Net Revenue: Represents the newt dollars remaining after deducting the invoiced consultants' fees and expenses and all reimbursable and non-reimbursable project-related expenses.
If a architectural company receive a 5% fee for the services on a $1,000,000 Project cost. and 30 percent is consultant fee and spent $3000 on permits that are reimbursable. what is the NOR.
5% of 1,000,000 is 50,000
30 % of this is 15,000
so NOR is 35,000
the 3000 spent on consultant's fee is paid back so it is 35,000 - 3000+3000. will remain 35000.
so why does the definition say we have to deduct consultants' fees and expenses and all reimbursable and non-reimbursable project-related expenses.
is the answer $35,000 or $32,000
Please advice
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Hi Radhika,
I believe the $35k is correct. Reimbursables are not revenue, unless the architect marks up the actual cost (which is what you should be doing). Reimbursables are expenses that are reimbursed. Revenue is 0 unless it's marked up. If it is marked up, the mark-up portion is revenue. I have heard of some architects marking up prints and renderings and things a lot, so it could be a good source of revenue.
Hope this helps.
Rebekka
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You're welcome Radhika!
Rebekka
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Hi Radhika,
The definition shown in AHPP, page 410, is also confusing to me, but I would refer you to the Architecture Student's HPP, Chapters 5.1 and 5.2 for additional reference.
In the above example, the NOR (aka "Net Revenue") is $50,000. Renevues are fees received for providing professional services (amounts earned by a firm during an accounting period).
Net Revenue = Direct Expenses + Indirect Expenses + Profit
Consultant Fees (30%) = $15,000 are the expenses of outside services. They are included in the Direct Expenses
Reimbursable expenses = $3,000 on Permits are project-generated expenses paid back by the owner. They are also included in the Direct Expenses
So, $35,000 is the available architectural fee to cover the remaining Direct Expenses (the expenses of in-house salaries and other expenses that can be charged directly to the project), the Indirect Expenses, and the Profit.
Hope this helps.
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Thank you Yilena,
I was so confused I took the PCM on May 9th and thank God I passed. I was still confused even after that and while studying for the PJM I came across the Profit and loss Statement table in Chapter 7 Page 424. And this kind of helped me understand the definition.
So in this table under Revenue we add two things and subtract two things to get NOR.
add (Fees Billed incl Consultants+ mark up) + Reimbursable Billed (Including Markup) = Revenue
Now to get the NOR you then subtract the (Consultants fee+ Reimbursable expenses + non-reimbursable exp).
So we do the whole exercise of adding and subtracting reimbursable expenses is to add any markup we get on reimbursable expenses as Revenue.
Hope I explained it properly and did not confuse every one.
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