Looking for the difference between Net Service Revenue and Net Operating Revenue

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    Paul Carson (Edited )

    Hi Marisa Ana Bustamante ~

    This is a great question; and as I get a bit closer to wrapping my head around what type questions will be asked, I have produced these (2) equations that are very similar to AHPP and a valued 3rd party resource.  If you will, please review and check my math, because I believe I know the difference between the both; however, I would prefer if someone could review the attached (2) equations (Both are using the same figures, just worded a bit different), this way I can perform the calculations from the words a bit more clear, if this makes any sense to anyone?

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    Haytham Abdelrahman Abdelall

    NOR is used to pay for salaries, operating expenses, admin, office taxes..etc. It’s the revenue after deducting the consultant fees, other reimbursable and non-reimbursable project related (see AHPP # 414).

    NSR basically is a project budget prior to deduct the non-reimbursable expenses & contingency, but reimbursable expenses is not in the picture (this is the way we distribute the fee to calculate initial project labor budget – see AHPP # 625)

    So, since both NOR and NSR are clear from the reimbursable expenses.

    Then, NOR = NSR - reimbursable expenses.

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    Marisa Ana Bustamante

    Thanks for the answers. I have a better idea now.

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    Valerie Galchenko (Edited )

    Net revenue is the money you made from selling services for the month, quarter or year. 

    Operating income is the dollar amount left after you subtract expenses from net revenue: 

    Net operating revenue = Gross revenue - project related expenses

    Revenue factor = net multiplier x utilization rate

    Revenue factor = net operating revenue / total labor dollars

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    Magdalini Vraila

    Hello all, 

    I just wanted to add to Haytham Abdelrahman Abdelall 's comment. I initially assumed that it would be :

    NOR= NSR - ( reimbursable expenses + non-reimbursable expenses).

    Please correct me if I'm wrong but my thinking is that since NOR is gross fee - consultant fees (aka NSR) - reimbursable & non-reimbursable expenses, both kinds of expenses would be part of the first equation. 

    Nevertheless, table 10.6 posted above only subtracts the non-reimbursable expenses. Can someone explain. why that is the case? 

    Thank you

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    Haytham Abdelrahman Abdelall

    You're correct, when we deduct reimbursable expenses + non-reimbursable expenses from NSR it'll give us the same value of NOR.

    Part-2, in table 10.6 NSR is the pure Arch value w/o consultancy fee, so we need only to deduct non-reimbursable expenses to have the NOR or project labor budget.

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    Magdalini Vraila

    Hello Haytham, 

    Thank you for responding so quickly. So to clarify, are you saying that we don't need to subtract the reimbursable expenses because they have already been subtracted? Do you consider the consultant fees to play be the reimbursable expenses? I always saw them as two separate categories so in table 10.6, after subtracting the consultant fees and getting the NSR, I would still subtract both the reimbursable and non-reimbursable to get the value of NOR. 

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    Haytham Abdelrahman Abdelall

    Hi Magdalini,

    "we don't need to subtract the reimbursable expenses because they have already been subtracted" Yes, it has been subtracted initially ( Formula A-B)

    "Do you consider the consultant fees to play be the reimbursable expenses?" Correct, that's why in C 401 there's a clause for consultant payment when the owner pay the architect.

    " I would still subtract both the reimbursable and non-reimbursable to get the value of NOR. "  Yes and No, I think NOR for all the projects in the office ( Office Operation Wide) while NSR is for project specific to help you expecting the contractual fee billed to the client " Top down budget approach"

    Thanks for this active discussion, I'm now in the mode of recovery and restudy for the exam again.

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