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Business accountability for architects
Nik Mohd Hasyudeen Yusoff
7 November 2017
Types of business structures
• Sole-proprietorship or
partnership
• Limited liability partnership
• Private limited company
Managing a business
• Strategy
• Marketing
• Operations
• People
• Finance
• Compliance
Critical operations
Designs and drawingsSecuring contracts
Project management
and certification
BillingsCollection
• All a...
Basic financial reports
• Income statement
• Statement of financial position
• Cash flow statement
• For companies, must c...
Income statement
Cost of professional
staff
Overhead:
Support staff
Rental
Utilities
Depreciation
Others
Other project cos...
Statement of financial position
Accumulated profits
Assets:
Properties and
equipments
Motor vehicles
Deposits
Cash
Capital...
Cash flow statement
Cash from investing
activities
Cash from financing
activities
Cash from operations
Net cash flow for t...
Planning
Cost of professional
staff
Overhead:
Support staff
Rental
Utilities
Depreciation
Others
Other project cost
Billin...
Project execution and control
Cost of professional
staff
Overhead:
Support staff
Rental
Utilities
Depreciation
Others
Othe...
Pricing and collection
• What is the cost to extract the stone
which is attached to the diamond?
• Pricing is determined b...
Taxation obligations
• There are two key tax obligations:
• Income tax
• Goods and Services tax (GST)
• Must registration ...
Taxation obligations
• Income tax
• For companies, must submit tax
estimate 30 days before new basis
period
• Start to pay...
Taxation obligations
• Income tax - employer
• Must deduct taxation from employees
salary, if they have reached threshold,...
Taxation obligations
• Goods and Services tax
• Registration is required if billings
reached RM 500,000 on a rolling
12 mo...
Professional obligations
• Professionals are defined by their
specific body of knowledge and skills
and the adherence of p...
Business accountability of architects ppt
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Business accountability of architects ppt

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Key business concept for aspiring practising architects including compliance with income tax and GST

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Business accountability of architects ppt

  1. 1. Business accountability for architects Nik Mohd Hasyudeen Yusoff 7 November 2017
  2. 2. Types of business structures • Sole-proprietorship or partnership • Limited liability partnership • Private limited company
  3. 3. Managing a business • Strategy • Marketing • Operations • People • Finance • Compliance
  4. 4. Critical operations Designs and drawingsSecuring contracts Project management and certification BillingsCollection • All activities and transactions must be properly recorded • Some of the contractual obligations and activities could exceed one accounting period • Record keeping is very critical
  5. 5. Basic financial reports • Income statement • Statement of financial position • Cash flow statement • For companies, must comply with Malaysian Private Entity Reporting Standards and must be audited • Will be relied upon by the Inland Revenue Board for tax assessment purposes • Accounting and income tax treatments are not necessarily the same • Need to invest in accounting system
  6. 6. Income statement Cost of professional staff Overhead: Support staff Rental Utilities Depreciation Others Other project cost Billings Gross profit - - = - = Profit/Loss • Income statement reports the profitability of the practice in an accounting period • Revenue is recognised based on accrual basis (how much is entitled based on stage of work), NOT how much is collected • Cost is recognised based on incurred basis, event when payment has not been made • Capital expenditures such as IT equipment and system are capitalised and depreciated over their useful lives
  7. 7. Statement of financial position Accumulated profits Assets: Properties and equipments Motor vehicles Deposits Cash Capital = • Statement of financial position provides the information on the financial position of the practice on a specific date • Essentially it is based on the principle that assets are financed through capital and liabilities+ Liabilities: Long term loan Accruals Bank overdraft
  8. 8. Cash flow statement Cash from investing activities Cash from financing activities Cash from operations Net cash flow for the period = = Closing cash balance • Cash flow statement captures the movement of cash: • Operations: Collection of fees and payment of expenditures • Investing: Investment made and proceeds from sales of investment • Financing: Raising of capital or loan and payment of dividend and loan repayments • The amount of profit for the period normally is NOT the same as the net cash flow + + + Opening cash balance
  9. 9. Planning Cost of professional staff Overhead: Support staff Rental Utilities Depreciation Others Other project cost Billings Gross profit - - = - = Profit/Loss Q1 Q2 Q3 Q4 Estimates Revenue is estimated based on the expected completion of professional obligations as contracted Expenditure could be fixed (e.g. staff cost) and can be variable such as materials and utilities Advisable to prepare budget based on projects This should be your prospective income statement ?
  10. 10. Project execution and control Cost of professional staff Overhead: Support staff Rental Utilities Depreciation Others Other project cost Billings Gross profit - - = - = Profit/Loss Q1 Q2 Q3 Q4 Performance of professional obligations must be tracked against projected completion and contractual obligations Cost incurred should be compared with budgets, and variance, positive or negative must be understood Proper process of cost control such as authority limits, approval and documentation must be strictly observed Revenue and cost must be allocated to the relevant projects so that their profitability could be properly assessed Project reports must be discussed on a monthly basis so that at variances or cost overruns could be managed or mitigated promptly
  11. 11. Pricing and collection • What is the cost to extract the stone which is attached to the diamond? • Pricing is determined by the value perceived by clients, not cost to produce • Market forces and competition would drive price downwards • Could also be influenced by nature of contracts: direct negotiations, fast-track or turnkey • Billings must be properly tracked and clear collection process must be put in place
  12. 12. Taxation obligations • There are two key tax obligations: • Income tax • Goods and Services tax (GST) • Must registration when threshold is met, don’t wait for authorities to “visit” you • Continuing compliance • Filing of returns and remittence of payments on time to avoid penalties • Record keeping • Company’s tax would be the personal liability of directors
  13. 13. Taxation obligations • Income tax • For companies, must submit tax estimate 30 days before new basis period • Start to pay tax in the second month until the first month of the subsequent year • Estimate could be revised on the sixth and ninth month • If actual tax exceed the estimate by 30%, fines would be imposed
  14. 14. Taxation obligations • Income tax - employer • Must deduct taxation from employees salary, if they have reached threshold, and remit to Income Tax Department • Submit annual employer return • Need to withhold tax if employee resigns until cleared by Inland Revenue
  15. 15. Taxation obligations • Goods and Services tax • Registration is required if billings reached RM 500,000 on a rolling 12 months basis • Cannot claim input tax if not registered • Must submit returns and remit collected tax to Customs Department
  16. 16. Professional obligations • Professionals are defined by their specific body of knowledge and skills and the adherence of professional standards • Clients may not be able to assess the quality of work performed, hence, commitment to ethics and standards is critical • Better to say NO rather than accepting jobs which could not be delivered as required
  • AhmadFariziFikri

    Nov. 11, 2017

Key business concept for aspiring practising architects including compliance with income tax and GST

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