Proper Accounting For Return on Time Versus Return on Capital

[Bryan Hancock]

I was wondering if anyone cared to share how they segregate fee centers and time-based income from return on capital for their projects. In other words, if you take fees do you break this down to dollars per hour invested? If you take a split on capital raised and your capital invested in a deal do you use an IRR calculation or some such?

I am trying to get a sense for how people account for return on their effort versus return on capital. It seems to me these are mixed frequently and it gives very misleading results when people tout their returns on projects.

Thoughts?

[Aaron McGinnis]

I pay myself as a project manager, general contractor, and agent. This cost is factored in and deducted from potential profit.

In accounting lingo, I treat myself as a cost driver and show up right there in the COGS at the end of the year.