Bookkeeping for Interior Design Firms
A mix of project management and financial understanding
6 FOCUS AREAS WHEN HIRING A BOOKKEEPER
As a busy interior designer or a growing interior design firm, you’ve outgrown being able to handle your books yourself (or maybe you just despise it). As you look for a bookkeeper, there are certain things specific to your business that you will want to make sure they are keenly aware of.
1. Cash Flow is King
Depending on how you structure your invoicing, you could be in a situation where you're purchasing furniture and other products on behalf of your clients before receiving full payment from them. Because of this, it's important that a watchful eye is kept on your cash flow. Your bookkeeper should be in constant communication with you about your income, cost of goods sold, and expenses to ensure that you have the cash you need to operate.
Keep a cushion in your bank account to ensure that you can pay for items up front without putting your business at risk.
Find a credit card with a higher credit limit and low interest rate to use for client purchases. Bonus = choose a card with a rewards program that you will take advantage of.
Structure your invoicing to collect a deposit large enough to start purchasing, or better yet, collect the majority of your fee up front.
2. It's All in the Details
Record keeping is essential to ensure that all purchases made are reimbursed by your clients. Your bookkeeper should help you make sure that there is a process in place that is specific to your business model and how you invoice.
Make sure to categorize all client purchases in a Cost of Goods Sold (COGS) account and use the functionality of your accounting software such as QuickBooks Online or Xero to apply each expense to a client.
Keep track of expenses for each project to ensure that you’re billing the right amounts with your profit margin in mind.
3. Product Returns
While keeping track of purchasing is important, don't forget to keep a close eye on product returns. With many transactions hitting your business credit card, it's easy to overlook a product return and you’ll want to be sure you receive all credits that you're expecting. Your bookkeeper will see all of the transactions that hit your bank account or business credit card and can be on the lookout for expected product returns.
4. Sales Tax
Let's face it. Sales tax is complicated. And getting it wrong can mean hefty fines. Depending on state and locality, the sales tax you need to charge is going to be different for many of your clients. It's in your best interest to work with someone who not only knows the ins and outs of sales tax but also demonstrates that they have an efficient way of tracking it for your business.
5. Time Tracking
Always take the time to track your actual time against estimated time when working on a flat fee design job. If you use an accounting system like QuickBooks Online or Xero, take advantage of the time tracking features to make sure you’re properly estimating your hours. This is the only way you can truly calculate your profitability. Your bookkeeper can help run reports that will allow you to view this data with the accuracy needed to help estimate project fees properly in the future.
Use a time tracking app such as Harvest or TrackingTime on your phone so that starting and stopping client projects is right at your fingertips.
Set aside 30 minutes at the end of each day to recap your time and make sure all of your billable hours are accounted for.
With so many variables like your cost of goods sold, sales tax, time tracking, mileage, and so on, it’s not a given that every project will be profitable. It’s key to find someone who can help you track projects and understand whether they’re making you money or not. Once you have that information you can make strategic decisions such as how to price your services, what intervals to invoice at, and what your markup should be. All of this has the potential to benefit your bottom line.
Finding the right partner who understands the business side of the design world is key to letting you focus on running your business and well, designing! If you’re looking to learn more about how we can help your design firm contact us. And if you’re just passing through and in the market for a designer, reach out. We’d happily recommend a few great ones that we work with!