Bookkeeping Tips for Interior Designers
Does your bookkeeper do this?
If you’re an interior designer, then you’re probably familiar with the complicated financials that come with managing your clients’ projects. You spend your time ensuring that your clients achieve stunning spaces and have a simple, streamlined experience. On the back end though, your books can easily end up cluttered and difficult to manage – definitely NOT the motif you were going for.
I began offering tailored bookkeeping support to interior designers because I noticed that there was a huge gap between the financial services that were needed and the ones that were being provided by traditional bookkeeping professionals. I found that when I worked with clients in the interior design industry, their problems were often rooted in poor financial management, and I’m not talking about a lack of cash. More often than not, I would see profitable businesses struggle simply because they weren’t keeping good enough track of their books or they couldn’t weed through the complicated financial history in order to understand what was going on with their company financials.
I wanted to share some common ways that I support interior designers at Modern Balance that traditional bookkeepers often miss. My goal in sharing this is to help designers better understand some key ways that they can alter their bookkeeping process to work better for their business and finally get the financial insights they need to accelerate their interior design firm’s growth.
Using Accrual as Your Primary Accounting Method
One of the #1 reasons that interior designers feel confused about their financials is because they are trying to use cash accounting. Many traditional bookkeeping professionals will default to cash accounting because it’s usually the best method for small businesses. However, choosing the accrual accounting method has several advantages for interior designers. Unlike with cash accounting, accrual accounting shows income as soon as an invoice is generated. Cash accounting does not record the income until the cash is in the bank. Since many interior designers must wait to be paid by their clients until a project has been completed, accrual accounting ensures that designers can see their profits even during times when projects have not yet been completed and collected on. This can be extremely helpful for designers who are trying to make choices about strategically scaling their business and need to see the true picture of where they stand financially.
Making Sure All Income Sources Are Accounted For
During a cleanup project, I noticed that Houzz hadn’t deposited any online payments for four months. My client hadn’t realized at all that the payments had not posted because she wasn’t keeping good track of all her income sources. She had no idea that she hadn’t received over $35k in missed payments! When we notified my client, she was shocked but so grateful I’d found the missing money and was able to help her recover it from Houzz. Because cash flow is one of the most common reasons for small business failure, not having access to that much of your firm’s capital can seriously slow growth and make it more difficult to continue scaling your firm. That’s why it’s so important to be proactive with your books. If you don’t have time to dedicate to bookkeeping each week, hiring a professional is the best way to ensure that all income sources are accounted for at all times.
Properly Managing Your Accounts Receivable
Managing A/R for interior designers can be tricky. Bookkeeping professionals who are unfamiliar with purchase orders and the complicated accounts receivable process that most interior design firms are accustomed to can end up creating significant errors for their clients. Because I often work with interior designers, I’m able to easily ensure that you’re A/R accurately reflects your cost of merchandise, markup, and any sales tax that needs to be paid by your clients. Because sales tax must be paid on some line items and not others, many bookkeepers struggle with managing A/R accurately and effectively for interior design firms. My advice is that if you’re managing the books yourself or working with a more generalized bookkeeper, make certain that your invoices accurately account for taxes and markup as failing to do so could come at a big cost for your business.
Effectively Tracking Your Time
If you bill your clients for the amount of time you spend on their projects, you’ll need a pretty meticulous time tracking system and an accounting process that honors this dynamic. We help our clients create time tracking systems that fit effortlessly into their accounts receivables process and even help them establish key practices for tracking their team’s time as well. This also helps us project and calculate the profitability of individual projects as well!
Tracking Recoverable Expenses
Interior designers are often traveling to clients’ homes, paying for parking when they pick up supplies, and making other expenditures from their personal accounts that are recoverable costs. Whether you bill clients for these recoverable expenses or simply reimburse yourself from the business for these costs, ensuring that they are tracked properly is the only way to make sure that your income does not end up overstated. We help clients maintain mileage logs, run reimbursements, and when applicable, bill clients for these recoverable expenses.
When it comes to interior design bookkeeping, having a tailored approach really matters! Is your interior design firm looking for a bookkeeper who specializes in your industry and can help move your business toward a more sustainable and profitable future? Reach out to me about how we can work together today!
