For interior designers, managing “the books” can be compared to cleaning a closet: some have pristine shelves with everything labeled to the nines. Others keep their dust-covered mess tucked away behind closed doors, never to see the light of day. (That is, until the IRS comes calling!). Whether you and your firm fall into the former or the latter camp — or, more likely than not, find yourself somewhere along the financial spectrum — there’s always a way to better optimize your approach to internal bookkeeping, particularly as it applies to the client payment process. Here’s where pros like Deena Raphael, principal of Interior Design Bookkeeping, which provides bookkeeping, project management and accounting services to interior designers across the country, come in.
Two of the typical challenges among designers with bad books are poor time management and a lack of a systematic approach to all things financial. “Often, designers are simply too busy or overwhelmed to keep on top of it. They don’t have a system or procedures in place or lack training in the system. They under- track their time, don’t get reimbursed for incidentals, and are scared of sales tax. They shop before receiving client payments. They don’t collect W-9s before engaging a service provider, and mix business and personal accounts,” she explains, naming some of the common hurdles facing design practices. “With systems and processes in place, these challenges can be avoided or addressed without year-end surprises.”
Deena, who works exclusively with Studio Designer software, shares some of the top truths accountants want designers to know about better managing their books.
Start with some simple changes
Client payments can prove to be a particular beast for designers, especially those who value keeping creative conversations separate from discussions about money. “Designers want to be paid quickly. A lack of clear payment terms and an inconsistent billing schedule can make that difficult,” explains Deena. A little organization can go a long way, however. “Create processes to avoid being out of pocket,” she explains, noting a few immediate must-do’s: “Collect 100 percent on goods and estimated freight upfront. Collect an accessories allowance before shopping for the installation. Send time billing out consistently. Set expectations and communicate so clients are not surprised when they receive an invoice.”
Get honest and stay current
While creatives aren’t necessarily known for their financial prowess, proper bookkeeping can be a learned skill. If you don’t have the time or inclination, hire a professional who does. “Most interior designers we know dislike bookkeeping and dealing with money. Outsourcing the bookkeeping takes the day-to-day work off the designer’s plate,” says Deena. Yet even if you opt to outsource, as she points out, “we don’t work in isolation.” A commitment to communication between designers and their accountants, whether in-house or hired out, is key.
In addition to honest conversations, make sure that your accounting reports are precise and updated regularly, too. Be sure to share all details with your bookkeeper or accountant, and enter all relevant information into the books on a routine basis. Set reminders, if you have to, or incorporate it into an existing routine, such as timed to when you process payroll. “It’s important for regular connection and a feedback loop to keep reports clean and the books current,” says Deena. “The reports available are extremely useful, but only as accurate as the information that gets entered into the system.”
Lay down the law, and set up a schedule
Stop fronting money for your clients. “Let clients know that goods will not be purchased until payment is received,” advises Deena. Enforcing a regular billing schedule can help clients stay on track with their payments, too. “Clients that are paying late often have not been receiving their time billing consistently. We get the billing on a schedule so clients know what to expect and then follow up consistently as needed.”
Simplify, simplify, simplify
Don’t overcomplicate payment. Depending on your clientele, consider abandoning paper altogether and implementing an online client payment process instead. “Make it easy for clients to pay with clear wire instructions or an electronic payment option,” explains Deena. It’s particularly fitting advice just as Studio Designer launches StudioPay, an integrated digital solution for client payments that allows for one-click payments, competitive fees, gross settlement, and other features, all tailored to interior designers’ unique business needs. You can read more about it here.
Seek professional help
Prefer to handle the creative with your clients, and leave the financial talk to the professionals? Consider deputizing your in-house bookkeeper — or outsourcing to an accounting or bookkeeping firm — to handle all finance and billing related conversations with your clients. “We handle the billing for many designers who don’t want to ask for money,” shares Deena. “This arm’s-length approach lets designers focus on the creative and client relationship, and we can be direct with the payment request.”
To learn more about StudioPay download this free guide today!
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