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When you fill your days creating beautiful designs, talking textiles, and communicating with clients, balancing the books may be last on your list. As an interior designer your business runs on having cash in all the right places so you can buy and style spaces to match your clients’ dreams. Bookkeeping should always be a top priority.
Even so, that doesn’t mean that bookkeeping always comes easily. Bookkeeping for interior designers comes down to two options:
Smart bookkeeping is crucial to managing your cash flow. It will ensure that your expenses are recorded accurately and income values are maintained and repeated. Not only does healthy bookkeeping help you estimate the current health of your interior design business, but it also lets you see patterns and make comparisons with previous years by looking back.
If you want to grow your business, you will need to support that decision with past accounting data and forecasting for the future. Whether you are taking on new clients or hiring more employees, better bookkeeping will give you the answers you need to build a successful business.
Plus, you’ll want to have accurate books so you can:
Bookkeeping for interior designers is straightforward enough if you have the right knowledge and you can stay consistent and organized. For an in-depth take on doing your own bookkeeping, take a look at our blog: Can I do my own Bookkeeping?
Here are some special considerations when you are doing bookkeeping for interior designers.
It is crucial that you categorize your transactions a on regular basis. When this is made a weekly or bi-weekly task, this can be done quickly and efficiently. When left undone, it usually spirals to be overwhelming and confusing. This task is best completed while the transactions are fresh in your mind.
As an interior designer, structuring how and who pays for furniture and materials should be expressed clearly as part of your contract. For help on writing a clear interior design contract, check out our step-by-step guide:
Another quick tip: As always recommended, your personal and professional expenses should be kept separate. You can do this by setting up a business bank account. With a business bank account, you can open a debit or credit card to be used exclusively for your business. Use this for making all your purchases for projects. These will all be connected to your bookkeeping software so you can easily see transactions rather than manually importing them.
Set aside time for non-design-related tasks, including doing your bookkeeping. This time should be a non-negotiable. When left unchecked, poor bookkeeping will start to affect every aspect of your business.
Bookkeeping may not be your favorite task, but its importance cannot be understated. If you find that you are pushing off your bookkeeping, consider hiring a bookkeeper or enlisting the help of a trusted team member.
It is critical to allocate time to projects and clients that are most valuable. You should be cautious to manage your time between billable and non-billable tasks wisely and prioritize the tasks that are more important to your business. If you track your time properly, you will be able to use historical data to correctly estimate how much a design project will cost.
Tracking both billable and non-billable project hours according to your available time will allow you to find out the real cost of a project, estimate its profitability, and you can raise your billing. Some examples of non-billable tasks in an interior design project include doing research, talking with the client, and brainstorming. Although these tasks are non-billable, you have to do them during a managed time to turn them into profitability.
Another benefit of tracking your time is that you can find out how many hours of labor have gone into a specific task. This helps you make the most of your time and human resources, and avoid overruns. Additionally, this enables you to make adjustments if required.
Regularly tracking your time (even for non-client activities) also helps you discover what tasks are taking up most of your time and what tasks may be worth outsourcing. If you find that your bookkeeping is taking up too much time, it may be time to hire help.
In summary: tracking time helps you manage projects, prioritize the most profitable tasks, and highlight time-consuming tasks.
Paying for taxes is one of the most significant parts of bookkeeping for interior designers. You need to be preparing for taxes throughout the year, not just during tax season. Estimated quarterly taxes are due in April, June, September, and January.
A rule of thumb state that interior designs should set aside at least 15 percent of their revenue monthly for tax. It is also suggested that they contact their tax preparer to find out if that amount of savings is enough for tax season.
Always remember the tax deadline to avoid possible penalties. A good approach is to set reminders for every essential deadline, so you can stay up to date. You can add tax return due dates and other reminders to your calendar to make sure you will never miss any upcoming due date.
Additionally, experts advise that interior designers keep their accounts in formats that IRS accepts. IRS does not accept credit cards or bank statements alone for auditing; they need receipts too. Therefore, interior designers should always keep their receipts scanned for tax season.
We highly recommend finding a digital solution to tracking receipts. Check out apps like Shoeboxed to digitally save receipts and track expenses. This is far better and easier than sifting through a drawer full of receipts at tax time. You can also attach digital receipts to invoices for your records and your clients.
If you want to do bookkeeping for your interior design firm on your own, utilize the latest technology to help you streamline your process. It is best to use a cloud-based bookkeeping service (rather than software you download onto your computer). This way you can access your financial information from anywhere in the world. It also gives your bookkeeper or accountant real-time numbers on your business.
Great bookkeeping software should integrate with not only your bank(s) but also your payment collection service and the other applications you use to run your business. This saves you so much time and money. You’ll be able to automate simple tasks, keep transactions up to date, and communicate quickly with team members and clients when they need important information.
While no one is perfect, these bookkeeping mistakes are unfortunately far too common for small businesses. Avoid these costly mistakes when doing bookkeeping for your interior design firm:
If you can stay consistent and organized, you can manage your bookkeeping for your business. Simplified software like LessAccounting’s DIY bookkeeping platform makes everything clear and upfront and works great for small businesses under 10 employees. Not only can you simplify your bookkeeping with LessAccounting, but you can also use our invoicing and proposal creation tools to communicate quickly and clearly with clients.
If it comes time to outsource your bookkeeping, take a look at LessAccounting’s full-service bookkeeping option. Our pro bookkeeping experts are dedicated to empowering small businesses like yours with the financial tools they need to flourish.