Running a creative business like an interior design firm comes with its quirks and is nothing short of an arduous task. On an average day, you handle multiple vendors and process different orders. Keeping track of all of the transactions eats into the time required to complete projects.
These can often be significant roadblocks. Even though you're a creative head, you know the importance of tracking investments, expenses, and a gamut of other aspects that comprise accounting. Above all, you require a smooth workflow, and that needs clarity.
To gain this clarity, we've divided this article into various sections, all of which aim to show you how accounting can be crucial to your interior design business.
Firstly, let's understand the fundamentals of how an interior design firm's accounting works. Accounting translates into tracking and recording every small financial order added as a record in the company's statement.
Given below is a list of all the elements that comprise the accounting process:
1. Chart of Accounts - This a list of the details of every account in the business, their names, and corresponding codes. With this chart, you have a well-structured account of all your finances in one place.
2. Balance Sheet - This contains a synopsis of all the major components of your business that affect its cash flow. Assets, liabilities, and equities are available at your fingertips. The former links to ownership, while the latter talks about the surplus or the unused parts of a transaction. Knowing your liabilities is equally crucial since it tells you how much trouble the business is in or outlines a projection of its financial situation so that you can plan accordingly.
3. Income Statement - This a summary of the turnover, investments, expenditure, and corresponding profits garnered through the business in a pre-determined duration.
4. Cash Flow Statement - A cash flow statement is imperative for financial documents and helps track and report the inflow and outflow of cash of your business for a certain period.
To ensure that your passion for your projects sustains your business, keeps it afloat, and continues making profits, you need an orderly accounting system. Once the financial management is out of the way, you can focus on growing your presence rather than its other financial aspects.
For instance, consider you have an urgent project with a tight deadline to work on. You have to race with time to make it happen, and amidst all this, you're stuck stringing together invoices. While you might be excellent at what you do, if you're juggling responsibilities and can't focus on the task at hand, you're bound to make mistakes. This can lead to the loss of a potential client and perhaps even a negative review.
With an interior design business, you have a significant revenue stream with project design and strategy. Setting aside factors like staffing, resources, and profit margins, accounting for interior designers also have to handle lots of billing. This responsibility could often fall on your shoulders, keeping you from focusing on implementing your projects.
Managing overhead expenses itself is a huge task, and most of the money coming in gets spent in a rather short period. This makes multitasking much harder, forcing you to handle the creative and financial aspects of your business at the same time.
Outsourcing your firm's accounting needs by hiring an agency is far more convenient than learning the basics of accounting yourself. After all, you run a business, and no matter what its size, you have to ensure that it stays afloat, and the only way you can achieve this is by focusing on its creative side while outsourcing the accounting.
At Fincent, we ensure that the outsourced guide to accounting of your interior design firm is hassle-free and affordable.
You can pay attention to the following factors to ensure a consistent and hassle-free accounting procedure:
Interior design businesses always have to work within a certain budget. As a result, if a particular piece of furniture suits the project's overall theme or design, it doesn't make it to the show if it exceeds the budget.
It's essential to keep track of all your expenses as it's crucial to keep your client aware of any purchases made for their projects. Additionally, while the purchase is made out to your interior design business, the sales invoice ultimately goes to the client.
As a result, you must always know what deliverables you're charging the client for, along with the details of the goods and services present in the invoice. Also, the final cost involves the total cost incurred coupled with the sales tax.
Further, you must ensure that all the purchase orders are appropriately marked and recorded separately in the accounts.
Many firms and enterprises swear by automated solutions since manual data entry is an undesirable and laborious process. With computerized accounting solutions, you can key in the essential components and sit back as the software handles the rest of the operations for you.
Accounting software solutions are a quick fix for your financial management woes. You can easily reconcile payments and note any discrepancies that can affect your business' operations.
Delegating these tasks to Fincent can help in the quick and efficient management of your accounts, giving you more time to focus on your business' other operations.
Also, setting up e-mails on auto-response and ensuring all other communication channels are working well help in the smooth processing of tasks.
While setting up an interior design business, it is essential to create a financial blueprint that involves preparing projections for your profits. Setting goals for your business incentivizes you to perform and manage all your tasks better.
After all, profits help in rewarding your workforce, raising capital, and reinvesting into the business. By knowing your business' total expenditure and net revenue, you can easily calculate its profits before filing tax returns.
Project management and the appropriate allocation of resources are crucial to achieving success in your business, especially from the financial viewpoint. This is especially true since keeping track of accounts can be a stressful and repetitive process.
You can always outsource it to us at Fincent, where we provide an extensive support system to simplify the accounting process. This ensures that you can deliver excellent results and industry-leading projects to your clients. Here are a few tips to ensure that the plan translates into action:
1. Maintain clear and concise financial statements to avoid any issues during audits or filing taxes.
2. Keep a close check on your income statement to know if the data is current and accurate. If there are any inaccuracies, you can look through your billing orders again.
3. You should never have any overdue or pending transactions that can affect the firm's workflow, and in turn, the net profit earned.
4. Apart from all of the financial statements, it's also essential to complete your projects appropriately. Once you finish them, please ensure that all the purchase orders are billed, and there are no documents with the "Work in Progress" remark.
5. Please ensure you have a systematic arrangement of all the records and there's no gap in analysis or understanding of the collaterals. After all, if you're consistent and committed to your business, you can efficiently handle complicated tasks.
When you ensure seamless reconciliations and the accurate tracking of purchase orders, you enable transparency in your work. This will help you avoid any challenges in your operations, even if you're a small business.
Fincent is your one-stop solution for handling all of your bookkeeping needs. We cater to creative professionals like yourself to help you save time and money and focus more on building a successful business.