Architects are mostly creative-minded people, whereas running an architectural firm is a completely different ballgame. Are you an architect thinking about a startup business? Then managing your financing adequately should be your top priority.
We have compiled some of the best financial management tips for architects to prevent “feast and famine” situations in business. From bookkeeping to monitoring cash flow, payment terms to automation of processes, these tips can help improve your overall business efficiency.
9 Financial Management Tips for Architects
Follow these 9 tips to nail the financial aspect of your company.
#1 – Acing Recording Management
All businesses need to maintain records for various purposes. For instance, the Inland Revenue Service (IRS) may ask you to produce certain receipts and invoices to audit. Furthermore, maintaining records properly will help avoid any miscalculations of profit and expenses.
No matter how big or small a transaction is, you must always ask for a proper receipt, from business travel expenses to giving gifts to clients and partners. Everything must be on the books. While bigger architectural firms have a finance department to carry out these tasks, small firms or freelancing architects can use a small box to store the receipts.
#2 – Budgeting Regularly
Do not let your business go without budget planning for months, or you will risk ending up in financial turmoil. As a sensible architect, you must take regular stock checks or your backorders. It would be best to forecast the estimated revenue of the upcoming ongoing and upcoming projects.
This information will help you know your liabilities and your profits. Based on this data, you will be able to make other decisions, such as whether to invest in another project or how much to pay a new employee.
#3 – Building Up Your Savings
Creating an emergency fund is always a good idea so you can dip into it during unforeseen circumstances. You can also use this fund to pay off your business liabilities in case a client delays a payment. No matter how small you contribute, you must always put some money aside into your architectural business's savings account.
The savings will also be able to help you avoid situations such as borrowing temporary loans at high-interest rates. You will also be able to avoid penalties on a delayed credit card or other loan or bill payments.
#4 – Clear Payment Terms
You may not realize as an architect, but unpaid invoices by the clients can cause various issues. Delay in payments by clients may result in overpayment of taxes and a late payment on your existing loans and other financial obligations. This can have an adverse impact on your business' credit score.
Therefore, you can reduce the late payment instances by clearly stating payment terms in the contract with your clients. 30 days in a reasonable amount of time for the client to pay once you have rendered the services.
#5 – Hiring a Professional Team
You are good at building but must leave the taxation part for the professionals to handle. Do not make the classic mistake of trying to save money by doing your own taxes. A slight error or discrepancy may cost you more money in fines and paying higher taxes.
On the other hand, a financial expert is well-versed with best practices in financial management. Similarly, an accountant will create a system to handle your invoices, expenses, accounts receivable, account payments, and file for taxes in a timely manner. This way, you will be getting multiple services by paying a single person or entity.
So, once again - always remember to hire a professional accountant or accountancy firm to do your taxes. This is one of the most critically important financial management tips for architects.
#6 –Investing in Automation and Efficiency
The right procedures and tools to reduce your administration tasks are through automation. Creating automatic invoices, sending payment reminders, etc., can help you reduce the cost of hiring administration employees. Furthermore, you can use your time focusing on more productive tasks.
#7 – Know Your Real Cost
Just like calculating the incoming payment, this is one of the financial management tips related to the outgoing money stream. You must make sensible decisions about what salary you will pay your staff or what price to pay for raw materials and services by third parties.
Other most common factors to know your collective real costs of running architectural business include:
- Rent payment
- Office supplies
- Decoration and furniture
- Food and drinks expenses/business lunches
- Travel and transportation expense
Once again, keeping your receipts will help you update your financial management system and maintain a good record.
#8 – Leveraging Financial Software
You can find so many financial software solutions online to manage your invoices, account receivable, and receipt information on the go. You can log all your financial spending in real-time and such platforms will give you real-time information on your expense to date. Some services even options with options to produce reports for taxation purposes.
#9 - Monitoring Your Cash Flow
Whether you are a freelancing architect or an entrepreneur running a startup, tracking your money is critical. Managing your cash flow will ensure to get paid on time and also run your business operations as per schedule.
To maintain a cash flow, you must also stay on top of your account receivables. This will keep you up-to-date on pending invoices and how much cash flow you can expect during the next payment cycle.
Have a good invoice system in place. Furthermore, it is a good idea to split payments for a project into small timely installments instead of collecting them at the end of the project. This way, you will have a steady cash flow and enough resources to complete the project without borrowing.
Financial paperwork and planning will never be as exciting as planning and creating high-rise buildings and bridges. However, these financial management tips can certainly help you take care of the most basic money management as an architect.
That said, if you are a freelancing architect or a full-scale architect consultant, you can use all-in-one solutions such as Vergo. This platform helps take care of your cash flow analytics, invoice management, smart banking, and much more. You can now manage the cash flow for all the projects via virtual cards.
With a little bit of care and diligence, you will be amazed at how much money you can save just by streamlining your financial affairs.
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