Weissenberg explains: “If you know you have to spend $30,000 per month no matter what, all of a sudden it’s very simple: $30,000 x 12 means you need to bill one million. So [aim for] $1.5M to cover your expenses and make a little money. I think that target is the most important thing at the beginning, just to know where you are.”
Make Upfront Payments Non-Negotiable
Avoid the pitfalls of fronting cash during the procurement phase by forecasting your spending—and taking payment in full prior to placing orders. “Be very careful not to pay out for things you have not been paid for,” cautions Weissenberg, whose firm requires approval in writing and payment upfront before any furnishings are ordered. “What I don’t want is for the client to say, ‘I don’t want it anymore,’ and now you’re making a sofa and you’re stuck with it,” he explains. Josh Thornton, Managing Director of Summer Thornton Design, follows the same principle, even if the vendor only requires a 50% deposit. “This ensures you have the funds on hand when balances are due,” he notes.
Some firms choose to invoice by room or item (ordering pieces with the longest lead time first) while others request a furniture retainer up front, which they draw from as selections are approved. A retainer can expedite the ordering process during heavy procurement mode, avoiding potential delays and availability issues, notes Kloythanomsup. “But clients are still approving every single thing,” she says.
Be Disciplined About Balancing Your Books
Thornton suggests structuring your accounting system so that cash received is not recorded as income until after the product is delivered to the client. “This way you never count your chickens before they hatch,” he says. He also cautions against allowing monthly billings to fall behind schedule. “Set a deadline for yourself and never miss it. Once you get delayed by one month, it creates a domino effect that negatively impacts cash flow management for the entire project’s duration.”
Link Your Accounting and Procurement Systems
The best accounting system for tracking all that money is a hot topic in the design industry. Some firms cross-reference spreadsheets and bookkeeping software like QuickBooks with project management platforms like Programa, Houzz Pro, or Fohlio, while others opt for fully integrated tools like Studio Designer. Prior to migrating over to Programa, designer Gil Melott’s firm used a series of Excel charts. “The most analog process we possibly could,” he says. “What I realized is that complexity compounds in the gaps: Between procurement and invoicing, between commitment and collection, and between what the project looks like and what costs we carry.”
On the flip side, a software system that integrates bookkeeping, procurement and invoice reconciliation all in one place gives you the big picture at a glance, leaving far less room for things to fall through the cracks. “When all that information lives in one system, the complexity has nowhere to hide,” says Melott.
It is notoriously complicated to switch systems however—Weissenberg has tried twice—but if your firm is outgrowing your current method, it’s worth considering. Advances in AI mean the technology is constantly improving and as firms grow, so do their needs. Fohlio, for example, is designed for complex hospitality projects, while Studio Designer is a favorite among residential designers who want procurement software with a built-in accounting system.
