Helping Firms Embrace the Language of Business
“Bookkeeping?!?! Psshh. It’s confusing, boring, and I don’t want to do it!”
“I went to school for architecture, not business!”
“Pencils I know, scales and tracing paper I know! Deciphering the client’s needs and wants? Bring it on! But bookkeeping?!?! What manner of evil is this?”
These are the sentiments of many firms in the architecture community. There’s absolutely nothing creative about it and yet it is crucial to the growth of all design firms. Consider the following.
To do what you love, you must have a profitable business. To have a profitable business you must make well informed business decisions. To make well informed decisions you need to have financial clarity.
Financial clarity is achieved through great bookkeeping.
With that being said, allow me to share my bookkeeping basics for architects. It’s a wonderful companion on the journey to passionate and profitable design.
Bookkeeping Basics for Architects
What is Bookkeeping?
Bookkeeping is the classifying, recording, and reconciling of financial transactions.
The Chart of Accounts (COA) lists the names and codes of each account and is used as a guide to keep those transactions organized. Accounts are then prepared into financial statements or reports that help tell your firm’s financial story.
The big 3 financial statements are the Balance Sheet, Income Statement, and Statement of Cash Flows.
The Balance Sheet gives you a snapshot of what you own (assets), who you owe (liabilities) and what’s left over (equities) for a specific point in time.
The Income Statement displays your revenues, costs, expenses, and profit for a specific period of time.
And the Statement of Cash Flows gives you an autopsy of cash going in and out of your business, also for a specified period of time. Check these at least once a month.
Now I could fill this post with other important aspects of bookkeeping, but for the sake of time (and sanity) I’ll leave this section with the point. Keep your accounts/books clean, accurate, and current to obtain financial clarity.
Many would assume the major benefit to clean, accurate and current financial statements is relief while filing taxes and enduring audits. However, these statements satisfy far greater than IRS requirements. They provide the information you need to thrive.
Having trouble achieving profit margins? Mosey on over to your income statement! Perhaps your expenses are gobbling up revenues. Depending on the data, you may be able to solve this issue by raising your billing rates, reducing the time spent on project phases, or reducing other costs or expenses.
Or maybe your profit margins are high but you’re having trouble paying bills. Take a look at all three statements. If you find the total cash from operating activities (Statement of Cash Flows) to be significantly lower than net profit (Income Statement) and your accounts receivables (Balance Sheet) are ridiculously high, then bang on your client’s door and shout “PAY ME NOW!” Or some polite variation if you prefer.
Clear financial statements are very powerful tools. Use them to avoid operating in “darkness”. They tell your financial story and help you discover solutions to obtain and maintain profitability!
I want to add some nuggets to help boost your bookkeeping experience. Your time is valuable. Great bookkeeping is also valuable, yet time consuming. See the conundrum? There’s a great deal of equations, functions, principles, performance indicators, reports and other “goodies” that shape great bookkeeping. To tackle this beast alone on top of your responsibilities as an architect is really counterproductive. Create a system enabling you to obtain the financial clarity you need to be profitable in as little time as possible.
This can be achieved through automation and delegation.
There’s a plethora of financial accounting software programs available to make your bookkeeping experience less painful. I’m talking minimal data entry, fast bank reconciliation, fast and easy invoicing, budgeting, and so much more! Find a fully integrated software program that encompasses those big 3 financial reports and all other “goodies” necessary to help your architecture firm prevail. As an added bonus, create an automated ecosystem of accounting and project management tailored to fit your firm’s unique needs. (It’s not a unicorn, it actually exists!)
You’re a great architect! You have the power to inspire even the most cynical of critics through your amazing structures! This valuable gift does not come without costs. You wear many hats as an architect. From pre-design to construction administration, your tasks and responsibilities are great. And as an entrepreneur, you add extra layers from marketing to financial management. One might mistake you for the Mad Hatter himself! Don’t be a Mad Hatter. Delegate the extra responsibilities to those who do it better. Bookkeeping is no exception.
Great bookkeepers are here to help you set up and manage your financial ecosystem. They are here to help interpret your firm’s financial story. They desire to see you succeed in business and in passion. If ever you come across one, ask plenty of questions to help foster a healthy, trusting relationship.
For information on automation, delegation and more bookkeeping basics for architects check out these articles.
Great bookkeeping doesn’t have to be so burdensome. Embrace it through automation and delegation. Gain understanding to make better business decisions and grow!
This is a guest post by Candace Dixon.
Candace is the owner and head virtual bookkeeper at The Builders’ Keep LLC, virtual bookkeeping for master builders! In 2007, she graduated from the University of Central Florida with a BSBA in business management. As a fellow creative mind, (singer/songwriter) she understands the architect’s desire to simply create without the stresses of business undermining creation. Candace is committed to helping the small firm architect realize their creative and financial goals through profit management.
Learn more about Candace and The Builders’ Keep at TheBuildersKeep.com.
Photo Credit: Shutterstock / Bacho