Business is booming — can your accounting keep up? Bookkeeping for architects requires great attention to detail. As you grow from a small firm to a thriving organisation, it may be time to recruit some additional help in the bookkeeping department.
An architecture firm must combine project management, invoicing and employee revenue tracking to create a full picture of financial health. Can your staff handle it all? And should they have to? Your unique bookkeeping needs will demand a tonne of time and resources. Here are some tips for advancing your firm’s bookkeeping, and how to call in reinforcements.
What do you need to keep track of?
Bookkeeping for architects is different than bookkeeping for retail sales or the entertainment industry. With large-scale projects billed on an accrual basis, you need to be particularly diligent about tracking your accounts receivable. Overheads in architecture and similar fields are also higher than it might be for a smaller operation.
Here are some of the primary metrics that an architecture firm should keep track of:
- Overhead rate: Calculate the ratio of indirect expenses to direct labour. The overhead for the architecture industry is typically over 100%; a good number to strive for is about 150%.
- Utilisation rate: This rate reflects how much of your employees’ time is spent on billable projects. Shoot for at least 60%. There will always be some time spent on non-billable tasks, such as training new employees, meetings and internal emails, but a high utilisation rate makes you more efficient and profitable. Accurate time tracking is key.
- Age of accounts receivable: Most architecture firms want to receive final payment within 60 days. This keeps your cash flow in order and limits the amount of money chasing your staff has to do.
- Personnel expenses: Annual leave days, sick days, and other staff benefits are an additional labour cost to track.
- Cash flow: This metric is one of the most crucial for any architecture firm. You can be profitable on paper, but if you don’t have enough cash flow you won’t be able to meet financial obligations.
- Long-term assets: Keeping an up to date balance sheet shows what you own and what you owe currently. It will also help you track assets and debts in the long term. Long term assets can be anything from valuable equipment to loans.
Tips for bookkeeping for architecture firms
Your firm’s business development hinges on your ability to remain profitable and flush. When you’re working with billable hours, that means careful bookkeeping that highlights where you’re overspending and tracks outstanding receivables.
These basic tips are a good place to start if you’re doing an inventory on your accounting health. Ask yourself, have you done these five things?
- Develop a reporting pack
A reporting system in the cloud keeps accounting practices organised and transparent. You can run automatic reports using software such as Xero or MYOB, and you can set your software up to pull data straight from bank accounts and more.
- Outsource your bookkeeping so you can focus on your business
Every minute your executives are spending on the books is a minute they are not billing to clients. Your architecture firm can become more efficient and profitable by outsourcing your bookkeeping to experts who know architecture and similar industries.
- Stay on top of billing and expenses
Catchup bookkeeping should not be a regular practice. Current cash flow calculations and accounts payable data provide a realistic sense of solvency at any given moment. You also want to keep up on expenses because you may be able to deduct some of your expenses. If you don’t have proper records, you won’t be able to claim deductions.
- Review your architecture firm’s books regularly
Running regular weekly and monthly reports helps you catch mistakes. Reconciling your bank statements can ensure that you catch any missing money, forgotten receivables, and other discrepancies. Bank reconciliations are a good end-of-month routine.
- Maintain a chart of accounts
Itemisation helps you sort out your books client by client. You want to keep a chart of accounts so you can always tell which clients are current who have an outstanding bill. By having a digital chart of your accounts, you can properly code expenses and hours to the appropriate account.
Do you need some help with your books? Visory offers bookkeeping for architects at all stages of business. Whether you are a budding firm or a thriving organisation with years under your belt, we have bookkeepers who can handle your finances.
Learn More: Visory’s Bookkeeping for Professional Services