Understanding the Fundamentals of Interior Design Bookkeeping

Whether you’re new to the Interior Design field or you’re a seasoned veteran, it’s important to understand the basics of proper interior design bookkeeping practices for your business.  We’ll cover some of the biggest do’s and dont’s to help you streamline your business and avoid messy books!

Setup Your Accounting Software

The first order of business should be ensuring that your accounting software is set up properly for you interior design bookkeeping.  QuickBooks online needs to be set up properly from the day you start using it.  This means setting up your sales tax center, setting up your chart of accounts (income accounts, expense accounts, etc.). If you need help setting up your systems, we are here to help with our Ivy/Houzz Pro Mapping Package. 

Managing Client Payments

Next, you’ll want to set up your own internal process for managing your projects. We typically advise clients to follow this process once you are ready to start a project:

  • Create a proposal for your client based on your initial call or consultation with them.
  • Send this proposal to your client for approval, changes, etc.
  • Once everything is approved on the proposal, you’re ready to start ordering your products (if applicable).  Create purchase orders from your estimate and send out to your vendors so you can begin ordering the client’s products.
  • If necessary send your client a request for payment for the product (whether it be 25%, 50% or 100%). We recommend collecting 100% on all invoices to align with industry best practices. 
  • Send payment to your vendor when ready.
  • Once items are installed and no changes are expected, you can convert the proposal to an invoice and if necessary collect any balances due.

We know that of course, everyone’s process is different when it comes to interior design bookkeeping. You may invoice your client right off the bat once they approve the proposal.  Some designers will create retainers for design fees and apply that retainer to invoices as design hours are completed.  The most important thing to note is that whatever your process is, make sure you are tracking your time and products/materials so that everything is invoiced to the client and accounted for. 

Handling Client Concerns

What should you do if the client changes their mind about something?  Or the table they wanted is no longer available or the vendor estimates extremely long lead times?  It’s important that any changes made to documents should be handled carefully so as not to disrupt any reporting, specifically sales tax reporting.  This means if you have invoiced your client for a taxable product and there is a change in amount, quantity, etc., that you do not make an edit to an invoice that falls within a month sales tax has been filed.  We have several suggestions for workarounds that have to do with client credits or refunds that will not disrupt previous month’s sales tax reports.  

Bookkeeping Tips

Other helpful tips for interior design bookkeeping, would be to make sure when recording payments to vendors you are recording specifically what the vendor is charging you.  We know that oftentimes a shipping charge will change at the last minute, product price fluctuates, or the vendor tacks on a handling charge.  You would simply update your PO and payment so that what they are charging you matches exactly to what you’re recording on your end.

We do also recommend that you work with a bookkeeper who is well versed in the Interior Design industry. There are often moving parts that happen frequently during the course of a project and it’s important to keep accurate records to ensure you have clean books and financials.

Do you have additional questions or would like further information on the basics of Interior Design bookkeeping?  Please contact us and we will be happy to answer any questions you may have!

Understanding the Basics of Interior Design Bookkeeping

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