Assessing Your Firm’s Profitability with an Item-Based System

If you are involved in running an interior design firm, you know that accurate and concise accounting is one of the keys to success. And whether you are a small, large, or quickly growing interior design firm, tracking the items you propose and order for your clients is essential to that success.

We often refer to Studio Designer as an “items-based system.” That is because we believe a firm’s profitability at an item level is critical to its profitability at an overall company level. Using an item-based accounting and project management system like Studio Designer can help designers accurately and efficiently track the growth of their business.

So, let’s look closely at how items give designers the power to lead a profitable interior design firm.

In Studio Designer, the items are the driver. Whether it’s soft furnishings, millwork, installation, or professional fees, items are first created and then all added to a project once. From there, it is effortless to move a project along. You can easily add items to a client proposal, submit purchase orders to vendors, invoice clients, and keep track of paid and outstanding items.

An item-based system is reliable for ensuring that project items have been ordered, invoiced, and paid for as they should be. This means less chance for billable project expenses to go un-invoiced. It also offers a better way to see profitability, allowing designers to see where and how they make money.

For example, let’s say you are a designer who thinks you are consistently making money in accessories. Since all pertinent accounting information related to an item (i.e., pricing, tax, markup, sales codes, shipping) and project lives in Studio Designer, you run an Income Statement report to prove your theory. With a click of a button, the report drills down into your income and expenses. You now see that you make more money selling custom furniture (i.e., sofas, chairs, tables) than selling accessories, from project to project. This level of insight now allows you to better understand which revenue streams are most profitable (which may surprise you!). It also brings awareness to areas where you can adjust how you sell and bill for future projects.

Getting this level of insight into profitability can be challenging if you are not using software that integrates accounting and project management functions at an item level. This is because, more often than not, you would have to draw information from two or more different programs, i.e., whatever program you use to manage your projects and whatever accounting program you use to handle the financials, say QuickBooks.

In QuickBooks, assessing profit insight can be tricky as there is a manual effort to locate accurate numbers in reporting because all item information has to be viewed at the proposal/invoice level, not at an item level. This opens the door to costly errors and frustration when valuing your business’s financials.

Design firms must continually plan, monitor, and understand their financials to grow in business and profits. Using a system like Studio Designer that captures all instances of profitability at the item level gives designers a clear and concise view of their firm’s profitability and overall success for years to come. With this intel, designers can see the big picture of their firm’s overall earnings and ensure that each project is profitable for their business.