Are You Leaving Money on the Table? Financial Systems to Protect Your Profit

The Difference Between Thriving and Struggling Design Studios

Episode 98

As an interior designer, you're passionate about creating beautiful spaces for your clients. You've honed your creative skills, built your portfolio, and attracted clients who value your aesthetic vision. But are you leaving money on the table?

In this episode I look at the essential financial systems that separate thriving, profitable design studios from those constantly struggling to make ends meet.

I hope you enjoy the episode

Beth xx

Download the Project Tracker Here

The Three Pillars of Financial Success for Interior Designers

Building a profitable design studio requires attention to three critical financial systems:

1. Cashflow tracking - Knowing exactly what's coming in and going out

2. Invoicing best practices - Ensuring you get paid on time, every time

3. Strategic pricing - Setting rates that reflect your true value

Let's explore each of these pillars and how they can transform your design business.

Cashflow Tracking: The Lifeblood of Your Design Business

If someone asked you right now how much money is in your business bank account, could you answer confidently? More importantly, could you also answer how much is coming in next month and how much is going out?

"Cashflow is the lifeblood of your business," Beth emphasizes. "If you don't track it, you are flying blind."

Setting Up Effective Cashflow Systems

To gain clarity and control over your finances, Beth recommends:

1. Proper Accounting Software

Invest time in setting up accounting software like Xero, QuickBooks, or MYOB correctly. If you're not sure how to do this, schedule time with your accountant to walk you through it.

2. Weekly Review Habit

"You need to get into the habit of reviewing your cashflow weekly," Beth advises. "Set time aside—be it first thing Monday morning or Friday afternoon—whatever works best for you, but get into the habit of checking it so you're never caught off guard."

3. Pattern Recognition

Look for patterns in your cashflow. Are there months where you're consistently short on cash? You might need to adjust your billing schedule or plan for these lean periods.

Common Cashflow Mistakes to Avoid

Beth highlights several cashflow pitfalls that trip up many designers:

• Spending money before it's in the bank: "Just because a client signed a contract doesn't mean that the money is in your bank account yet. Don't spend what you don't have."

• Forgetting about tax and business expenses: "Keeping a separate account for GST, tax, and overheads is a great idea so you know that money is put aside and you're not scrambling later."

• Not paying yourself first: "Make sure you get paid. Even if it's a set monthly salary from your business, it's really important that you are getting paid. If you are not getting paid, then why are you running a studio? We are not running hobbies. We are not running charities."

Invoicing Best Practices: Getting Paid Faster

One of the biggest reasons designers struggle with cashflow is delayed payments. Clients forget, invoices get lost, and before you know it, you're chasing overdue payments.

"Delayed payments are going to be a killer to your business," Beth warns.

Strategies to Improve Your Invoicing Process

To ensure you get paid on time, every time, implement these invoicing best practices:

1. Invoice Promptly

"Invoice on time, every time. Don't wait until the end of the month. Invoice as soon as a milestone is reached," Beth recommends. This should be linked back to your fee proposal and project timeline.

2. Clear Payment Terms

Make your payment expectations crystal clear. "Payment due within seven days" is much more effective than the vague "due upon receipt."

3. Automation

"Use automated invoicing. All of the accounting software these days has automated invoicing if you want to set it up. They also have automated follow-ups for when payments are not received."

4. The "Accounts Department" Trick

One of Beth's favorite strategies for following up on late payments: "Setting up a second email account—it might be accounts@studioname. It just gives you the ability to pretend like you've got an accounts department who's chasing up the invoices for you."

Effective Payment Reminder Cadence

For those uncomfortable with chasing payments, Beth suggests setting up automated reminders with this cadence:

• Three days before due date: "Just a friendly reminder your invoice is due soon."

• On the due date: "Your invoice is now due, please arrange payment today."

• Seven days overdue: "Your invoice is overdue, please process payment immediately to avoid late fees."

Pricing Strategies: Charging What You're Worth

"When we're talking about leaving money on the table, one of the biggest things that designers are guilty of is undercharging," Beth states.

Consistently undercharging puts a lid on your studio's growth potential and can lead to resentment and burnout. Your pricing needs to reflect several key factors:

Factors to Consider in Your Pricing Strategy

1. Experience and Expertise

"Think about your years of training, your skill, your industry knowledge," Beth advises. "And if you are new to this industry, it's not just about the years you have in the industry. You might have already done 10-15 years in a previous career and have a large number of transferable skills."

2. Value Delivered

"We are not just picking cushions. You are creating a functional, beautiful space that improves your client's life. If you don't value that, it's going to be very hard for the client to value that."

3. Time Investment

Remember to account for all aspects of a project: "All of the things—the calls, the sourcing, going to site, the admin, the stuff that happens in the background—all of the stuff that sits alongside the designing, it all adds up."

Are You Charging Enough?

To evaluate your current pricing strategy, Beth suggests asking yourself these questions:

• Are you making a profit on every project? "If you're not, something needs to change. You really should have a percentage of profit that you are trying to hit for every project."

• Are you including markup on products you're sourcing? "If not, you're missing out on a key revenue stream."

• Would you be happy doing this project at this price again? "If the answer is no, you need to raise your rates."

"Your pricing should allow you to run a profitable business, not just break even," Beth emphasizes.

Implementing These Systems in Your Design Business

To protect your profit and stop leaving money on the table, Beth recommends these action steps:

1. Track your cashflow weekly so you always know where you stand financially.

2. Set up automated invoicing and payment reminders to get paid faster. If you're not sure how to do this, ask your bookkeeper or accountant to show you.

3. Price your services for profitability, not just to cover costs.

To help you implement these financial systems, Beth offers a free Project Tracker template designed to help you monitor the financial health of your projects.

The Bottom Line: You're Running a Business, Not a Charity

"We don't run charities. We're not doing this as a hobby. We are here to run profitable businesses," Beth concludes.

By implementing these essential financial systems—cashflow tracking, invoicing best practices, and strategic pricing—you can transform your design studio from merely surviving to genuinely thriving.

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