Although architecture firms can make a large amount of income, they typically do so despite a number of tricky financial realities. Small architecture firms, in particular, have to be incredibly astute in order to maintain growth. Here are some useful financial tips for architecture firms.
Consider Debt Factoring
Small architecture firms often focus on one project at a time. They simply do not have the staff or resources to work on multiple concurrent commissions. While this is not a problem in itself, it can have a negative impact on cash flow. Architects are typically paid after the completion of a project using an invoice. If they are paid in installments, the vast majority of the money is transferred after a project is signed off for construction. If only one project is being completed at any given time, the gap between paid invoices can be large. This gulf can mean a firm has to endure a large period with no income.
For this reason, some architects might to debt factoring brokers like Fundinvoice.co.uk to help them maintain a regular flow of money. Debt factoring is an arrangement in which a company can generate cash using unpaid invoices. The debt factoring broker takes a small percentage of the invoice value in exchange for a rapid payment. Some small architecture firms are users of this service, which can help ease the financial stress caused by inconsistent payments.
Communicate Clear Payment Terms
A lack of clarity can make receiving proper payment for a commission a somewhat torturous affair. It is incredibly important to give clients very clear payment terms before they sign off on a commission. Consult with a lawyer to develop a set of payment terms that can be easily understood and legally sound. If payment terms are not clear, clients will have room to negotiate, which can lengthen the time it takes to receive the payment that the commission demands. You cannot force clients to immediately pay an invoice, but you can stipulate reasonable payment deadlines. These deadlines can help a company to keep track of its finances and plan accordingly for gaps in cash flow. Architects are usually paid in either installments or when a project is signed off for construction. The method of payment should be made very clear in all paperwork associated with a contract.
Carefully Calculate Costs
There are many hidden costs associated with completing an architecture commission. It is important to carefully consider all of these costs before coming up with a quote for a client. Everything should be taken into account: rent, staff, materials, and bills. If you don’t take all of your costs into account, then you could find that a job is actually very poorly paid in real terms.
Conducting regular audits and producing regular budgets is essential. By keeping track of incoming and outgoing funds and budgeting accordingly, architecture firms can develop money-saving plans and make sure that nothing goes to waste.