Billing is a complicated issue for interior designers. With a multitude of potential pricing methods to consider, profitability should be your top priority when deciding how your business will collect for its services. Get down to the brass tacks by first determining your market worth on a price per hour basis, then develop a pricing strategy to meet that threshold. Whether or not you charge clients for your time explicitly, your profitability per project will always be tied to the amount of time you and your employees spend on it. Therefore, logging your collective working hours is crucial to staying in the black, and the more detailed your records, the better you will be able to control the profitability of your business in the future.
Before the Project Begins, Get on the Same Page With Your Client
Beyond an initial consultation, best practice for an interior design business dictates that every client project should begin with a contract defining the scope of work, pricing method, and anticipated payment schedule. Use this contract as an opportunity to establish a clear roadmap of expectations with your client. Get every project started on the right foot by explaining each part of the agreement to your client in plain terms, particularly the budget and the project timeline, so they are not caught off-guard by unexpected fees or the number of invoices. If your pricing method includes charging an hourly fee for your time, outline what activities will count as billable time in the agreement. You may want to also include whether or not you will charge for other expenses such as meals and travel. If you do not directly charge clients for your time or project-related expenses, you still need to measure your expended resources and factor their worth into your pricing.
How to Keep Track of Your Time with Design Manager
You have developed a pricing system that factors in the value of your time. Your client is on board. Now, you have to keep track of your time for the system to work. In the worst case scenario, you can spend more time trying to log the hours of you and your team than you do on advancing the project. Having an organized system is key, and Design Manager has all of the tools necessary to make tracking time a seamless part of your everyday business administration.
There are several ways to manage time billing in Design Manager. A simple way to get started is to create an item, define the location as time, and populate the description. Just like you can create an item for traditional merchandise, you are creating an item for design services which you can categorize as billable or non-billable and taxable or non-taxable. Design Manager will save your verbiage such as “professional services” and descriptions, for example, “AutoCAD” or “materials selection,” so that you can customize the program to your specific pricing method and don’t have to re-enter regularly recurring language.
You can also add time charges to another invoiceable item for a client with the check of a box. The breakdown of the charge will be saved, but you can decide whether or not to show that breakdown in the invoice. This allows you to factor in the value of time without directly charging a design or consulting fee. If consulting fees are part of your pricing strategy, you can also set Design Manager to automatically create time billing items for a set period of time (i.e. weekly, monthly, etc.) at a prescribed rate. Rates can be pre-entered in a tiering system that allows you to create up to three different rates per hour depending on the task category or employee. Design Manager can also create automatic time entries with more specific data by using the timer function, which enables you to start and stop the clock on a timer while working through emails, speaking on the phone, or doing other project specific tasks.
Whether recorded manually or with any one of Design Manager’s advanced time billing tools, these items are easily turned into a branded invoice with just a few clicks. If you have two different items for the same category within the same invoicing period, you can combine them manually or set Design Manager to combine them automatically. You can control the chronology of items, as well as the level of visibility in the breakdown of charges. These settings are customizable by project, allowing you to adjust your presentation to the specific needs of each client.
You can use the same functions to budget time, which is a great way to estimate the value of your time over the course of a project. Just create a new item, called “Proposed time budget,” for example. Enter “time” as the location and input your estimated metrics such as range of time, number of hours, and pricing. This will create a forecast you can use for internal purposes, or to charge clients in advance. You can then track your real time usage against the budget by creating new time entries within the budget item. You can control the settings so that new entries linked to a budget item can only fall within the prescribed dates.
Design Manager’s time billing features also make it easy to manage multiple employees with different responsibilities. Employee profiles can be linked directly to projects and can include an employee’s rate per hour, which will automatically populate in linked items. Time entries per employee can also be imported from timesheets that come from apps like HoursTracker and Harvest or more traditional sources such as Outlook and iCalendar. Any source that can produce a .csv, .xls or .txt file should be compatible.
Another option is to use the Design Manager time template. In an employee profile, select a date range or a project and with the click of a button, Design Manager will create an email directed to the employee with their customized timesheet attached. The newly created timesheet will include drop-down menus that pull from the project and time activity tabs. This feature acts as a way to control what can be included on an employee timesheet. To import these time entries back into Design Manager, just click import, select the spreadsheet, and follow the prompts to bring in the desired information into Design Manager. For more information, watch this comprehensive webinar for an in-depth review of Design Manager’s robust time billing features.
The Design Manager app will also include features to make time billing a breeze. The app’s built-in timer will let you track time as you work or enter hours after you are finished working. You can track time to specific projects and add notes, just like you can with the standard software, and any information added via the app will automatically sync to your Design Manager account. In addition to simplifying the time billing process, the app can also take pictures and add items to projects as you see them, making shopping trips more efficient, add new contacts on-the-go, and create professional photo galleries for client presentations.
How To Stay The Course
For a business to be successful, every incoming and outgoing dollar must be accounted for. Because Design Manager can track the granular details of time spent per client, its reporting tool can compare budgeted time versus actual time, billable and non-billable time, employee time and time profit by project. Look at top-down data summarizations by a number of different metrics or break out the information into detailed reports. You can also view open time-related items during a project or after its completion, showing which time entries have not been invoiced to a client. Not all projects meet profitability expectations, so understand where you have wasted time in the past to come up with a strategy to ensure your business will thrive in the long term.
Also, because interior design businesses are built on personal relationships, invoicing one's own family and friends is an awkward bridge most designers must cross eventually. It is important to stay firm in your pricing when working with personal connections and enter the project with a clear pricing method to help mitigate potential understandings. Politely draw clear lines between professional and personal conversations to clearly delineate billable hours. The handy timer feature on the Design Manager app makes it easy to smoothly start and stop clock any time, any place.
With so many ways to structure pricing, interior designers need a customizable solution to keep track of the many moving pieces. Time is money, and Design Manager’s advanced time billing features make sure you have the tools to quantify, qualify, and collect on your time spent without missing a minute. If you are not already using Design Manager for your interior design business management, start a free trial today!