9 Financial Tips For Architects and Engineers

Dec 13, 2022 · 8 minutes to read

An architect working with his design on a paper

Managing business finances and cash flow is a challenge for many small businesses. Architects and engineers are no exception. You may be great at designing buildings and know safety regulations back to front, but balancing the books? This might be outside your skillset.

Learning to manage finances as an architect or engineer is crucial to running a successful business. To help, here are nine architect and engineer money management tips to help you budget, improve cash flow, file your taxes, and protect your business.

1. Take budgeting seriously

As an architect or engineer, you understand how essential budgeting is on projects. Well-run jobs have a set budget that allows you to properly plan the work to be done and maximize the amount of money you earn. Going over that budget can lead to unhappy clients and poor profitability.

You probably do everything possible to stay on or under budget during each contract you accept. But are you running your business as carefully? You’d be surprised how many firms don’t apply the same standards to running their business as they do to completing client work!

Making and sticking to a budget can help improve your architect business’ cash flow. A budget enables you to trim expenses, allocate funds to other areas of the business, and increase your profitability. Accounting software can help you get started by helping you visualize incoming revenue and expenses over time.

2. Stay organized

Setting a budget is crucial, but it may be hard to stick to if you’re not organized. Architects and engineers understand the importance of getting the details right. But once again, you might not be applying the same rigor to your office as you are to client projects.

Organizing your office and paperwork may seem daunting, but it can’t be overlooked. Properly filing invoices, bills, and other essential documents can save you valuable time searching for misplaced paperwork. This is true whether you’re storing hard copies or digital files on your laptop.

Once you have a system in place, stay on top of it. Consider setting aside an hour at the end of the day or one afternoon a week for office admin. Input revenue and expenses into your accounting software, follow up on invoices and return client messages. This can help you continue to stay organized and avoid a backlog of tedious admin.

3. Embrace automation

Technology can be an architect or engineer’s best friend if used in the right way. You may already be using automated processes to help you produce some drawings and blueprints. Why not apply the same idea to running your business?

Software and apps could help you tick many repetitive tasks off your to-do list faster and with greater accuracy. Think sending invoices, tracking time spent on projects, analyzing cash flow, and reporting. The time you’re spending on these tasks might be better spent on other parts of your business.

4. Hire an accountant or bookkeeper

Of all the architect and engineer’s money management tips out there, this might be the best one! It may seem counterintuitive to bring on more staff to save money. However, the cost of a bookkeeper or accountant may be worth the expense in the long run.

Bookkeepers and accountants are experts in money management. Not only can they help keep your books in order, but they could also identify potential savings and ways to boost your profits. Come tax time, you may be glad you have an accounting pro on your side! They could help you save time filing your business taxes and be helpful if you are audited.

There are options if you can’t afford a full-time accountant or bookkeeper yet. Hiring someone part-time or bringing in a freelancer once a month may work with your budget. Regardless of how often they are there, make sure you understand what you can do to make their job easier. Freelance accountants and bookkeepers will especially want to maximize the time they’re spending on your accounts.

5. Consider retainers and milestone payments

Large projects can be very profitable for architects and engineers. However, it may be challenging to keep your firm running if you have to wait months to get paid. Instead of charging the total amount at the end of a project, consider charging a retainer at the start and milestone payments throughout to help improve your architect business’ cash flow.

Charging a fee upfront and as milestones are hit helps you maintain a steadier flow of cash. Otherwise, you’ll likely experience huge payment spikes followed by long cash droughts. It can be difficult to budget when you’re paid like this. Creating a more predictable cash flow is easier to manage and takes some unpredictability out of running your firm.

Retainers and milestone payments can also help you prepare for unforeseen events. If a client is unable to pay at the end of a project, it might be impossible to recoup fees for the hours of work you’ve already put into it. Charging retainers and milestone payments helps ensure you receive at least partial payment for your hard work.

6. Add markup on reimbursable expenses

Many projects include items that the client will reimburse you for, especially travel expenses. Having clients cover the costs of flights, gas, accommodation, and food helps you turn a profit. But only charging for these items alone might still eat into your revenue.

It takes time to organize travel for a project—booking flights, researching and booking accommodation, and making rental car reservations (just to name a few examples). You or someone else will need to do this work, and they’ll need to be paid! Charging a markup (generally 10-20%) on reimbursable expenses helps you cover this time and effort.

7. Itemize charges on invoices

Clients generally appreciate transparency when it comes to invoices. Most want to know exactly where their money is going, so they can ensure that you’re charging them a fair price. But providing clear and understandable pricing could also benefit you.

Itemized invoices, including the tasks done and hours spent on each, help showcase the full value you are providing. This might encourage repeat business from existing clients. If they don’t feel they have a complete picture of what the competition is offering, they may be more likely to hire you again.

Itemized charges also help architects and engineers avoid scope creep. This occurs when clients ask you to do additional work beyond what was initially negotiated. Clear invoicing makes it easier to justify charging more.

8. Charge interest on late payments

Chasing outstanding invoices is a hassle. Ideally, every client would pay you on time (or better yet, early!) without needing a reminder. But as you already know, this is often not the case. You might need to find ways to incentivize them to pay on time every time.

Many architects and engineers charge clients interest on late payments. This helps them prioritize your invoice to avoid paying the penalty. Typically, the consequences of not paying invoices on time are detailed in the project contract. You might also include a note about late payment penalties at the bottom of each invoice as a reminder.

9. Consider business insurance

Successful architects and engineers are ready for anything. They take steps to avoid common risks and hazards of the job and may have a backup plan for if the unexpected still happens. Business insurance is often part of this contingency plan.

Architect and engineer insurance covers different risks you may face while doing your job. There are different types of coverage to consider that help shield your finances and professional reputation against claims and lawsuits. This may include events such as damaging a client’s property, unplanned business interruptions, or allegations of professional negligence.

Without engineer or architect insurance, the cost of a claim or lawsuit would fall squarely on your shoulders. Your business accounts and cash flow could take a big hit. These expenses could take much-needed funds away from other parts of your business.

We hope this engineer and architect firm profit guide has been useful. Applying these and other architect and engineer money management tips could help you maintain a steady cash flow and continue building a solid and successful business.

BizInsure makes it easy to architect insurance and engineer insurance to protect your growing firm. Compare policies online in minutes and get instant coverage. Start now!

As with any insurance, coverage will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this guide is general only and should not be relied upon as advice.
The number of quotes provided varies between products, occupations and other underwriting factors determined by the insurers.
This information is a general guide only and does not take into account your objectives, financial situation or needs. Always check with your local licensing board when getting or renewing your trade or professional license to ensure you are meeting their current licensing requirements.
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