Below are just a few tips on setting up and using QuickBooks
for an interior design firm.
I highly recommend that you purchase at least the first book on this page and study it thoroughly, make it a part of your
life and library. Re-read it and as many of the others that you can annually.
QuickBooks, nor any software for that matter, will manage your design studio or practice. In order to be profitable, you must
implement practice management. At the very minimum, use the tools available in either QuickBooks Premier for Contractors 2008
or later or Professional Services 2008 or later or QuickBooks Enterprise for Contractors or Professional Services 2008 or
later. The reason that you need to use 2008 or later and not the prior years is that beginning in 2008 one can run a report
to see THE DOLLAR VALUE OF UNBILLED TIME. The earlier versions DO NOT have that capability. Do not try to make do with the
QuickBooks Online Edition. As much as I like that version of the software, it doesn't include all the tools that you need
such as special orders and progress invoicing. (Your practice will determine which version of QuickBooks that you need.)Seek
expert advice on the setup. Your business will suffer if it is not done properly, and your business is unlike many others
in that in order to correct the problems, your QuickBooks file will need to be re-entered from the beginning.
Monitor, monitor and monitor your projects. Both for the purchasing and most especially hours. For designers that are hourly
billers, the standard is 80% of their time is billable. For principals whose reponsibility is predominately marketing related
the standard is 50%. Review weekly the outstanding purchasing proposals and purchase orders. Use the built-in budget capabilities
in QuickBooks to do this. Make sure that the hours to financially manage the project are built into your proposals. If you
have a design studio with more than three people and are purchasing goods for your clients, you need a full-time bookeeper
with cash management skills or a business manager. If you have hired someone with lesser skills, make sure that they are trained
and have enough hours to get the job done. Bookkeeping work for a design practice is very time consuming.
Set up a notebook for yourself, tabbed by month. Print weekly at least a balance sheet and profit and loss on BOTH a cash
and accrual basis for your review and study. (If you are billing for fees, cash basis reports are too narrow a view.)
If you are looking for customized templates, send me an email detailing what you are looking for, and I'll quote your a price
for the work. If you, however, are looking for that "one page" report that will tell you how all of your projects are doing,
it's not available in any version of QuickBooks as one report. It is available on separate reports but it has to be built
using the ODBC driver in any Enterprise edition of the software. I create those reports all the time for clients. Just email
for a quote.
By the way, I love the option of invoicing using Word included in QuickBooks. Many designers prefer the letter style invoicing,
and their clients do too. It's easy to create that format using the tools in the software that will pull all the purchasing
or time information directly into a preformatted letter created in QuickBooks that can be printed out on your letterhead or
something that you have designed specifically for invoicing. It's a wonderful style statement for your business!
Read your financial statements or bookkeeping reports weekly. Keep them in a binder so that you can compare and review them.
You should look at (a) a QuickBooks comparative profit and loss statement, run so it has MTD and YTD columns (reports->company
and financial->comparative profit and loss) (b) an accounts receivable aging (reports->customers and receivables->a/r aging
summary). If you are seeing more than 15% of your receivables in the 30+ day columns, do you have a stop work policy in your
contracts and in the long-text box on your purchasing proposals? If not customize your invoice to include this very important
business policy. (c) a report that shows the hours by project both MTD and YTD for all current projects (reports->jobs and
time->time by name) Customize it to include YTD hours for active jobs. And most importantly (d)are you receiving or generate
yourself a flash type of report like that in Ms. Knackstedt's book " The Interior Design Business Handbook."
Always look for areas that need management: is your accounts receivable greater than fees for one month? Are
your bills for fees going out on a timely basis, e.g., within three business days after the end of the month? How much cash
do you have? Has your overhead changed? If it has increased, have you revisited your billing rate levels, adjusting
thm to accomodate your increased need for cash?
If your QuickBooks file was not set up to capture the information required for Ms. Knackstedt's report,
simplify the report to show MTD and YTD receipts for goods and fees and MTD and YTD costs for client purchases, overhead,
payroll and net income. Plan to fine tune your QuickBooks file to give you the important studio management information included
on her financial report and reference a few of the books below for ideas of how else you might use your financial file.
Tip 2: Use the customer type or job type field in QuickBooks
to define whether your client is hourly, retail or a combination. Experiment with the job costing reports using the customer
type or job type field.
Tip 3: If you've written a contract that includes billing for hours as well as purchasing, set each one up
as a separate job not separate customers. That way you'll easily be able to see the total value of the customer relationship
and easily receive payments when your customers use one check to pay you for both fees and purchasing.
Tip 4: Do not use more than one QuickBooks a/r account. Although this can be done, it is very difficult to manage. Use
the job types. QuickBooks cannot split a deposit across separate a/r accounts but can using separate jobs. DO NOT USE MORE
THAN ONE A/R ACCOUNT. It is very difficult to apply a credit from one job to another job. Attempt to avoid the need to do
this in your thinking of job setup.
Tip 5: Use estimates (aka purchasing proposals) for all client purchasing. Customize the template for the estimate to
include the long text field that restates your contractual terms and includes a signature line on the form.
Tip 5: Change the QuickBooks generated number on the estimate, purchase order and proforma to match. Append
a code onto each proforma (aka invoice) so that you can see easily on a detailed accounts receivable report what is owed for
Fees (F), Reimbursables (R) and Purchases (P). Write credit memos for any cancelled proformas including any cancellation fees.
Credit memos should use the same number as the original proforma with a (CM) on the end. Prepare change orders for any adjustments
to the customers contract and purchasing.
Tip 6: Even if you are using an outside payroll service, regenerate payroll in QuickBooks so that you can run
job costing reports that show you the exact amount of payroll per job for any period. It's really most efficient to use QuickBooks
Payroll Assisted, if you have the staff for it since Complete does not have the ability to generate the job costing information
hat you need.
Tip 7. Don't write NTE (not to exceed) contracts. Your clients will love the results but you won't like the effect on your
practice. If you do write a NTE contract, consider that you will have to monitor the budget for the contract daily and probably
still not make money.
Tip 8. Monitor your overhead expenses carefully monthly. Plan a yearly review of your price levels.
Tip 9. Make sure that the officer's payroll and the support staff payroll is separate on the profit and loss report from the
Tip 10. If your business uses credit cards to pay for client purchases, connect the credit card charge to the purchase order
and purchasing proposal by entering the credit card charge and choosing the PO. In order to enter credit card charges you
need to merely set up a credit card account in QuickBooks and enter (or download) the individual charges and reconcile the
account, just like you reconcile the bank account. For the transaction ID on the credit card charge use the same # as appears
on the your QuickBooks purchase order. That way when you do a find for the PO, you'll see the credit card charge at the same
time. When you enter the credit card charge, do not use the name of the credit card company, e.g., MBNA, use the name of the
vendor that you are paying.
Tip 11 Use QuickBooks estimates to define hours budgets for fees by phase or room and then run estimate to actual time reports
to see where you are on a project. To do this you need to create an estimate and use the timesheet items to enter the estimated
number of hours that you want to budget for the job. You can add the fields, billed, unbilled and not billable to the standard
estimate to actual hours report by clicking the customize button.
Tip 12 Customize your templates so show you but not print the retail price for reporting purposes. Create custom templates
for all the necessary paperwork, e.g., pro forma, purchasing proposal, purchase order, sales order, etc.
Tip 13 Create NONINVENTORY items for purchasing that will bring meaning to your sales reports, e.g., case goods, carpet, lighting
and millwork. Create service items that define the phase of the work.
Tip 14 For bad debt or any accounts receivable write-offs, only use credit memos. Do not use journal entries or the discount
button in the receive payment screen.
There are many more ways that QuickBooks can be tailored to save time and increase the profitability of an interior design
firm. Your business is complex. Hire an ADVANCED QuickBooks CERTIFIED expert to set up or tailor your file to your business.
Many businesses do not have complex needs and the end user can structure the file without a great deal of difficulty and have
accuracy of information. This is seldom the case with an interior design firm. Mistakes in this type of business are very,
very costly to correct and result in both lost business and lost revenue.