Contract - June 2014 - (Page 34)

PHOTO COURTESY RICHARD POLLACK COLUMNIST Financial Management for Firms: Accounting, Billing, and Budgeting by Richard N. Pollack, FAIA, FIIDA An old adage about our profession is: "What does a designer or The result is an increase in revenue and, hopefully, profit. Designers are architect do when they inherit one million dollars?" Answer: "They keep often reticent to ask clients for additional services, but that should not practicing until it's all gone." The truth is that it is quite possible to make be the case. Think about how often a contractor will submit change a good living in the profession, and that requires a firm to be run with orders. Also, attorneys often bill in six-minute increments and try to robust financial management techniques and controls. As management charge for all the time they spend, and the most senior attorneys bill guru Peter Drucker says, "If you can't measure it, you can't manage it." the most time and money. In order to do the design work we love, The first step is to purchase an appropriate accounting and I believe that we must receive the revenue to properly compensate project management system-a product for straightforward staff, and account for all the time spent on projects. accounting, such as QuickBooks, as well as project management Another key component of strong financial management is software that can record staff hours and track staff time spent against establishing a smart budget for the following fiscal year, with the fee projections. The most effective program is one that serves both starting point being expenses related to the firm's strategic plan. Using accounting and project management functions, and just a few this approach makes the budget a stronger component of the tactics examples for architecture and design professionals are: Deltek, used to achieve the firm's strategies. The detailed budgeting process Ajera by Axium, and Clearview by InFocus. With business software's also focuses leadership more tightly around the strategies. movement to the cloud, the product you choose should have full An effective approach to validating the budgeted expenses is online capabilities, including the ability to back up data online. I am to review expense categories from the previous three years, coupled not a software expert, and I suggest that you conduct your own with updated firm strategies. For example, strategy might include research on the best program for your firm. developing a new project type, such as healthcare. In order to penetrate On the matter of recording time in the project management such a market, there is a need to create new collateral, attend system: Your staff should be able to input their own hours from healthcare design conferences, and hire staff with more experience wherever they are, but timesheets still need to be reviewed by project in healthcare design. The annual budget would show all the anticipated managers or principals prior to finalizing and invoicing. Even with the expenses associated with diving into the new market, and would also process completed online, my suggestion is to make the most of your enable the firm to track success in getting there. face-to-face meetings. Have all timesheets submitted and reviewed Budgeting revenue accurately can be a challenge, but the prior to a consistent weekly morning staff meeting at which those starting point is, again, to review the previous three years' income, responsible for reviewing hours can raise any questions, and overlaid with external economic realities. I always attended economic make edits or corrections. forecasts presented by municipal government, dedicated real estate Principals at some firms do not complete timesheets-you know associations, and the regional real estate community with the intention who you are. If that is the case, the firm is definitively not getting the of getting information on market factors affecting interior architecture. highest potential revenue and profit for both hourly not-to-exceed and If a firm's leadership does not fully utilize the systems and fixed-fee projects. In addition, almost every design firm has staff not procedures that I outline in this month's column and budget recording at least some of the time spent on projects, especially effectively, they cannot measure performance, and therefore, overtime, and the result is that the initial project fee is no longer cannot prosperously manage the firm. accurate and staff are typically not getting paid for those extra hours. Ensuring that all staff time at all levels is captured enables a firm to Richard N. Pollack, FAIA, FIIDA, writes a regular column for accurately measure which project types, internal teams, and clients Contract on business practices in design and professional are the most profitable. development. Pollack is the CEO of San Francisco-based Pollack Every company needs a certain level of pressure to exceed Consulting, which supports firm growth and success through business expectations and goals. By recording all time spent, the staff improved business development, winning presentation techniques, managing projects are pushed to identify any potential scope creep recruitment of top talent, business coaching, and ownership to the client, and to follow up with requests for additional services. transition implementation. 34 JUNE 2014

Table of Contents for the Digital Edition of Contract - June 2014

Contract - June 2014
Industry News
Columnist: Financial Management for Firms: Accounting, Billing, and Budgeting
Product Focus: Disappearing Act
Product Focus: Pulling the Wool
NeoCon Preview
Funny or Die
FiftyThree, Inc.
A Steward of History
9/11 Memorial Museum
Designers Select: Seating
Ad Index

Contract - June 2014