Financial planning is a cornerstone of any successful business, and as an interior designer, understanding and managing your finances effectively is crucial for long-term success. This is the first part of our two-part series on financial planning specifically for interior designers. Today, we will dive into the importance of setting financial goals and establishing a schedule for key financial tasks.
As an interior designer running your own studio, the finance side can feel extremely overwhelming. From taxes to payroll, there are so many things to consider. Your business relies on a steady stream of revenue to thrive. Financial planning and forecasting allow you to anticipate your income, track expenses, and manage cash flow effectively. By gaining a comprehensive understanding of your finances, you can make informed decisions that drive your business forward and ensure its sustainability.
Design: Kelsey Leigh Design | Photography: Emily Hart
Identify Your Revenue Sources
The first step in financial planning as an interior designer is to identify your revenue sources. Consider the various services you offer, both directly and indirectly. These may include consultations, design time, purchasing services, e-commerce sales of products, and affiliate sales. By understanding the different avenues through which you generate income, you can develop strategies to optimize each revenue stream and maximize your overall profitability.
Set Your Financial Goals
Setting clear financial goals is essential for providing direction and focus to your interior design business. Whether your objectives revolve around increasing revenue, reducing expenses, expanding your client base, or investing in growth opportunities, establishing specific, measurable and achievable goals is key. Think about what your short-term and long-term goals might be.
Here are some examples of potential financial goals:
Increase annual revenue by 20% through targeted marketing campaigns and client referrals within the next fiscal year.
Reduce operating expenses by 15% by renegotiating vendor contracts and implementing cost-saving measures within six months.
Expand client base by securing three new high-profile projects within the next quarter through networking and outreach efforts.
Allocate 10% of monthly revenue towards building an emergency fund and long-term savings for business expansion.
By setting financial goals tailored to your business's unique needs and aspirations, you can chart a clear path towards success and measure your progress along the way without feeling overwhelmed.
Design: Lindsey Brooke Design | Photography: Amy Bartlam
Schedule of Financial Tasks
One way to feel less overwhelmed when it comes to your finances is to follow a schedule for financial tasks. By establishing a routine, you can effectively manage your financial obligations with clarity and efficiency. Setting aside dedicated time for tasks such as budgeting, invoicing, and expense tracking allows you to stay organized and proactive. With a consistent schedule in place, you can navigate your finances with confidence and ease, ensuring your business's fiscal health and stability. We've broken the schedule down into three categories to give you flexibility, but also clarity.
Ongoing
Continuously assess your business's needs and make strategic investments in areas that support growth and efficiency. Evaluate whether purchasing a new system or hiring additional help for business operations is a wise investment. For instance, if you can bill $200 an hour for your design work and a new project management system costs only $60 a month, it's likely a beneficial investment to make.
Weekly or Bi-Weekly
Regularly categorize your transactions or delegate this task to your bookkeeper. Take time to review open invoices and send reminders to clients regarding outstanding payments. Maintaining organized financial records on a weekly or bi-weekly basis ensures transparency and helps to optimize cash flow.
Monthly or Quarterly
Obtain updated financial reports such as Profit and Loss statements, Balance Sheets, Cash Flow statements, Accounts Receivable aging reports, and open Purchase Orders from your bookkeeper or accounting software. Allocate a percentage of your profits for tax purposes, making it clear that this is an estimate. Consider consulting with your CPA to determine the appropriate amount to set aside and meet quarterly for more accurate tax projections. This proactive approach to financial management ensures compliance and provides insights for informed decision-making.
Design: Ginny MacDonald | Photography: Tramp Studio
Financial planning is a vital aspect of running a successful interior design business. By setting clear financial goals and establishing a schedule for key financial tasks, you can gain greater control over your finances, drive business growth, and achieve long-term sustainability. In the next installment of our series, we will explore budgeting basics, bookkeeping essentials, and understanding financial statements to further empower you as an interior designer in your financial journey.
Don't want to wait? Check out the The Interior Collective Podcast episode with Brittney Vier. In this episode, virtual bookkeeper for interior designers, Brittney Vier, answers all the most important, the most confusing, and even just the “Where do I start?” questions. She shares tips on how not to leave money on the table, ways to ensure your business can stay afloat during times of uncertainty, and who should make up your financial team.