In the world of architecture, anything is possible on paper. Successful firms recognize, however, that designs need to be rooted in reality in order to both satisfy clients and remain a profitable business.
“Architects often live more on the artistic side,” says Jeff Ong-Siong, CPA, a partner in the real estate group at RBZ. “You come up with a concept and it looks great in your drawings. But sometimes, as great as it looks, you have to walk away from it because it’s just not feasible or because the cost will be more than what you are going to take out of the project. Eventually, your firm has to make money.”
The ability to balance artistic creativity with fiscal discipline can go a long way toward determining your firm’s future.
Smart Business spoke with Ong-Siong about the three keys to staying on top of your business in the architectural world.
Tip No. 1: Watch your costs
Let’s say you need two junior architects to help you with a certain phase of a project.
As you get into it, you realize you need a third person because the two of you aren’t able to get the job done. Now, your cost has gone up by a third. Unless you regularly monitor those costs and make changes, you would not know that.
It’s common for architectural firms to hire outside consultants like a landscape architect or an elevator engineer. You have to track those costs to make sure you are within the original budget. If they’re not, you need to look at adjusting the budget.
Without reliable data, it is difficult to say where you are on a project. You may continue thinking that you are within your budget or if you’re not, you’ll make it up at the end of the project. Without a strong accounting system to track information, you may already be losing money before you get there.
Start accumulating the costs. Every bill that is paid out is related to a project. If you get an invoice from a consultant for project A and you pay it, you have to make sure that invoice goes to project A. Someone has to be tracking that.
These are simple steps, but it’s obviously very easy to get sidetracked. That’s why it’s critical to have someone whose job is to monitor these details and make sure they are being managed responsibly.
Tip No. 2: Seek strong accounting expertise
You need a strong accounting person who can capture information on costs and budgets to allow owners and project managers to see where the money is going. What stage are you on for a particular project?
Are you on target based on the budget? Did you confirm the actual costs before you responded to a request for proposal?
You also need a good accounting system to capture all the data and information. Make sure the project managers and owners continue to monitor the project cost on a regular basis.
Create a system so at any point in time, you can pull up that system and find out where you are with the budget compared to the actual costs incurred.
Tip No. 3: Demand accountability
Make sure, as the president or key executive, you highlight the importance of filling out your time and tracking changes every time you meet.
It’s very easy to slip back into old habits. If one of the key architects in your firm is not tracking his or her time and metrics, other people are going to ask, ‘Why should I do it?’
You have to be out there leading the way.
One thing you can do is every Monday, print a list of everyone’s time and say, ‘Hey, these are the five people who did not submit their time at the deadline.’
If those people are called out, your leaders need your support at the very top to say, ‘We need you guys to do this.’ ●
Insights Accounting is brought to you by RBZ
