What’s the best invoicing structure and method for Architects? By Stage? Monthly? By Work completed?
How can we plan our revenue in a meaningful way?
Having worked with Architects and their businesses for quite a while, I can comfortably say that every business is entirely unique, and when I come in the doors, nearly all of them have problems figuring out when their revenue will come due.
It’s not their fault – town planning could take weeks, months, or occasionally even a year to complete. Report and consent processes can hold up the projects. And even a well-trusted engineer can drop the ball and make you delay your work packages by weeks.
All these uncertainties leads most Architects to never really try and ‘tame the beast’ that is revenue forecasting in their business. But without revenue forecasting, it’s very challenging to determine which staff are busy, and which staff are just slow or lacking direction.
At the end of all of this complication, we have frustrated Architects who aren’t driving their business like a car – they’re herding it like ducks.
It’s all part of the same question – ‘how do I run my Architecture studio more efficiently’, and it’s something that needs a few minds to tackle properly.
Monthly invoicing, or stage invoicing?
To invoice, or not to invoice, that is the question…
I think that the most logical way to attack this issue is to break the invoicing down into clear stages of work that don’t overlap hold points (consultant works, council approvals, or client decision points).
So that logically looks something like this:
- Mobilization – invoiced as a commencement invoice. This gets your client to engage with invoicing early, and is a good way to a earn a little bit of business respect up front. Architects aren’t beggars – we should act like all other professionals who invoice upfront for mobilization.
- Sketch 1 and Sketch 2, best as end-of-stage invoices, so you can get client sign-off at the same time.
- Town planning – best as a 90% invoice on submission. 10% invoice on RFI responses. No invoice on approval.
- Any design development phases – broken into equal monthly invoices if longer than 1 month.
- Construction documentation – broken into equal monthly invoices, with any consultant hold points being between the penultimate and final invoices for that chunk of work.
- Tender process – single invoice at contract signing.
- Contract Administration – Monthly retainer.
This process may look a little bit different to what you’re currently doing, and it has several merits from a business perspective:
Major hold points still have stage invoices attached, but everything else is simple month-by-month invoicing. This means automated monthly invoices – pre-written, planned, and forecasted to perfection.
When you sign a client-architect agreement, you can preload all of your draft invoices into Xero, so that each invoice matches your fee proposal, and you can date all of the work into the future.
If a hold point slides? Simply push the dates of the draft invoices by a fixed number of days (you can do this by typing +30 in xero!).
Architects shouldn’t work harder – they need to simplify, and treat invoicing just like any other profession would. Get it on automatic, and identify the plan right inside the client-architect agreement, so there’s not grey area.
This will allow you to set work targets for staff, give them ownership of their own invoicing and work plan, and allow you to accurately use automatic xero reports to tell you your revenue amounts – all without wading through spreadsheets, or manually tracking fractionally invoiced packages.
Remember – the best business is a business that can run with OR without you. Take the easy road, so that you can spend more time on design and family.
