The insidious costs of a mis-matched accounting system.
How can accounting systems be mis-matched to the firms using them?
The First Way
The main way to get a mis-match is to use a generic accounting system. Architectural firms are project-based. If your accounting system is not project-based, one of two things has to happen. Either you build ancillary systems to track projects; or you mostly ignore the fact that you have a project-based business when doing accounting.
The problem with building ancillary systems, or even customizing generic software, is that it takes time to set up, it takes time to manage, and it takes expertise that you probably do not have. And all this time you are spending is not making you a better architectural firm.
If you are ignoring the financial implications of being a project-based business, at least you are saving time. But you don’t really know why you get the results that you do.
The Second Way
Another way to get a mis-match is to use an architectural accounting system that is designed for firms who can afford to have a full time bookkeeper. These are the 7% of firms who have more than 20 people.
I tried that way out of ignorance. I didn’t think I had a full time bookkeeper, but I did. I didn’t dig deeply enough into what seemed like a given.
The cost of the software is not the mis-match. The mis-match is the time that you invest in learning the accounting discipline, the time that you invest in managing the software (think AutoCad updates), the ongoing cost of maintaining your accounting system (postings, yearend close out, new tax rates, etc.), and the cost of doing things because you can.
Financial statements and payroll are two examples of things you end up doing because you can. Both of these cost more to do yourself than to hire an expert. It may not seem like it because one is an unidentified overhead expense and the other is a very identifiable overhead expense. The unidentified overhead expense is not only larger but it is insidious because it also represents lost opportunity. You spend too much time on an accounting chore instead of spending that time on something of more value - business development, or doing architecture.
For the majority of architectural firms the solution is bookkeeping rather than accounting. Use an accountant for accounting. Just keep your financial transactions and your time entries by project (your firm is treated as a project in this solution).
The software that I have been building is designed to do just that. The focus is on how each project stands as of yesterday, or when the last time entry was made.
This is a link to a Test Drive Account so you can see what Architectural Bookkeeping looks like.
MyCorbu is the name of the software.