Working Profitably

9/23/2018

Three things are needed to be profitable. Of course I am referring to the time after you have secured a commission to design a project and also a reasonable fee to do the work.

1. Daily Timekeeping
2. Architectural Bookkeeping
3. Project Management System

Daily Timekeeping For Profitability

The largest expense that an architectural firm has is wages. Whether you charge by the hour or not, you need to know what those wages produced. You can tell yourself a story, or you can record the facts. You get the facts by documenting your time daily. If you use any other timekeeping frequency, you aren't serious about knowing where the time went that you paid for. If you don't know what this major expense produced, then you can't know why your profitability stinks. Getting (more) profitable starts with daily timekeeping.

Benefits of Daily Timekeeping
In addition to profitability there are other benefits of Daily Timekeeping.

Daily Timekeeping takes less time than other timekeeping frequencies because it eliminates 90% of the research expended for accuracy.
Daily Timekeeping makes it possible to manage projects with less effort because everyone is submitting a daily report without extra effort.
Daily Timekeeping makes it possible to take immediate corrective action when the effort expended is exceeding the results produced.
Daily Timekeeping creates a more factual record of an individual’s accomplishments and their value to the firm.

More about Daily Timekeeping…

Architectural Bookkeeping For Profitability

You need Architectural Bookkeeping to achieve profitability, and most accounting systems are no help. The key words are ’Architectural’ and ’accounting’. Your bookkeeping system needs to be designed for an Achitectural business. Customizing a generic system is a waste of your time. Even if you get it right. Accounting systems are wrong for you because you are a less than a small business (up to 500 people); you are a tiny business. The effort that goes into managing an accounting system is excessive for firms of less than 20, minimum. Over 90% of all architectural firms are smaller than 20 people.

The Problem With Accounting
* An accounting system is designed to tell you the profitability of your business. You need to know the profitability of each project as you work on the project. A monthly post mortem isn't timely enough to manage for profitability.
* If you can’t design a project for the fee you receive, studying your accounting system’s financial statements won’t tell you how to do it either.

An Architectural Bookkeeping system collects all your time and expense data and displays it in a way that is meaningful for the management of an architectural firm. Daily Timekeeping makes this information available in (almost) real time.

The Benefits of Architectural Bookkeeping
With Architectural Bookkeeping these are the kind of things you have access to every day.

Who is working on what
Month-To-Date billable amounts by project
Who owes you money
To whom do you owe money
Project profitability
Overall profitability
Billable Ratio
Many more

More about Architectural Bookkeeping…

Project Management System For Profitability

Everyone thinks they have a Project Management System. Here's how to tell if you do.

Is it written down?
Does everyone have access to it all the time?
Does it include all phases of the work?
Does it include every task that may conceivably be needed on a project?
Does it describe how to perform each task?

Questions 1 and 2 are pass / fail.

The Benefits of Real Project Management
Without Real Project Management you are limited in your Labor Choices. You need to be on top of your game on every project in order to get profitable results. Every time ‘special’ circumstances arise you are in danger of getting poor results. ‘Special’ circumstances are anything that adds to your time-pressure: scheduled or unscheduled time off, too much work, too much work in the same Phase, too little work.

Real Project Management adds the third labor choice. Otherwise you are limited to choice 1 or 2.

Labor choices:

Cheap (inexperienced) labor requires expensive (experienced) supervision to complete the work. Can they stay within budget?
Expensive (experienced) labor doesn’t require supervision. Can they stay within budget?
Cheap (inexperienced) labor following written instructions requires expensive (experienced) development of the written instructions to complete the work. The expensive development of the written instructions can be reused over and over. This is the most dependable way to consistently stay within budget.

More about Project Management…

For Architects there are no easy ways to build a profitable firm. Each of the three things that are required are difficult. Well Daily Timesheets isn’t difficult, it just seems like it. Finding and implementing Architectural Bookkeeping can’t be done overnight, but over a month or two is realistic. Implementing real Project Management is the work of a year or two, but it is the only way to build value in your firm by having a repeatable, profitable design process.