Managing a successful architectural practice relies on a number of immutable, longstanding truths. Yet there's an equal influence of new trends, techniques, and tools that separate the reasonably well-run firms from those that excel. In part, the more recent advances in firm financial management relate to macro trends in the field, according to the American Institute of Architects' (AIA) recent Firm Survey Report. For example, while about half of all U.S. firms were registered as sole proprietorships just 15 years ago, today that share is only about 20 percent.

Yet even the smallest firms—those with fewer than 10 employees—earn a large share of the national total of architectural billings, at about 20 percent of the total according to the AIA survey. Expand the sample to firms with up to 20 employees, and you have the lion's share of billings. That's millions and millions in revenue for these firms, and a key reason to keep careful tabs on firm financial operations.

“Providing great architectural services and running a financially successful firm are not mutually exclusive,” says Steven Burns, FAIA, former principal of Burns + Beyerl Architects and now chief creative officer at BQE Software Inc. “It's quite the contrary. What separates the great-struggling designers from the great-successful designers isn't luck. The latter practitioners understand the rules of the game and wield them to the benefit of their firms, their projects, and their clients. And clients are attracted to winners, too.”

Part of what makes great and successful design firms is purely organizational. These firms are able to quickly and efficiently provide principals, project managers, and entire staff essential information they need. They've reduced the amount of time needed to manage project tasks, billings, and documentation so that they have more energy and creativity for the core activity: design workflow.

Their invoicing is clear and meets client expectations. They're using the leading edge of technology to automate processes, manage tasks and phases, eliminate misfiled documents, and run reports easily and quickly.

 

“We are a small firm of seven that was using separate software programs for billing, time tracking, contact management, and calendaring,” says Donald Powers, AIA, principal of Union Studio in Providence, Rhode Island. The approach was inefficient and time-consuming, he adds. By focusing on project flow and formalizing firm management practices with a new financial software platform, Powers has since implemented comprehensive templates for correspondence and project administration as well as automated billing summaries. In addition, all the firm's designers enter their own time into a central database to simplify invoicing.

A similar turnaround helped the San Francisco firm BRU Architects reduce their invoicing turnaround and automate staff payroll and vacation tracking. “It used to take us months to get invoices out,” says Rebecca Firestone, the firm’s former manager of business operations. After adopting the new practices and systems, “invoices would usually go out within five days of the last month’s cutoff, and the amounts were definite and easily auditable.”

Every firm wants to share a story like this. So where should they start?

Choosing to Make Money

It's not an architect's fault that after all the years of education and training one must endure to become an architect that the resulting firm leader doesn't know the first thing about how to run a business. But in addition to designing and detailing structures, the architect who is a firm leader must also truly understand the difference between income and revenue, and between a credit and debit, just to name two key pairs of accounting terms. The firm leader has to know what a minimum billing rate and an overhead factor are, and why these two measures are so critical to successful practice management.