As an interior designer, your focus is on creating beautiful spaces for your clients. Interior design accounting requires just as much focus to create and run a successful business. While it may not be the most exciting part of your work, proper accounting can make a difference in developing a financially healthy business. Here are some accounting basics to help improve your interior design company:
Understand Your Income and Expenses
Tracking your interior design business's income and expenses helps you make informed financial decisions. Monitor all revenue streams and costs, regardless of their size. With this careful attention to your finances, you can begin identifying areas where you can reduce expenses and increase profits.
Use Cloud-based Accounting Software
Cloud-based accounting software can come with benefits like real-time financial updates and easy collaboration between you and your accounting team. This software can also seamlessly integrate with other business software to improve workflows. This software can automate many interior design business administrative tasks, such as invoicing, payment processing, and reconciliation.
Create a Budget and Financial Plan
Your budget can include all the expenses involved in running your interior design business, including rent, salaries, marketing, product purchases, and any other expenses you may incur. Documenting your budget and spending goals can help you better manage your money. You can review your budget regularly and make adjustments to confirm that it remains accurate with your business's needs.
In interior design accounting, financial planning may involve creating a roadmap for the future of your interior design business. This can include setting financial goals and developing strategies to achieve them. Financial planning can help you make informed decisions about investments, hiring employees, and expanding your business. By clearly understanding your financial position, you can create realistic financial goals and track your progress over time.
Keep Track of Your Taxes
To keep track of your interior design company's taxes, you must be aware of tax deadlines. Mark on your calendar the deadlines for filing tax returns and paying taxes. The IRS has specific deadlines for different tax types and can impose penalties for late filing and payments. Keep electronic or physical copies of tax returns and related documents for your financial records. These documents might include receipts, invoices, and bank statements and can be used as supporting evidence during an audit or tax dispute.
Tax laws can change frequently, so stay up-to-date with any changes affecting your interior design business. Consult with a tax professional to confirm you're aware of all changes and can adjust your tax planning accordingly. Here is more information about different types of taxes that may apply to an interior design company:
Sales Tax
A sales tax is a consumption tax imposed by the government on the sale of goods and services. Depending on where your business is located, you may be required to collect and remit sales tax on the interior design products and services you provide. Take the time to research and understand your legal obligations regarding sales tax to make sure you are collecting and remitting it appropriately.
Property Tax
An interior design company may be subject to property tax if it owns or leases property for its business operations. Property tax is a tax on the value of real estate or personal property, such as equipment, furniture, and fixtures. The amount of property tax owed is determined by the assessed value of the property and the tax rate set by the local government.
Use Tax
An interior design company may be required to pay use tax if it purchases products or materials outside its home state or country and uses them in its business operations. Use tax applies to tangible personal property purchased from out-of-state vendors or online marketplaces. This property can include furniture, equipment, and business supplies.
Hire a Reputable Interior Design Accounting Expert
Working with a professional accountant can help you manage your interior design company's finances more effectively. They can provide valuable advice on tax strategy, financial planning, and aspects of interior design accounting. Consider working with cloud-based accounting software if you prefer managing your accounting in-house. Contact an interior design accounting expert today to learn more about how they can help your business's finances.