In trying to share with other designers out there how I work, I find that one of the most common questions asked of me is how I bill. First, we are pro-forma, which means that clients have to pay in full prior to receiving merchandise. Once a job is presented and approved, items are invoiced in full and for some items we receive a 50% deposit. The 50% deposit is for long-lead items (upholstery, custom furniture and pieces being shipped internationally), invoiced in full are fabrics or one-of-a-kind pieces like antiques or immediate delivery items like light fixtures. Both of these are billed with our commission.
As items become ready to be shipped, we bill the balance and at the same time, bring together all the different shipping charges which are added on to the invoice. The items are not shipped until it’s paid for in full and that rule is never broken in the office. Every time I have, I’ve ended up regretting it. I’ve learned the hard way that people are much happier to pay and get, than to pay once they’ve already received the items.
Concerning commissions and fees, I find that everybody works in different ways. We charge 35% of the net cost and if we are consulting on architectural detailing and specifications and the client already has an architect, we charge a flat fee, which depends on the bulk of the work. I find that however people bill (hourly, flat fee or a combination) it usually comes out to approximately the same thing. I feel very strongly about the fact that one should collect the cost of the merchandise and your fees before installing because you can be stuck with people not wanting to pay the balance and then you’re held responsible to your suppliers. This works very well for me as when we present a job, we present it in full, so all the figures have been calculated prior to presentation, which allows the billing to move very quickly.
How do you work? Have you worked this way and had problems? Let me know.
I’m pro forma all the way, I cannot imagine leaving myself exposed to the liability of billing any other way. If I have to write in a third, post-completion payment, I make the final payment small enough so that it’s gravy when the invoice gets paid. I want all of my costs covered prior to delivery. I’m glad I’m not the only stickler about this.
Thanks for that insight Vicente! It’s nice to know where I am along side my peers when it comes to billing…which I find the most arduous part of the process.
I was wondering…do you take a retainer at the beginning of the project?
Best,
Michelle
Hi Vincente, I’ve been following your work for awhile now and have become more acquainted with you through Ronda’s Carmen’s “All the Best” blog. I think your blog topics are great. Most design blogs (like mine) want to show what’s out there on the design scene, but I’m so glad that you are talking about the workings of the design business. I am also a relatively new interior designer (after 5 years of study and a second career choice). So, while I have business experience, it’s SO great to read your blog and know what professionals, like you, are charging, are thinking about, are frustrated about, etc. Your writing comes across as very personal and as a reader, I feel like I know you personally! Thanks for the great posts and I’ll be keeping up on your blog and your work and maybe even someday get a chance to meet you! Cheers!
I myself charge for time at an hourly rate and take a markup on furnishings. And DEFINITELY collect all $$ upfront before furnishings are delivered.
Also- I think you started a firestorm wi/ your question about billing…do you follow Design Trade on FB? It looks like they picked up on your post and ran with it….Here’s a sampling from their posts..
Design Trade Hello Design Trade fans! Today we have a question from another fan for all you designers: How do you charge for your services? How many designers do not charge an hourly consult fee and make their money on mark up alone vs. charging an hourly fee and a mark up over wholesale?
5 hours ago · Comment · Like · Share
3 people like this.
Ivie ParkerWe charge hourly and cost-plus for purchases.
5 hours ago
Laura StollWe charge hourly and a percentage off list for most things except we charge reatil for fabrics.
5 hours ago
Laura Smyczek-Oberheidecharging design time is critical, I think (can anyone provide a good counter-point?)
4 hours ago
Isabel Perez-Jaegersame for me as Ivie- charge hourly & cost-plus for purchases. And design time is very critical.
4 hours ago
Celeste Alexandertime is the new commodity.it cuts out the real clients from the fishers. I charge for consult and then fix it back into the project because your time and expertise is valuable . I tend to do a flat fee in theses days and and upset of hours.
3 hours ago
Alexandra GibsonIf you do not charge for design time, you are basically a furniture store. Clients need to respect your time as a professional and not simply see you as another retailer. You will be more likely to be shopped if you do not charge for design time. Our design firm moved to fixed fees about 7 years ago (we do a very limited number of hourly … Read More
3 hours ago
Amy AiniI agree with Celeste. I always charge a consult fee so I know who’s really interested and tell them I put it towards my contract fee. I then give clients the option whether they want me to charge them flat fee or an hourly. I find my clients appreciate the choice..
3 hours ago
I have found that proforma is best as well. Clients seem happy to pay up front if they know all costs are covered in the proposal. I have found they are not at all happy when they have to pay a freight or delivery charge after they have already received product.
I am really enjoying your blog, Vicente. So many of the design blogs out there are about beautiful pictures of beautiful spaces (nothing wrong there!) but this blog of yours is more like a behind-the-scenes look of a successful design business. I find myself checking back often for your next posts all the time! Call me an addict!!
I absolutely agree that the most sensible way is to always collect before the installation……because, like you, I’ve ALWAYS regretted breaking away from this practice!!
I agree, invoicing pro-forma is best. I love the topics you are blogging. I’m curious about how you deal with your clients “time”
expectations.
Just wanted to let you know how talented I think you are. So happy to have found your blog!
dallas
http://dillydallas.blogspot.com
At this point, I am just charging for my time and passing along discounts to my clients. This may change in the future, so I appreciate knowing how other designers bill.
Proforma all the way, with absolutely no deliveries or installations until the items are paid in full.
I’m also charging an hourly rate plus markup. When I was on the client side, I loved having a flat fee, but not only do people take advantage of those (even if not intentionally), but I can’t fathom how anyone can realistically estimate the time most projects will take. Some very experienced designers I know say that they *still* can’t, even after 20 years in the business, because each project is so different.
I’d be very interested to know more about how you come up with the figure you quote for a flat fee.
I would consider a “not to exceed” figure, if a client were to insist, but I’d make sure to set it at at least double my wildest estimates of how much time the project would likely take in order to cover myself.
I’m also now starting to ask for a 75% deposit in these more uncertain times instead of the traditional 50%.
My contract also provides for stiff finance charges for overdue payments, and I will definitely enforce that. People need to know up front that this is a business like any other, and that they must honor their commitments the same as I must honor mine, and the same as they must do with any other business.
I’m also looking into taking credit cards, which would not only be a convenience for clients and encourage them to spend more money, but would also help shift the financial risks off of my shoulders. I just need to figure out what the best way of dealing with the horrendous fees will be, but that will probably involve raising my rates slightly across the board to ensure that I end up with what I want after the fees.
People who object to any of this are either not serious prospects who are going to be worth bothering with, or they don’t fully understand the value I bring to the project, and it’s a sign that I need to educate them further.
We, designers, learn the hard way. twenty years ago or so when I started the business, I did what most of us do at the beginning….release furniture within full payment and regretted it. I have worked pretty much the same way you do and I have learned that your clients will respect you more if you have a clear explanation of you fee structure and the payment process.
I love your site by the way. I am also a cook like you. It relaxes me and accentuate this creative part of myself!!
We follow the same philosophy as you with regard to ordering products. We only work hourly now. Tried using a flat fee at one point but, we have found that decisions didn’t get made until every rug in the city is viewed. With hourly, you get paid for the time each client uses.
I am an accountant/business consultant working for almost thirty years exclusively in the residential industry. I recommend billing hourly designs fees (or a set fee) plus mark-up on any furnishings to designers not working on a retail basis. Clients are paying designers hourly or set fees for the project design. The mark-up on merchandise is a procurement fee to insure all merchandise is delivered correctly: the fabric is or is not railroaded, the custom colored rug has the right colors, the CFA sent matches the showroom sample, etc. Designers are selling two different services and each deserves appropriate compensataion.
“Pro forma” does not mean pay in full before delivery. It means “as a matter of form.” As a matter of form, and sound business practice, you require clients to pay upfront.
I bill hourly plus a design commission. I also take design commission at the time of the deposit. I also charge tax at this point. It’s a liability and if a client does not pay, gets a divorce in the process, dies (god forbid) or whatever, I still have to pay the tax. In Boston, professionals pretty much hourly plus a percentage.
Hello Vicente – Thanks for the great blog and for your willingness to share your experience with those of us not quite as far down the path. I’ve been in big discussions with clients lately about markups. I’m considering moving to hourly fees only with no markup. I can’t really justify why you should pay me $250 to select and purchase a $1000 table, but you should pay me $2500 to select and purchase a $10K table. It seems to leave a bad taste in my clients’ mouths, and the time I spend dealing with bad feelings is a real drag. The time it takes to deal with purchasing, expediting, and installing the table is the same for both, and as long as I’m paid for that time, I think my clients and I might both be happier without the markups. Any thoughts?
As a customer, rather than a designer – I have a problem with this line of thinking. What happens when the customer has paid up front and when the product is delivered, it is wrong? The designer/contractor has your money.
Hopefully the designer/contractor is honest and trustworthy, but I’ve been burnt and so have friends.
What we need is an escrow system where money is deposited but not withdrawn until both parties are satisfied.