Bookkeeping Challenges Every Interior Designer Should Know About

etel750
Sep 12
2 min read

Bookkeeping for interior designers isn’t as simple as tracking income and expenses. Because projects often stretch over months (even years) and involve multiple vendors, deposits for vendors and client retainers, design businesses face unique accounting challenges. If you’re not careful, it’s easy to lose track of where the money is, what belongs to the client, and how profitable a project really is. Let’s break down the five big areas where bookkeeping gets tricky—and how to stay on top of them.

1. Retainers from Clients

What’s tricky: Many clients pay money upfront, and these funds are not revenue just yet...
Best practice: A retainer is money held for future work and should be tracked as a liability until services are delivered. Misclassifying these can throw off both cash flow and taxes. Plus, your confidence that things are running properly can be affected.

2. Deposits Paid to Suppliers

What’s tricky: Interior designers often pay deposits to suppliers (furniture, fabrics, contractors) well before their product or service is supplied. If you treat these as expenses right away, your books will look off—because you haven’t yet received the goods or services.
Best practice: Record them as prepaid expenses, then move them into cost of goods sold once the item is received or installed or the service is fully provided.

3. Change Orders for Suppliers

What’s tricky: Projects evolve. Clients request changes, and suppliers adjust quotes. Without careful tracking, change orders can lead to miscommunication, surprise bills, or profit erosion.
Best practice: Always document change orders in writing, update both your client invoice and your supplier order, and make sure your books reflect the revised costs and revenues.

4. Tracking Project Profitability

What’s tricky: It’s easy to see money coming in and out, but knowing whether a project is truly profitable is another story. Without job-costing, you won’t know if the design fee covered your time, or if furniture markups offset admin overhead.
Best practice: Use project-based tracking in your bookkeeping software. Assign every income and expense to a specific project so you can run profitability reports and adjust pricing strategies for future work. Also, consider modifying your contract for future projects.

5. Close-Out Invoicing to Clients

What’s tricky: When a project wraps up, there are usually loose ends—final supplier balances, last-minute client requests, or unspent deposits. Many designers forget to reconcile everything at close-out, leaving money on the table or creating awkward client conversations.
Best practice: Before closing the books on a project, reconcile:
- All supplier invoices paid vs. deposits
- All client deposits received vs. actual work delivered
- Any outstanding balances to bill the client

⭐This ensures clean records, accurate profit margins, and a smooth client experience.

Bookkeeping for interior design projects is more than just sending invoices and paying bills—it’s about managing a constant flow of retainers, deposits, and supplier payments while keeping an eye on profitability. By setting up the right systems from the start, you can avoid messy reconciliations, protect your margins, and create a professional experience for your clients and your team.

👉 Ready to simplify your bookkeeping? Work with an accountant