Most of the income that you receive from providing architectural services will not be paid to you at once. Instead, your clients will normally pay you during the course of and at the end of the project. Income that is not received immediately (at the time when a client appoints you) is referred to as 'Cash from debtors' and is dealt with elsewhere in the Business Plan.
You may receive income from other related services, for example conducting energy surveys. It is up to you to decide whether the fees you charge for these services will be payable immediately or later (when you send an invoice). Any income of this nature that you receive there and then should be entered under Cash sales.
Although some customers may pay you in cash, remember that cash sales also include:
- debit and credit card payments
- bank transfers
To prepare your cash flow, you will need to estimate how much income you will receive over the next 12 months. To do this, estimate how many commissions you will undertake and how much you will earn from them, including VAT.
There are a number of things to consider when you make your estimates:
- where will your premises be. Many architectural practices are quite small and you may be able to work from home, at least during the early days
- what will you call your practice. Remember that the title 'architect' can only be used by someone who is registered with the ARB
- will you operate as a sole practitioner, or will you go into partnership with another principal - maybe someone who offers a complementary service such as a quantity surveyor
- will you employ any staff
- who will your clients be - for example, members of the public, local authorities and housing associations, commercial and industrial organisations
- will you be prepared to accept commissions that are not local
- are you able to offer clients a full service, from the very start of the construction project right the way through to completion (a construction project typically progresses through well defined stages)
- will you handle all types of commission or specialise in a particular area, for example historic buildings or ecclesiastical work
- will you offer a range of additional services such as landscape and garden design, interior and industrial design and so on
- have you established contact with the range of other professional consultants whose services you are likely to call on, such as structural engineers and quantity surveyors
- will you charge on a time basis, a lump sum basis or as a percentage of the total construction cost
- how will you establish what hourly rates to charge
- if you charge on a percentage basis, will this vary depending on the type of building involved
- will you undertake speculative work
To help with your decisions, click on the checkpoints for guidance. Once you have worked out a Cash sales figure add it to the relevant field in your cash flow forecast.