Bookkeeper for Architects

How does an architecture firm actually get paid?

Architecture firms get paid in progress payments tied to phases of the work, not in one check sent at the end.

The fee itself is set one of three ways. A percentage of the cost of the work, historically around 7 percent and commonly in the 6 to 15 percent range today. A per-square-foot fee. Or an hourly rate, gaining by the type of work, which commonly runs $110 to $200 and climbs toward $300 for a principal firm. Because the fee can be structured in this way, the AIA contract form (B101-2017) sets each phase as a percentage based on the budget of the project, so every phase has a dollar value your firm can invoice. Once a client pays a milestone, the contract does not adjust it later if the budget grows. That means your books should never settle the fee down to actual costs at the end of the project. If you see that reconciliation running, the books are holding onto an old way of doing business.

Most AIA contracts also carry a reimbursable expense line for printing, shipping, and travel to the site. Those costs are meant to be passed to the client, so they have to be tracked to the job. If they land in general supplies, the client never pays them.

Why does my time matter more than my software bill?

Staff hours are the largest cost in the business, and the one the books most easily misread.

The mechanic works like this. An architect costs the firm about $50 an hour and bills out at $150. That three-to-one gap is not profit. It funds everything that cannot be billed to a job: staff meetings, marketing, training, PTO, software, rent. Profit is whatever is left after that overhead takes its share. So the number that matters is the utilization rate, which is billable hours divided by total hours. An architect with 30 billable hours out of 40 in a week leaves a 25 percent hole, and the firm pays the full week either way.

Software is a significant recurring cost, but it is usually just a fraction of what happens when hours go unbilled. Industry analysts put healthy firm margins around 6 to 10 percent, with strong firms closer to 15. That leaves almost no room for a utilization leak.

Where do architecture firms get the books wrong?

The same few mistakes show up across the trade: misclassified time, inflated utilization, and reimbursables posted to the wrong account.

• A construction administration or design fee posted to administrative instead of the project it belongs to. That moves a fee the client paid into the overhead column.
• Staff time booked to a project with no signed agreement in place, when the hours were slapped into a proposal or an owner discussion. The job carries a cost it can never bill.
• A reimbursable like a printed drawing set or site travel posted to general supplies, so the client's invoice line never adds up.

The deeper problem is utilization. Owners chronically under-report indirect labor, which makes utilization look healthier than it is. The books can say the team is at 90 percent while real time disappears into a design review nobody bills. And once the timesheets are in, they become the official story. When the invoice does not match the work sequence, it cannot be reconstructed later.

What should I track for each project?

Time, reimbursables, and budget-to-actual for every phase, because the project is the unit that makes or breaks the firm.

Each project should carry its own ledger: staff hours per phase, reimbursables against the contract line, and the agreed schedule from the beginning. When that sequence holds, you can answer the question that matters: did this project cover its own time and overhead, and where did anything leak?

Track principal hours separately from staff hours because the rates differ. Track time that goes to a project before a contact exists as a separate bucket, so you know how much time was spent landing the job.

Which numbers should I look at every month?

Utilization per person, net multiplier per project, and profit margin per project. The standard profit and loss statement hides all three.

Utilization shows where the leak lives in the team. The multiplier shows whether the leak lives in the rate. Project profit shows which clients, building types, and fee structures actually earn the firm money. The P&L alone shows total revenue and total salaries, but not which jobs carried the firm.

What should the books tell me before I price a job?

The books should give you the floor under any price: your real cost per billable hour, plus the overhead load that rides on top of it.

Owners in trade forums describe the habit plainly: undercutting each other to win work until fees barely cover costs. The antidote is knowing your cost per billable hour. At a 75 percent utilization rate, every billed hour carries a share of an unbilled hour with it, plus software rent, and the rest. Price below that and the job loses money from the first invoice.

Scope is the other reason prices go wrong. Work done before the contract, like expectation-setting and feasibility conversations, gets charged to a project that can never bill it. The books should show how much unbilled time a job ran up before it was signed, so the next price starts from what the work actually costs. The same numbers tell you when to add capacity: when the people you have are fully booked, revenue stops growing until you run.