Don’t do work for free! Never worry about getting paid, and focus on delivering an amazing experience for your clients. Receiving money at the beginning of a project ensures that you always have leverage and are insulated from cash flow concerns.

Deposits and retainers are invaluable tools for interior designers seeking financial stability and smoother accounting processes. This article highlights why integrating these practices is crucial for enhancing business resilience and fostering better client relationships.

There are horror stories of designers starting to work on a project for a client, and after spending many hours on plans, the client decides to cancel the project and not pay their first invoice. A retainer protects you by getting the client's financial commitment upfront.

These terms can have different meanings for different people, firms, and industries. However, in Materio, we concretely define them to eliminate confusion hopefully.

Retainers allow you to collect general-purpose prepayments from your clients. You can give a retainer a name (e.g., 'January Hours' or 'Prepaid Design Services') indicating a general intent for the money. Still, retainers are inherently flexible and can later be spent on anything in the project.

Retainers are held as liabilities and only work with accrual-basis accounting. They do not count as income, affect the profit and loss (P&L) statement, or trigger sales tax reporting. Firms using cash-basis accounting should not use Materio retainers.

Deposits allow you to collect pre-payments from your clients that are earmarked for specific items in your project.

Don’t let yourself be in a situation where you purchase a big piece of art, and the client doesn't like it when they see it in person, leaving you stuck with the non-refundable item. It may sound unbelievable and silly, but this happens more than one would think.

Deposit funds are reserved only to be spent on specific pre-determined items, making them more precise but less flexible than retainers. Deposits are a good way of collecting pre-payments if you or your client need to know exactly what each dollar is for in advance.

Deposits are held as liabilities and only work with accrual-basis accounting. They do not count as income, affect the profit and loss (P&L) statement, or trigger sales tax reporting. Firms using cash-basis accounting should not use Materio deposits.

Preserving Financial Resources: Deposits and retainers act as shields, ensuring you have the necessary funds to kickstart projects while mitigating payment delays or default risks. By requiring upfront payments, designers safeguard themselves from potential revenue losses and project disruptions, offering peace of mind amidst financial uncertainties.

For example, if you purchased a $10,000 couch on your credit card, and the client is way overdue on paying their invoice, you could get hit with a big interest charge by not having the funds to pay the card balance. Eliminate this possibility!

Deposits and retainers establish consistency in cash flow, making financial planning easier and providing stability while concurrently juggling multiple projects' financial requirements. These financial practices streamline accounting procedures, making tracking transactions and maintaining transparent financial records easier, benefiting designers and clients.

Spell it out in your contracts: Clearly communicate your deposit and retainer policies in your contracts. This fosters understanding and trust between you and your client, setting clear expectations. Make sure to spell out when you will take retainers and deposits and whether they are ever refundable.

Set expectations upfront: Educating clients about the rationale behind these practices helps them appreciate the importance of financial security and accountability in successful project execution.

Hold the line: While accommodating client needs, designers must uphold deposit and retainer policies to protect their financial interests and maintain business integrity.

Incorporating deposits and retainers into interior design business operations isn't just about finances, building trust, and fostering smoother client collaborations. By embracing these practices, designers can protect themselves financially, streamline accounting processes, and create an environment for creative excellence.

Materio makes requesting, processing, and recording deposits and retainers extremely easy. Our QuickBooks integration ties everything together so that information flows from Materio directly into your financials.