Mark English recently spoke about the use of Social Media in a small architectural practice during the KA Connect 2011 conference held in San Francisco on April 27 & 28 of this year. KA Connect is a community of AEC professionals driven to transform the way the industry creates, captures, and shares knowledge. KA Connect was founded by Knowledge Architecture in 2010.

Mark had a lot to say about the conference apart from his own talk, too. “There was so much information about the structure and handling of knowledge. The room was full of extremely smart people, all explaining how they manage and use knowledge successfully within their firms. The various presentations covered very timely subjects in this extraordinary period of change in our profession.”

Knowledge Architecture is a knowledge management and information systems consultancy based in San Francisco whose goal is to empower architects and engineers to create, capture, and share knowledge to leverage their expertise and grow their organizations.

<>

We usually don’t use this blog to brag about our own work, but this time we had to. We’re very pleased and flattered to have our Fontana Building remodel featured on two major design blogs: The Contemporist and Houzz.com.

This interior remodel from Mark English Architects transformed the original early 60s decor into a sleek and sexy pied a terre. Photo by Matthew Millman.

Getting recognition for good design is a challenge that all design firms face. It used to be all about “getting published”, back when when getting featured in high-design magazines like Architectural Record was the pinnacle of architectural fame. Firms hired publicists to pitch and place stories, invested in professional photography and staging, and relied on insider connections to get the ear of a senior editor.

Now there are a greater number of places to present work. Magazines, books, and academia all retain a big role in promoting vanguard design ideas and emerging technologies. But now, online media has become the new go-to sourcebook for the general public consisting of architecture fans, potential design clients, and various professionals.

Yes, getting published is still important, and that still starts with having great photos. Typically, the architect has limited influence over the client’s interior design choices. But if the photos are cluttered, or the furniture is mediocre, the designs just don’t look as appealing. And there’s not much an architect can do about it.

That’s why this project was so exciting for us. We were doubly lucky that the interiors got the finishing touches from Gary Hutton Design that made the place picture perfect. And, photographer Matthew Millman‘s sensitivity and dedication to detail brought out every last bit of texture that, in person, make the place the perfect pied-a-terre.

The original layout had a wall that blocked the line of sight out to the San Francisco Bay. The revised plan maximizes the dramatic views and creates a theater from which to observe spectacles such as the Fleet Week aeronautics as well as Fourth of July fireworks. Parti sketch: Mark English Architects

Every third Saturday from now through November of 2011, members of the Small Business Committee of the AIA-San Francisco will be available from 11-3 at the Miele Gallery of Sierra Select Distributors, Inc. at 680 8th Street, Suite 169C, San Francisco, CA 94103. Bring photos, ideas, or just your questions!

The first session is this coming Saturday, January 22.

If you want to take the cooking class, please register for that one ahead of time here or by calling 415-431-8682. “We try to limit class sizes to 15 people because of space concerns,” says Zoe Gardner, who will be demonstrating the use of Miele’s equipment: the steam oven, speed oven, master chef wall oven and induction cooktops. (But if you just want to ask the architects, you don’t need to register for the class.)

We now have the Thanksgiving holiday behind us, and we are closing in on the end of Q4 2010. There may be ups and downs in the stock market but, barring any embarrassing Wiki-leaks involving the Bank of America, the year’s financial performance is all but over. All that remains is the writing of reports documenting the year’s financial story. Attention is now focused on holiday-driven retail performance and consumer spending.

This is the time of year when wealthy individuals begin to consult with their accountants and financial advisers to assess how their investments have performed in the past 12 months. Although financial advisers are rarely advocates for spending, this year may reveal a modest exception. Losses sustained by investors since December 2007 have been made almost whole again – even if the profit has not been realized, at least the invested principal.

Reed Construction Data reports that architecture billings are finally on the increase again.

Here are a few statistics that indicate the wealthy are in the mood to spend money:

• Hermes, the French luxury leather goods manufacturer and retailer, has already announced that 2010 is the most profitable year in their six-generation history.
• Neiman Marcus San Francisco hints that their retail sales are already 17 percent ahead of what they were at this time last year (2009).
• San Francisco’s Emporio Armani is closing its popular café at the end of this year to, one would imagine, create more retail space.
• BMW, Mercedes-Benz and Audi are curtailing year-end vacations and increasing the lengths of worker shifts to accommodate a steep, year-end increase in orders of luxury automobiles.
• And Wal-Mart has reported a 9.3 percent increase in quarterly profits (the battered middle class has stepped down a notch and is shopping more frequently at discount stores)

How does this information affect the architectural and allied design professions? For one thing, wealthy individuals have more than two years’ worth of pent-up demand for design services. The upper middle class has stashed away savings and are looking at spending strategies. Since banks are not lending with great ease to consumers, a few potential clients with recovered investment capital are ready to allocate a bit of their money to re-boot dormant or deferred projects. These individuals are, just now, receiving news from their advisers. And these individuals may, in turn, begin to call you to revive dormant projects, or to discuss new projects that might begin in 2011.

Which market sectors will benefit most from this new (albeit modest) willingness to spend money? Certainly the very high end of the single family residential market is seeing new life. Sales of $10 million houses are up, and inventory in this stratum is down. The market sector just below is seeing similar, if less vigorous, sales figures.

Renovation and remodeling projects are picking up, although the most recent data indicates that these projects are smaller and of lower construction value. For the most part, these projects are paid for in cash. Fees for design services are often lower, too, as a result of lower construction value (and value-driven clients). Fee erosion is an issue across all market sectors, but that is a separate issue.

According to Reed Construction Data, the projected growth rate for construction in 2011 is 3 percent across all market sectors, across all regions in the USA. Most of that growth is expected in the second half of the year. The first half of the year may well be close to flat but it is anyone’s guess. The bright spot in this gloomy forecast is that the Bay Area is one of five regions in the country that is expected to see growth that is double the national rate. (The others are Los Angeles, New York, Boston and Washington, D.C.) The single family residential market may see greater growth than that, with a projected growth rate of about 10% over last year.

Reed Construction Data information shows recent growth in the commercial/industrial sector.

Follow this link to a downloadable PowerPoint produced by Reed Construction Data, in collaboration with the Associated General Contractors and the AIA. The presentation is a great resource of projections and comparative data regarding design and construction across all regions, market sectors, material costs and employment. I suggest you quickly flip through it to identify projections for your specific market sectors.

Architects and interior designers should see this as an opportunity to refresh the list of key contacts and clients with dormant or deferred projects. Call or email them. Ask clients if they have news that might motivate them to resume progress on the project. If you are a landscape architect, structural engineer or general contractor (for example), contact architects whom you know to have projects on indeterminate hold. If possible, ask them if they have checked in with their clients. Develop and hone the ability to detect signs that clients are receiving good news from the people that manage their money.

I hope that your see your prospects trending towards “positive”. Maintain an optimistic outlook. Most importantly, do not wait for the telephone to ring or for that email to arrive. Make this the year that you commit to an increase in weekly or daily business development, because 2011 will be the year in which there will be a noticeable increase in business to develop.

We’d like to advise our local design colleagues of this potential scam which came across our radar last week. It has touched some local design firms as well as in New York. About six months ago, several architects were contacted by a group called the Haoshun Investment Company about an office/housing complex in China’s Henan Province. Yet, after signing contracts and traveling all the way to China, they’ve all come back empty-handed.

Although no one has lost much in the way of money, yet, it’s very disturbing to have one’s hopes raised only to have the deal vanish and wither away. The motive remains a mystery – the architects haven’t laid out any money other than airfare, and no one knows who the real target could possibly be, or why anyone would engage in such an elaborate pretense. Still, we advise our colleagues to be cautious.

Here’s a link to the full story, such as it is:

http://www.archpaper.com/e-board_rev.asp?News_ID=4895

Coming up on Saturday, October 16 from 10-3pm is a special event for fans of Modernism – the 2010 “LA Modern” homes tour sponsored by the Los Altos Community Foundation, along with many local businesses and design firms. The tour begins at The Los Altos Neutra House at 181 Hillview Ave., and includes homes in Los Altos, Los Altos Hills, and south Palo Alto.

Architects who have homes on the tour include: Bohlin Cywinski Jackson (Peter Bohlin recently won an AIA Gold Medal Award), Mark English Architects (sponsor of this blog), Jonathan Pearlman of Elevation Architects, Michael Albrecht of HAUS Design, Callas Shortridge Architects, and Scott Stotler of the Stotler Design Group. According to Jan Masters, one of the organizers, “The addresses of the houses on the tour are kept confidential until people actually  arrive at the Neutra House at 181 Hillview to pick up their tickets, tour pamphlets and maps to start the tour. We find this helps with the excitement … sort of like a road rally … and helps protect the homeowners from intrusion.”

Here are three sites you'll be seeing on the LA Modern 2010 Homes Tour in Los Altos, CA. Clockwise from top: Tour headquarters at The Neutra House; Stone Court Residence designed by Bohlin Cywinski Jackson; Moody Hills Farm by Callas Shortridge Architects.

Tickets for the LA Modern Homes Tour are $40, with a post-tour party and reception from 3-5 for an additional $20. A special VIP preview celebration occurs the evening before – if you want to do that one, $150 package includes the Preview Party, the home tour on Saturday, and the post-tour party at the end of the tour ($130 of the price is tax deductible). All proceeds from the “LA Modern” Home Tour, Preview Party, and Los Altos Neutra House Speaker Series benefit the Los Altos Neutra House to pay off the remaining capital debt for this preservation project.

The Los Altos Neutra House Project began in 2005 as an effort to save a small home designed by renowned Modernist Richard Neutra. This home was one of three cottages on a former prune orchard, that Neutra designed for two poets in 1935. With funding from local businesses and many private citizens interested in preserving architectural history, the home was moved to public land owned by the City of Los Altos, and has since been renovated to serve as a community center and conference facility.

This home will also be on the LA Modern 2010 Homes Tour in Los Altos, CA this coming October 16. Design by Michael Albrecht of HAUS Design.

And, over the next several months, the Neutra House Speaker Series includes lectures followed by receptions and discussions with people like Sam Grawe, editor-in-chief of Dwell magazine, John King, urban design critic for the San Francisco Chronicle, and Thomas Klope, Bay Area landscape architect.

The Speaker Series is $15 for each lecture, $15 for the reception following. Buying the Speaker Series includes a one-year membership in the Los Altos Neutra House Association, with additional tours and other events offered to Association members. For more information on these events, please contact The Neutra House association directly at 650-949-5908 or visit the web site at www.neutrahouse.org.

Left: Wolff Residence designed by Scott Stotler. Right: Sculpted ceiling planes define the spaces in this hilltop home by Mark English Architects. Both of these homes are on this year's LA Modern 2010 Homes Tour.

In addition to his design sense, Richard Neutra is widely admired among architects for his exceptional drawing skills. A recent exhibit of his sketches was shown at the L.A. Public Library last year. Who knows… maybe it’ll come to the Bay Area eventually.

This Modern interpretation of a Mediterranean residence by Elevation Architects - completed just barely in time for the LA Modern 2010 Homes Tour- includes solar water heating and electricity.

This is a follow-up to our earlier post on KA Connect, a conference on knowledge management for architects.

Michael Bernard writes: Here we are in the quiet of 2010. Think back two years ago: July 2008. The Dow Jones Industrial Average (DJIA) stood at 11,326. Many firms were busy with abundant work, months of assured work in the pipeline, and stunning new prospects to fill in the void. Finding qualified staff to handle the copious workload was the major challenge. Entry-level designers who entered the job market in May 2008 had the prospect of three or maybe four offers of employment.

None of us could have easily predicted that, three months later, the stock market would drop almost 3,000 points. Nor could we have predicted that five months later, the Dow Jones Industrial Average would drop to 6,626 points. Eventually, in a span of under eight months, the stock market dipped 4,700 points. By December of 2008, the outlook was as gloomy as the winter weather, with no end in sight.

Depression-era unemployment was supposedly a thing of the past - until the present.

Of course, the world did not entirely come to an end. Since March 2009, the market has recovered somewhat. However, despite the market’s apparent recovery, the architecture and interior design professions are not seeing the same rebound in inquiries and signed contracts. Unemployment among design and construction professionals still stands between 15 and 20 percent. Clients who still have funding for their projects continue to drive hard bargains on both soft and hard costs. Clients who don’t have the money in hand are having difficulty financing, despite the fact that money has seldom, if ever, been less expensive than it is today.

What’s more, we recently received discouraging news in a newsletter from the AIA:

‎” . . . the AIA Consensus Construction Forecast Panel was downbeat on the prospects for the year [2010], projecting a 13% decline in spending (inflation adjusted) for nonresidential building projects. Halfway through the year, prospects have deteriorated, with the current consensus predicting a 20% decline this year.”

Link follows here.

What does all of this mean to the average small or medium-size design firm?  Many firm owners are working twice as hard to capture half the commissions, and those contracts are likely to be smaller in scale and lower in value – leading to leaner design fees. In an uncomfortable turn of events, we may find ourselves competing against our colleagues in market sectors where that was formerly not the case, such as single-family custom homes.

Meanwhile, the evolution of technology in everyday practice continues, even in the absence of billable projects. Software licenses expire regardless of economic swings. Computers become obsolete. The employees we have been fortunate enough to retain now need to learn new programs to stay current. Our servers are undersized and sometimes cannot handle the new software. Our bandwidth/DSL is inadequate. In order to compete with our colleagues, we now want software to track every hour spent on every project in order to understand what a project actually costs us to deliver. Large-scale projects are increasing in complexity, requiring ever-tighter integration between disciplines and wholesale data conversion from 2-D drawing libraries to 3D building objects. (Translation: more training, more software and more hardware, more overhead cost – when we can least afford it)

And we are two years into a recession, the end of which has been predicted unsuccessfully a number of times.

Paul Downs, a Philadelphia-based cabinetmaker, chronicles his efforts to balance cash flow and technological evolution in his New York Times blog post, “You’re The Boss”. In his post, Mr. Downs makes the ironic observation that, while he builds durable objects intended to last a long time, software is designed with the opposite premise in mind. And the software costs money that we might otherwise spend on business development and/or staff retention.

We have two choices, it seems: We can hibernate for a number of years, like Rip Van Winkle, waking conveniently to a new world. (For most of us, this is not a viable option.) Or we can make the time to consider new business development strategies that highlight our firm’s value and that put us closer to new projects. Concurrently, we can consider ways to improve our ability to stay abreast of trends in technology and practice.

Left: Washington Irving's character Rip Van Winkle woke up after a 20-year sleep. Right: Hibernation pods have been a popular sci-fi storytelling device, but the sleepers don't accomplish anything in the interim.

[This is easier if you can optimistically treat your down time as a sabbatical, an opportunity to update your infrastructure in ways that you don't have time to do when you're busy. You won't accomplish much by viewing the recession as a punishment imposed by circumstance. - RF]

Staying abreast is more than just learning the newest version of ArchiCAD, though. It’s more than springing for a bunch of new software licenses and computing equipment. Now is a good time to think about how you run your practice, especially how you organize and store information. Technology sometimes makes familiar tasks faster, but it’s also an enabler that can sometimes open up a whole new way of doing things. Technology enables knowledge: how you acquire and share knowledge, how you store that knowledge in a meaningful way, and how you organize information to find things quickly.

This past April, I attended the inaugural meeting of Knowledge Architecture, KA Connect 2010. I listened to a wide range of perspectives on the evolving nature of capturing and disseminating design and construction knowledge. The speakers proposed that such knowledge is its own form of “architecture” that gives organization and structure to design practice, to construction, to collaboration and to learning. Many of the short talks are available here. They represent an accessible trove of (no-cost) knowledge that can help you in your daily practice. I encourage you to take a few minutes to view these talks, which add a new perspective to the world of design and construction.

Two of the speakers at KA Connect focused on very different strategies for changing how we practice, asking two important questions:

• How can we leverage our existing resources to distinguish ourselves from the rest of a highly-qualified pack?

• How can we stay nimble and responsive in an unpredictable marketplace?

Staying nimble in this new economy is not as easy as it sounds.

Communicating Value To Your Clients

In her talk, “Communicating Value to Your Clients and Prospects”, Nancy Kleppel addressed the perennial importance of fostering a design culture where the entire firm is engaged in the effort to communicate value to (new and repeat) clients. We must communicate to our employees the essence that drives us to pursue our projects: is it for love? Or is it for money? Employees in turn should be coached and encouraged to communicate their awareness of value to clients in every interaction. By creating a “project landscape”, where the value, significance and relevance of every project is understood by each member of our team, we can grow our firms not just in size, but more importantly in depth of technical and business development expertise.

Nancy Kleppel writes:

“We begin by evaluating who we are as designers, what defines our own individual firm and separates us from our many competitors. This requires an in-depth understanding of not only the kind of work we do, but what we do best. We then must continue to develop our understanding of which of our attributes are most highly valued by our targeted clients and which of our projects best demonstrate our specific abilities. Next we need to create a common understanding across the firm that speaks to our specific firm attributes, talents, skills, mission and values. This must be clearly communicated to all staff in such a way that any one of them is able to serve as an ambassador for the firm in the full range of unpredictable circumstance where opportunities might present themselves. (We should also train them to recognize opportunities, but this is beyond our current focus.) Finally we must empower our staff to speak with a common voice, making it known that business development cannot be the provenance of a single individual or even a small group and create a firm structure whereby people who bring work into the firm will be properly recognized and rewarded.”

Global Outsourcing: Better Get Used To It

Darren Rizza, CEO of Satellier, addressed the reality of global outsourcing, which is likely to change both the nature of firms of every size, and the range of services they deliver. Highly-educated, low-cost design professionals outside of the USA can work around the clock to deliver high-quality design documents using the latest software. They can convert drawings to 3D building objects, offer libraries tailored to local building codes in other parts of the world, and even leverage expertise that will win YOU new work.

The result? Being able to do more with less, with the architect of record efficiently providing services that focus on the initial design vision followed by subsequent document review for the duration of the project. This may be the future of practice for some of us: “on-shoring” services that rely on creative and intellectual design leadership, while the “big middle” of a project may actually be produced off-shore. This project delivery method is of increasing appeal to many clients who are bottom-line driven. If this becomes the desired means of delivering projects, we need to train now in order to respond quickly to our client’s requests. If we are not ready – someone else will be.

Business is currently “light” for many of us, to put it mildly. The “on-shore/off-shore” paradigm may seem like a remote possibility. Its appeal to clients may not be apparent today, when the demand for design services is temporarily low. But as project inquiries increase in frequency and predictability, when funding is more easily available, clients will invest their hard-won funds in hard costs, with the possible effect of even leaner design fees.

Meeting the demands of a lower fee for service might be accomplished through carefully-structured outsourcing. The potential effect of such global outsourcing is that the very nature of how we practice may change. Rather than the traditional design practice hierarchy of “junior-intermediate-senior” staff, we may find that we are better suited to a “senior designer-job captain-document reviewer” arrangement, with a very small number of junior designers to support the initial design effort.

Our role as design service providers may evolve into one that is largely editorial and less supervisorial, as globally-produced data models find their way into our FTP drop-box. Our day-to-day tasks may shift from directing in-house staff to one where we review outsourced documents for design and code compliance. Consider this as a possible paradigm. Can you fit in – and if so, how? Would you and your staff be able to embrace such a prospective arrangement? And, assuming that you want to take the leap to try this new approach, how do you structure your firm so that delivery of services in this manner generates revenue?

Workshare: The New Word for Outsourcing

Darren Rizza writes:

“The opportunity to rebuild your firm as the industry comes back slowly will require new ways of putting teams together and producing design, analysis and construction documentation and modeling. The majority of firms have scaled down to their ‘A’ teams. But these teams may not be able to provide all the necessary services and billable hours for a project.

A small firm can use outsourcing to scale up for a big project - including specialized skill sets.

“How do you as a firm/project leader re-staff without affecting your bottom line profitability? Workshare, or outsourcing, is a logical path for recovery given its low cost/high value. Workshare is not only about staff, it is truly about process. Your workshare team needs to understand your design services process and execute it as you would. Typically, the workshare team would be task driven leaving the design aspects to the client. However, even this is shifting as those who have utilized workshare for years before the downturn are now better equipped to have design services executed through workshare thus reducing their internal needs while maintaining and in some cases increasing their ability to service more projects and clients.

“Need to execute in BIM? Don’t have BIM processes in place? Don’t have BIM software and really can’t afford the upgrade investment? Workshare is seeing significant increases in clients who are requesting or requiring services to be executed in a BIM process. In fact, more than 50% of all new workshare services involve BIM processes.

Pre-created Building Information Modeling (BIM) objects can save a lot of re-drawing time. These examples are available from Reed Construction Data.

“Workshare is not limited to architecture and engineering firms only. Increasingly, contractors and owners are seeking out workshare services to help improve their visibility into their projects as well as gain process knowledge they may not have on their teams. Owners now more than ever realize the benefits from a BIM or virtual design and construction [VDC] process and are now seeking workshare services for the management of their project as a way of managing the overall project and multiple team partners.

Virtual Design and Construction (VDC) can be used among other things to simulate construction sequencing, generate construction documents, and detect conflicts prior to construction.

“Our projects are no longer in our own backyard. Our building products and materials are not sourced from our own backyard. Our hardware, software and support are not from our own backyard. Our internal project teams are no longer from our own backyard as well. The recovery is shifting the balance. Flexibility and responsiveness will allow us to move forward successfully.”

Outsourcing: Friend or Foe?

Rebecca Firestone writes: As soon as people hear this particular word they think, “American jobs lost!” but actually, it can be a gain as well. I spoke at length with Darren Rizza to ask him some hard questions about outsourcing. His answers about how to get the most out of it – even for small firms – were very enlightening. Let’s face it, architectural firms have always outsourced the work they don’t want to do themselves, tasks that are not part of their core competency – marketing or tax accounting, for example. But now for the first time A&E firms are exporting large chunks of design work as well.

Outsourcing as a buzzword got its start with the information technology industry, when it became synonymous with “offshoring”, i.e., the moving of jobs overseas. (Prior to that, the migration of manufacturing jobs overseas was simply called “the migration of manufacturing jobs overseas”.) Customer call centers were next, moving to places like India, Ireland, or the Philippines. Now, people travel to India even for surgery. What’s next… outsourcing our hangovers (now there’s a thought)? It doesn’t matter if we view outsourcing as friend or foe, because we’ll have to embrace it in some form or another.

Below, Darren Rizza of Satellier, a company providing outsourced services to the architecture and engineering industries, answers questions from Rebecca about the meaning and value of outsourcing for firms large and small.

How do I know when to outsource? Are any of your remarks applicable to small design firms that work locally on one-off custom residential projects for private owners?

Darren: Regardless of what you’re outsourcing, you have to start with one fundamental question, namely, what do you consider your core business to be? Your core business is what sets you apart, why you are here. These functions are things you might want to control very closely.

But there are other tasks that we all have to do as part of our primary professional function, about which we say, “I don’t come to work to do this”. Outsourcing should make your processes more succinct. You don’t necessarily have to outsource across continents, either. You can find outsourcing firms in Iowa now, because the cost of labor is still lower there than it is in places like New York.

Small firms might outsource other functions, like accounting, legal, or HR – not necessarily A&E.

How do I know if my firm is organized to outsource successfully?

Darren: You have to understand your own process steps first, regardless of whether you outsource or not. Whether you’ve got six people in one office at home, or 75 people abroad, you have to determine:

• Who needs to do each one

• Where are the handoffs

• What are the yes/no decision points

Before you can outsource portions of your own work process, you need to understand the process, including decision points (shown here in this example as diamonds), and who is responsible for each task.

Good communication is essential! There should be shared understanding about the tasks, such as how long each one takes. Then you have to work out how change management is handled, including notifying stakeholders. In fact, I’d say of all the things that make for successful outsourcing, change management is in the top 3.

How do I select a good firm to outsource to? How do I kick their tires to see if they know what they’re doing?

Darren: If you’re outsourcing out of your local area, you will have to consider how to do business across a different continent, culture, and legal rules. Whatever your industry, you want to ensure that your needs will be met by the service provider. Look on CIO.com for the top 100 questions you should be asking your outsource service vendor.  Although many of them pertain to the information-technology industry in particular, many of the questions are applicable outside of IT.

Questions like:

• Why are we doing this?

• What are the success criteria?

• How much experience does my organization have with managing outsourced engagements?

Specfic content-related questions that you can ask a provider for A&E include asking them to show their details for things like doors, ceiling plans, framing plans, vertical circulation. These can serve as dictionaries, and are valuable aids. By looking through these templates, you can see what they know, and what they can potentially reference. If there is a discrepancy between the building codes that they use in their details and the ones that your project needs to use, this will also be apparent.

Ask the outsource vendor to show you some of their typical detailing, and see how close it is to what you would need for your projects.

The provider should also have experience working with Westerners – including your region, as well as experience with the type of project you want to do.

What are the logistics of moving to an outsource provider?

Darren: Again from CIO.com, here’s a sampling of checklist items that you should take into consideration.

• Is there a master services agreement in place?
• How long will it take new supplier resources to learn their jobs?
• Will there be layoffs among my staff?
• How should I divide the project work among several suppliers in different locations?
• How can I get enough sleep when my project team is on different continents?
• What are the major holidays? When can I expect to find people in the office and when not?

In the "Dilbert" comic, the fictitious nation of Elbonia somewhere in Eastern Europe serves as a stand-in for offshoring jokes without having to offend any "real" nationalities.

What’s a good sort of trial project to use with a new outsourcing firm?

Darren: One major task in adopting new technology is simple data conversion. A small firm could use outsourcing to convert all their existing 2D libraries into 3D building objects. If the firm is looking to grow and embrace new technology, this is one way to get a leg up. It’s a lot quicker than trying to learn the tool and doing all the conversion yourself.

How do I get off on the right foot with my outsource team?

Darren: You need to allow for some ramp up time. Give some thought to the types of projects and length of engagement. Once the new team has learned how you work and what your expectations are, they can truly be an additional right and left hand for you.

You also have to remember that the outsource team are people. Another aspect of Indian culture to consider is that people will be extremely dedicated to their work will leave a company if they don’t like it. If they don’t like the people, or they don’t like the work, or the commute is too long, they’ll leave. Many people live with extended families and can afford to change jobs but more to the core of motivation is their belief of personal happiness. So you have to give feedback, compliment the team for doing things like meeting a major milestone. In meetings, you should praise the entire team, not individuals – you can always praise individuals in private.

In some cultures, it's important to praise the entire team in group meetings. Offering individual praise is best done in private, to avoid the appearance of slighting the other members of the team.

A few years ago, when Satellier was really busy, U.S. clients would send over gifts like coffee mugs and caps. Even small firms can do this. The remote teams want to know who they’re working with and what they’re doing. So you can, for example, post things like photos from the San Francisco team’s outing, sharing day-to-day experiences. Learn who the individuals are on your team – learn their names and pronunciation, learn their backgrounds of education, family, from where they come. A lot of people may not understand the importance of this effort, but it makes a big difference in building tight connections.

My feeling about new technologies was that they trickled down eventually. They might start as the sole provenance of large firms, but then 10 years later everyone’s got it right on their desktop.

Darren: Do technologies trickle down? Not necessarily. Larger firms may adopt greater quantities of technology. But some alternatives may disappear over time due to consolidation.

The trickling that happens tends to be across firms. Employees at one firm may take their tools, preferences, and processes with them when they change companies. This can happen from large to small firms, but also from small to large. That’s one way that stuff gets adopted.

As staff move from one firm to another, they bring new knowledge, tools, and methodologies. Firms can thus acquire skill diversity without sacrificing their core competencies.

This “stuff” can include new work processes, ideas, and methodologies. It can be disruptive, or not. Sometimes there’s a temporary disruption in efficiency that I call a type of “bubble”. There’s the disruption, there’s the bubble as the company learns to deal with the new information, and then things settle down again. Outsourcing, and offshoring, is one of those bubbles.

How much visibility does each team need? If they only understand their piece, they can’t spot discrepancies that could affect things later on the way an integrated team would.

Darren: Who says outsourced teams can’t be integrated?

The question is how much visibility into adjacent pieces should a team have. More insight does lead to smoother understandings. It’s good for the teams to understand how the outcomes of their tasks affect things down the road. Although most schedules are expressed in terms of daily or weekly deliverables, these deliverables can have a conditional effect.

The more visibility the team has into the overall process, the better they will be able to contribute.

The management team must provide guidance to the outsourced teams so that those teams can make decisions with forethought. Even rote tasks require some decision making. For example, in an office building, how does a particular door operate? What codes will it need to meet? If the person designing or configuring that door doesn’t know what the next steps or the needed outcomes are, there’s only a 50-50 chance they’ll make the right decision.

Visibility can be a problem even if the team is all physically in the same room. If there’s one person who doesn’t share information, it can affect everyone. Some people may be just fine with a handoff, but sometimes they can be frustrated by their own inability to have an impact on the work – because they don’t know how their work contributes.

Does it matter where the outsourced team is located or who they are? Do local cultural norms ever inform a team’s working style?

Darren: Local culture is a big consideration. When I moved to India, I read up on it before coming and continue to do so every day. What was I getting myself into? One of my main references is Speaking of India: Bridging the Communication Gap When Working With Indians by Craig Storti. Yes, they speak English – British English that is, but it’s not always the same meaning.

For example, Storti explains that traditional Indian business culture is very hierarchical. There might be three or four levels within an Indian organization, but each one only talks to the level immediately above. So Level 4 would talk to Level 3, and Level 3 with Level 2, and so forth. Rarely is management structure flat. In fact they have a term for it: “skip-level meetings” where a Level 4 can speak directly to a Level 2 and not be frowned upon.

Improv theater master Keith Johnstone described a status game where each person can only give orders to the person immediately beneath himself - thus an order to the lowest menial has to be repeated by each successive level of management.

Here’s another example. Indian culture places a high value on saving face, which discourages people from being openly critical. They will always present information in a positive way, they’ll always say “yes” but you have to listen to it in an Eastern way. They mean “yes, but only within this time frame” or some other set of parameters. It’s a very thin line. There are many workarounds in how teams operate, and what they present as information.

Local knowledge includes things like building codes, too.

Darren: It’s that, and also how to use language to talk about things like building design and construction. It’s worth asking a potential vendor what their experience is with US building codes as opposed to, say, Australia. But this is an asset that an outsourced company can offer as well, a skill set that the engaging firm might not possess.

How do you de-code communication styles?

Darren: When considering an outsource provider, ask about their experience of working with Westerners, and specifically with different types of Westerners: Americans, British, Australians, Germans – even within a single country there are regional differences in attitude that can be important. These attitudes inform the communication style. After all, with a remote team you’ll spend 99% of your time with them as phone or email communication. When someone makes a statement, you have to interpret it according to local conventions.

For example, at a former position we had offices in New York City, Chicago, and San Francisco. Each office produced the same quantity and quality of work, but their attitudes towards getting it done were radically different. In New York, everything was speeded up – “go go go”. San Francisco was more laid back: “OK, we’ll take care of that.”

Specific to Indians and their native languages (the majority of Indians are bi- and trilingual), they speak quickly. You can miss up to a third of what they’re saying. But, in business they will restate everything at the end of the conversation, and that is THE critical piece of the conversation. They will base their understanding on this summary. Later on, if you discover that the quality is not what you needed, they will refer back to this portion of the conversation to show how they arrived at their final work product.

Email is another realm. We communicate so much via email, and if those email messages are very terse, it can be hard to know what someone actually meant. I subscribe to The Times of India via Facebook as a way to learn how to read ‘Indian’, and the commenters often use an Indian texting style with alternate spellings that make sense if you say it out loud, but you have to read it with a Hindi accent. With written language, you have to slow down. You can’t just fire off a response. Take the time to really read what they wrote, then figure out what they meant.

But eventually you have to learn enough to be able to immediately respond. A lot of cross-cultural communication really hinges on this first response, or their reaction to something you did. But you have to step outside of your own culture.

You’ve mentioned that even design can be outsourced. But design seems so… sacred.

Darren: Hah! There are no sacred cows here, as I recently learned. One Saturday there was actually a cow on my street in India, which was unusual for that street, and a very odd thing happened. Within seconds, a young woman appeared on a bicycle with a stick and started whacking the cow to get it to move. Cows may be revered in India but they still can be motivated to do what you want.

Confronting the sacred cows of our own preconceptions can be a very "moooo"-ving experience.

Our preconceived notions about design are a kind of sacred cow, too. Not that it isn’t a wrenching experience to give up some of the creative design work. It’s easier to give up technical documentation. But here’s an example of how we did it recently.

A recent design project we had involved a large British firm. In the U.K., it’s much harder to downsize and lay people off in the U.K. than it is in the U.S. So this firm had already set a ceiling for how big they wanted to grow. Then they won a very large project, so large in fact that they were forced to outsource much of the design. They had 1/3 of the design team in the U.K., and then the remaining 2/3 of the team was at Satellier in India.

What evolved was a hierarchical design process where they set the partí and the general direction, and then we would design according to their high-level directives. This was the first time we had to design directly from a conceptual standpoint, and we had to document the process of questioning and answering that happens as a part of design. It’s not about outsourcing the creativity, it’s about decision making, so that the outsource firm can make decisions in the same way that the client would be making them.

The division of labor for design tasks involves multiple levels of decision-making, with the primary design firm providing overall guidance, with the outsource firms also responsible for some portion of the creative work.

Design is quantifiable in some ways, in terms of quality control and noticing where the process works and where it doesn’t. Outsourced designs already occur in other industries such as product design, clothing design, and manufacturing design (prototypes).

Outsourcing can help smaller firms to win bigger projects without having to ramp up and do it all themselves.

Darren: It’s one way for a smaller firm to have a bigger piece of a project than they would otherwise be able to handle. That’s one thing that small firms who were early adopters of BIM and Revit taught us all. They made the transition from using drawing tools to information modeling. Suddenly a small firm could produce the same quantity of work as teams three times their size. A firm of 2-3 people could manage an outsource team of 10.

By teaming up with an outsourcing firm, not only can small firms do more work, they can gain work in new sectors, with the outsourcing firm providing specified expertise and skill sets that the bidding firm may not possess themselves.

Outsourcing for small firms can be beneficial in that they don’t have as much employee overhead. They can staff by project and gain the ability to scale. The downside is that you have to pay the outsource firm on a regular basis. You might get paid based on milestones of project completion, but the outsource firm may need to be paid monthly. So you have to plan for this upfront.

Any famous last words?

Darren: Hmm, how about “Try it, you might like it”? More seriously, don’t view outsourcing as a necessary evil. Embrace it as a way to grow your business and increase your reach. It’s all in how you use it.

Have you ever wanted a chance to ask an architect about your home? Maybe you’ve got some new idea and want to know what’s involved in making it happen, or maybe there’s just one thing you’d like to change but you don’t know how. Well, if you live near San Francisco and you’re planning on doing the San Francisco Living: Home Tours, then you can also bring your photos, idea books, sketches, and questions to the “Talk to an Architect” booth at the Home Tours headquarters.

The Home Tours headquarters is the Stable Building located at 2128 Folsom Street in San Francisco. Tours are Saturday and Sunday, September 11-12, from 10-4pm.

Last year, eight local designers volunteered: Mark English, Tim Mangan, Andre Rothblatt, Phil Rossington, John Klopf, Jonathan Feldman, Jim Cline, and Kathleen Bost. The Home Tours is only one program in the month-long Architecture and the City festival sponsored by the AIA San Francisco.

“Some people brought drawings or ideas, and we’d have a good exchange of information,” said Andre Rothblatt. “Architects could bring things to show as well, such as their portfolios or a sample drawing set. It’s about architects responding to the people,” he added.

Drawing details can be helpful for clients who want to better understand construction methods.

It’s OK for visitors to admit that they’re beginners, too, if they don’t know anything about the design process. John Klopf, another participant from last year, viewed it as a public service. “It’s helpful to have a knowledgeable practitioner with nothing on the line. Some people came with photos and specific questions, or different potential floor plan layouts that they’d come up with, and they could get honest answers to their questions. It’s also fine for someone to declare themselves a beginner.”

Other popular topics included how to work with a contractor, or exploring the possible costs for a potential renovation. “I didn’t do it in order to get new work. It’s more of a public service,” notes Klopf. “It raises the profile of architects in general when we make ourselves accessible. We know things that can help people. And this year, at the the Talk to an Architect program, we’ll have contractors sitting at the table with us for the first time, so visitors can talk to the whole team.”

An architect can advise on how to make a home more livable. Shown above: before & after photos of a San Francisco renovation by Andre Rothblatt Architecture.

The Talk to an Architect program is free and does not require pre-registration. Just drop by the Home Tours headquarters at 2128 Folsom Street on September 11 or 12, anytime from 10 to 4.

[ This article was written in conjunction with Michael Bernard, our "Ask Michael" columnist, and addresses billing from the standpoint of smaller firms with a focus on custom single-family residential work for private owners. ]

Invoicing and collecting payment are a key element in the designer-client relationship, one which is often overlooked particularly with small firms serving private residential clients. A designer may feel embarrassed to be demanding specific sums of money from his clients. Or she may feel that the relationship that she has with her clients is so personal, so delicate, that even a single invoice would drive them all away. Some designers may try to hold off on invoicing until the client is too emotionally invested in the project to back out. Then they send a huge invoice, and the fight happens anyway, only it’s worse than ever.

Needless to say, these self-deluding habits don’t serve anyone – not you, and not your clients, either. If you don’t know how to ask for money for your services in a way that gets you paid, the consequences are obvious.

Billing should be treated as one of the fundamental business practices of small and large firms alike, rather than an afterthought. Yes, the design work is important because after all, that’s why your clients are coming to you. In terms of cash flow, collecting is one of the biggest challenges especially for small firms – and yet, the AIA Handbook has very little advice to offer on things like what information an invoice should contain, how it should be presented, or what to do if payments are not received in a timely fashion.

Is Billing The Real Problem?

When most of us think of collections, we think of third-party agents calling up deadbeats and threatening them with increasingly scary penalties. That attitude doesn’t go over well with a private design client, even if that client owes tens of thousands of dollars in fees. Some architects end up in a downward spiral of gamesmanship with their clients, each of them trying to hold the other over a barrel – with the bill as the focus of contention. But is that the real problem?

Typically, both client and architect argue about fees when other problems arise. Could it be that we’re fixing the wrong problem here? They say an ounce of prevention is worth a pound of cure. How can we line up all our ducks in a row so that misunderstandings never even have a chance to develop?

For many professionals, client disputes stem from a lack of trust - which in turn arises when the parties have failed to establish shared understandings and common goals from the onset. And, sadly, some people derive more satisfaction from "winning" than from actually accomplishing anything. Art: "The Conjuror" by Hieronymous Bosch shows a crowd fascinated by a street magician. The magician's accomplice steals their purses while they're distracted

That’s essentially the strategy outlined by Michael Bernard, AIA who is not only an architect himself, but also a seasoned management professional specializing in business consulting for design firms. Through his own firm, Virtual Practice, Mr. Bernard works with over 50 clients consisting of firms both small and large, ranging from sole proprietorships to firms of over 30  people with offices in Northern and Southern California cities. I figured if anyone would know the answer to this question, it’d be be him.

Culture of Billing

“You have to create a culture of billing,” says Bernard. “You need to create a structure which will allow you to collect fees. You don’t have to be shy about it. It’s what keeps your business moving forward.”

“Be rigorous in billing every month.” Bernard was emphatic. “Some firms delay up to three months, but they’re losing money by doing that.” It really takes commitment from the principals, not just hiring a bookkeeper and putting the problem in someone else’s hands.

This culture should extend to all of your employees as well. “A typical office might issue something like 20-50 invoices a month. Your staff needs to understand how the work they do supports the well-being of the firm. Part of this is to understand that completing their timesheets accurately and on time is what helps the office to get paid on time.”

The Contract is King

As it turns out, fee disputes are often the first symptom of weaknesses in the architect-client relationship that had gone undetected, and one of the biggest weaknesses is not clarifying relationships and expectations at the very beginning. The early stages of engagement are a delicate time and many architects tread lightly to avoid frightening off a potential client. After all, if the clients are that leery of spelling out commitments on paper, do you REALLY want to work with them?

“Use the contract to convey established billing practice,” advises Bernard. “The contract is the memory of the project, with all parties signatory.” The contract spells out who the parties are, their roles and responsibilities vis a vis one another, the scope of the work to be performed, a proposed timetable, a fee structure, and billing practice as well.

With a good contract, all the other "courtiers" must submit equally to the royal sceptre. These are the who, the what (scope and cost), the when, the where, and the why (program).

“California law stipulates that architects may not perform design or construction services without a signed agreement with the client,” Bernard reminded me. Sometimes a firm will commence work to meet a demanding schedule and simultaneously try to work out the contracting details. This is almost always a risky practice, not only because it’s illegal but because it just postpones little issues until they become big ones. Even in cases where there’s not a moment to lose, get an agreement in place and then work out the contract as quickly as possible. An initial agreement can be as simple as a letter of understanding.

Although Bernard didn’t provide a timetable for finalizing a contract, I’m going to go out on a limb and say that letters of agreement should only hold for the first billing cycle, and if the client can’t agree to a contract after that time, the architect is inviting trouble by letting it slide.

Consider Client Response Times

One issue that I have seen as problematic on other projects are clients who are simultaneously demanding but who are also unavailable half the time for important decisions, or who are so preoccupied with their other affairs that they don’t have the bandwidth to think about things like finalizing and signing their contract agreements. If your clients are overseas for long periods of time, for example, you should get another designated responsible party who is empowered to act on the owners’ behalf, and clearly convey to the client the costs and consequences of project delays. “A simple solution is to include in the agreement the name of the designated project representative. This can be the owner or another party,”advises Bernard.

Even so, there are some decisions that can really only be made by the owner, and if the owners can’t understand the implications of delays, then the architect may have to expend considerable effort to keep the project on track.

Use Examples in the Contract to Illustrate and Convey Expectations

The contract can be used to set expectations by example as well as by description. “If you have third-party sub-consultants who bill to the architect, and the architect then bills that out to the client, you can include an attachment to the contract that sets some rules, including expectations for billing frequency and information – what to expect, and when to expect it.”

One aspect of this is to actually ask your clients what information they would like to have on their invoices. “Sometimes the owner gives us an invoice template,” says Bernard. “I attach this invoice to the sub-consultant agreement so that the sub-consultants can see how the information they provide to me is in turn provided to the client.” You can use this same method to establish the invoicing details that you would like to see on the sub-consultant invoices for your own information. Make sure that the information desired by the client is something that your office can reasonably deliver.

What does your invoice say about how you run your business? Your invoice should be carefully thought out to present relevant information clearly, including any desired actions - such as what to pay and when to pay it.

Define a Billing Timetable

Along with format, the architect must set forth clear invoicing timetables with both the owner and the sub-consultants in a way that allows them to mesh together smoothly. These timetables should be written into the contract which is agreed upon and signed by all parties.

You’ll have to establish clearly with the owner questions such as:

• By what date should the invoice be received?
• Who should receive a copy and do they need it electronically or in paper form?

“If we’re about service, then this attention to detail is part of that service,” says Bernard.

On the other end, you’ll have to set a timetable for the sub-consultants as well, ideally arranging to receive their invoices a few days before you have to invoice the owner. If they miss their deadline, they’ll have to wait another month to get paid, but that’s their problem.

For example, suppose that the owner establishes that he needs to have the invoice by the 7th day of the month in order to send remittance within 30 days. You might determine that your bills need to be done, approved, and sent out by the 5th calendar day. Your sub-consultants, in turn, will need to get their invoices to you by the 2nd or 3rd calendar day of the month. If it’s too much of a hardship for them, then you, the client, and the sub-consultant will need to propose some mutual arrangement that works for everyone.

The chain of dependency spans from contract terms, through hours worked, and finally to payment received. If any one of these links is weak, the remaining transactions may be delayed or absent.

A simpler practice might be to make a point of getting your invoices out within the first 5 calendar days of the month. “By establishing clear timetables for all parties, you won’t be late because of lagging sub-consultants,” notes Bernard. “You don’t want to be held up in your billing and end up holding the bag for everyone else. Every day that you delay will cost you money because you’re essentially giving the client a loan. Don’t do that.”

If you delay billing on your end, but the sub-consultants bill YOU on time, you’ll be on the hook twice.

When people are asking YOU for money, and you don't have the cash, that's known as a negative cash-to-cash cycle. Make sure you can collect from your clients before you have to pay your own vendors and consultants.

What to Tell Your Bookkeeper

“Don’t forget to give your bookkeeper all the information about timetables, roles, and billing formats for each account. You could have different billing arrangements with each client, and it’s very important for the bookkeeper to have that information prior to issuing invoices, especially if your bookkeeper works offsite and only comes in a few days every month.”

You don’t need to give your bookkeeper the full legalese in every contract, but that person does need to know the basic fee structure and billing agreements that are in place. “Make sure your bookkeeper has a project information sheet for every project: name, address, billing address, other contact information, and terms of payment.”

Which Fee Structure is Best?

Before we go into this, one note to make is that the American Institute of Architects does not allow its members to discuss and compare specific fee rates. Even hypothetical examples can be an issue, so we’ll have to be vague on actual numbers here. Having said that, there are several common fee structures for private residential work, and no one method is best in all cases.

Fee as percentage of construction cost. Some architects like this, some don’t. Basically the architect’s total design fee is specified as a percentage (which can vary) of the construction cost. In early design phases, the cost of construction is of course an estimate. Upon project completion, this estimated cost is reconciled with actual construction costs. It’s up to the architect to figure out how to allocate and track this fee across the project so that the design budget doesn’t get consumed too early.

Hourly fee only. For some projects an hourly Time & Materials agreement with a fee schedule for different types of staff is acceptable.

Hourly fee with not-to-exceed limit. The architect is responsible for monitoring fee usage in order not to exceed the budget. Part of this is keeping the project within scope, and informing the client immediately when some requested design change would impact the design fee, or other project costs.

Additional Services

For fixed-fee projects, how do you communicate clearly when a specified service or task is not part of the base fee – PRIOR to its appearance on the bill? It seems to me that this information should be conveyed directly to the clients at the time that they make the request of the architect.

“Get a letter of acknowledgment from the client,” says Bernard. “Either send them an email formally advising them that the task will involve an additional fee of an estimated amount, and request from the client for authorization to proceed. Don’t start until you receive this authorization. Then, on the next invoice, itemize each of these tasks.” For example, an additional shade study or extensive meetings with the neighborhood association above and beyond what might be specified in the base contract could be considered as an additional service.

Use the Invoice as a Communication Tool

I asked Michael Bernard how to keep clients from being unpleasantly surprised by their invoices. How do you prepare them for the fact that different design phases may involve different levels of effort and possibly different fee amounts? Is that something that gets plotted out in monthly billing projections so that private clients can do their own personal budgeting, which may include freeing up needed funds from other sources?

Bernard didn’t recommend using assumed calendar durations to calculate exact fee projections, because the duration of a design phase can be somewhat uncertain, especially if agency approvals are involved. However, projected or non-binding estimates of a monthly range of fee that clients can expect, by phase, is helpful, as long as it’s not tied to the calendar.

Communicating with your clients helps shape their expectations and their understanding of value. Your invoice is one part of an ongoing communication whereby you demonstrate the value of your services.

“Walk the client closer to paying on time by giving good information. We need to increase our value with our clients as service providers, and part of providing good service is to show a clear-headed understanding of money. Sometimes clients can’t understand every design issue, but they CAN understand money, so make that area your common ground.” This includes treating our clients’ money as if it were our own.

Don't view your clients as cash cows to be milked. They'll spot that sooner than you think.

What Should Be Shown On the Invoice?

Getting the right level of detail on an invoice is important. Too much line-item detail just invites a nickel-and-dime approach on the part of the client, who may dispute hours worked without understanding the design need for those hours. Part of this is conveying the principle of design as a service rather than a product. Another part is telling a clear story, so that it’s easy to follow how each subtotal figures into the invoice. And, finally, the invoice should present clear instructions for remittance – how much and when.

“Avoid tying the release of deliverables to your fee,” advises Bernard. “Don’t lose control of the link between services and fees.”

OK, so what should be on the bill, then? “If the fee is set as a lump sum fee billed as a percentage of construction, then it’s just the fee with no detail. If the fee is hourly with a cap, we may want to provide detail, especially regarding project changes that cause us to exceed the fee,” says Bernard. As stated earlier, these additional services should not come as a surprise to the client – get an authorization to proceed by task before billing for additional services. If you need to show fees allocated across design phases, then you might need to include the design phase (or phases) on the invoice for work performed, even for fixed-fee arrangements.

If your fee agreement is straight hourly, your invoice will be a diary of work performed and, as such, can be a useful tool for both you and your client. For the architect, it allows them to communicate the value of their services to the client. In fact, good invoicing is a diary of the project, regardless. The issuing of invoices is a project activity just as are submittals or deliverables to the client. Having clear and consistent invoices is an important part of the project record – what was billed, when, what was paid, etc.

Other details on what information should be presented should have been worked out earlier, in the initial contract. Some architects will show things like fees spent vs. fees remaining, or provide separate summaries on each invoice showing just the total fees billed to date – not including reimbursable expenses.

Details Matter

“Always review every invoice before it goes out,” cautions Bernard. “Your clients will expect you to know what’s on those bills whether you really do or not.” Invoices with too many typos create an unprofessional impression, and if there are any errors in arithmetic, charges, or line items, you’ll have some explaining to do. Even if it was someone else who made the error, like your bookkeeper, the buck still stops with YOU.

Not All Hours Are Billable

If you’ve agreed to a fixed fee but you bill monthly by T&M, you could get a lot of questions from your clients, especially if you don’t do a good job of allocating resources internally, and you are bent on billing out every hour of staff time to “reduce overhead”. The client isn’t responsible for your failure to budget for your own operations.

Visibility Into Your Own Operations

“All firms should have a billing system that is NOT Excel!” Bernard and I discussed the various merits of QuickBooks and ArchiOffice. (I’d used ArchiOffice at my last position and loved it – even for a small firm it paid for itself the first day we ran our bills on it, and it simplified reporting and timekeeping by a magnitude of 100.)

"All firms should have a billing system that is NOT Excel," advises Michael Bernard. Shown here is ArchiOffice, a system that I used at my last firm. Yes, I'm shamelessly promoting a piece of software - for free.

I think my question was about how much information a small firm really needed about its own operations, if they’re not doing Federal work. Is it worth it to do complex profitability analysis or corporate-level financial reporting? “You need to know what your expenses are. Where do you spend money, and what is the profitability at staff level for each project?”

A real billing system simplifies timekeeping and timesheet entry, and it also does something even more important: real-time information on project budget and hours used. “If your project is over budget, you can trim your effort in a timely manner, instead of continuing to put forth the same level of effort only to find out you should have cut back a month ago.”

“In terms of overall billings and expenses, you should know: what your target is per month, what you earn, and what you spend,” says Bernard. Not all billing systems will include full operational features for internal expenses and payroll, so you’ll need a general accounting system to provide and manage this information.

The Cost of Delays

What does it actually cost you when you are late getting your bills out, or when clients are late in paying? “When payment is delayed, you’re essentially lending the client money. How much does it cost you to tap into your line of credit?” Of course if bills don’t go out at all, payments will never come in. Unbilled but billable staff time is not money in the bank, as some people might fondly believe. It’s money OUT of your pocket.

Questioning an Invoice

Sometimes a client will question an invoice. Here again, a clearly written contract that’s signed by everyone is your best ally. You should be able to refer back to the contract to identify how a billing number was arrived at, and where it fits in with the total agreement. New clients may need to understand that a retainer is not part of the fee until the end of the project.

“Use contract language to establish how much detail to provide on the invoice,” reminds Bernard. “If we establish in the contract that we don’t provide detail, then they shouldn’t be demanding this detail as a condition of payment. If we do, then any hours we spend on gathering the reports they need should be billed as T&M as an additional service.”

Can you bill your bookkeeper’s time for additional reporting? Yes, if it’s already in the contract. But do people actually exercise this option? “Probably not. But it gives you leverage. Think of this as a mini-exercise, a strategy to facilitate an ongoing design dialogue… how we manage fee transparency should be the same process as for design discussions.”

It is very hard not to feel put on the defensive, especially with a demanding but uninformed client. It may signal a lack of trust, and that may not necessarily be your fault. But if you really have nothing to hide, then you will be able to respond to even the most irate questions with calmness and courtesy.

"What's this on my bill?" We believe that a calm and courteous demeanor is the best defense, along with scrupulous honesty.

In our next installment, we’ll go into strategies for collecting late payments.