Manuel S.

Enverga University Foundation

An Autonomous University
College of Architecture and Fine Arts

Module 03, Lesson 01a

THE BUSINESS OF
ARCHITECTURE cafa@mseuf.edu.ph
(042) 710-2830
MSEUFCAFALC

PP113 – Professional Practice 03

 THE BUSINESS OF ARCHITECTURE
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A. FINANCIAL MANAGEMENT
1. FINANCIAL SYSTEMS
A. Establishing the practice
B. Establishing a financial system
C. Day-to-day financial management
 THE BUSINESS OF ARCHITECTURE:

FINANCIAL MANAGEMENT
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“CASH IS KING”
• is a colloquial phrase sometimes used in
analyzing businesses or investment portfolios. It
may refer to the importance of cash flow in the
overall fiscal health of a business.
• in all businesses, and architectural practices are
no exception– no matter how much profit you
make on paper, the practice will struggle for
survival if the cash doesn’t get to the bank.
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FINANCIAL SYSTEM
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ESTABLISHING THE PRACTICE

• Financial Adviser/Consultant
• Board finance comittee
• Initial cost resources
• the partners’/directors’ own money;
• borrowings, usually from a bank, but potentially from
other sources;
• a bank overdraft.
• Business plan (projections, source of income,
profits)
 THE BUSINESS OF ARCHITECTURE:

FINANCIAL SYSTEM
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ESTABLISHING THE PRACTICE

• The bank will be principally interested in three
things:
• when it is likely to get its money back;
• the degree of certainty that it will get it back;
• what return it will get on the money it is lending.
 THE BUSINESS OF ARCHITECTURE:

FINANCIAL SYSTEM
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ESTABLISHING A FINANCIAL SYSTEM

• A practice’s financial management system needs a
number of components:
• Long-term plan
• Annual business plan
• Monthly forecasting and monitoring
• Monthly management account
• Cash collection
• Bank reconciliation
• Weekly monitoring
• Daily monitoring
• Other reports (Annual audit,Tax, & Bank reports)
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FINANCIAL SYSTEM
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DAY TO DAY FINANCIAL MANAGEMENT

• Appointments
• Client credentials/records
• Financial reference
• Documentations
• Initial payments
• Payments
• Fees, method of compensation
• Payment schedule
• Architect’s Guidelines (UAP Doc. 210)
 THE BUSINESS OF ARCHITECTURE:

FINANCIAL SYSTEM
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DAY TO DAY FINANCIAL MANAGEMENT

• Key financial performance indicators
• Financial budgeting/reporting by project
• Resource allocation and budgeting
• Cash collection
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CONCLUSION
It is worth repeating the observation that, while making money is
frequently not the reason that architects go into practice, poor
financial control is often the reason they go out of business.

Profit is essential as it ensures the practice will continue to exist

and grow in the future, and sound financial management,
particularly in respect to collection of cash due, is of fundamental
importance.

It is also extremely important to take care about who the practice

works for – a client who is difficult to work with, who wants to pay
low (or no) fees and who is difficult to part from their cash for work
properly undertaken may well be a client not worth having, no
matter how good the design opportunity is.