You’ve had your business long enough to know that a “cash flow crisis” doesn’t just disappear on its own. 

We’ve seen it firsthand— businesses had to shut their doors this year because they ignored the signs of a cash flow crisis until it was too late.

For interior designers, cash flow is especially tricky. Your income is project-based and irregular, expenses can pile up quickly, and it’s all too easy to assume that as long as the bills are paid, everything’s fine. But that’s not always the case.

The truth is, most business owners think they have their cash flow under control when, in reality, they’re just one mistake away from disaster. A recent report from Relay, The Cash Flow Compass, revealed that 91% of small businesses experienced cash flow issues in the last year. For many, it wasn’t just stressful—it was a breaking point.

We’re going to dive into the warning signs of a cash flow crisis and some helpful next steps if you identify that you’re heading towards a crisis. 

The Danger of Overestimating Cash Flow Control

Most business owners overestimate how well they’re managing cash flow. They assume they’re in the clear as long as their bank account has money. 

But here’s the reality:

• 95% of business owners check their bank balance before making financial decisions. They log in, see a number, and base spending decisions on that figure alone. What they’re not considering are pending expenses like payroll, subscriptions, or vendor invoices that haven’t cleared yet.

   

• 31% of businesses missed major payments in the last year. Often, the first sacrifice is owner’s pay. You might be covering your expenses, but if you’re not paying yourself, how sustainable is your business?

   

• 71% of business owners say cash flow problems have impacted their health. Anxiety, burnout, and sleepless nights are common symptoms of cash flow chaos.

For interior designers, these challenges are magnified by the irregular nature of the industry. Projects can take months to complete, and payments often come in stages. It’s easy to get caught in a cycle of chasing money while struggling to pay bills.

Why Traditional Cash Management Fails Interior Designers

Relying on a single bank account for your business is a recipe for confusion. When all your money sits in one place, it’s impossible to know what’s truly available for spending. You might think you have enough to cover new office furniture or marketing expenses, only to realize you don’t have enough for payroll next week.

This method also masks the real problem: You’re either not charging enough, spending too much, or both. Without a clear picture of your cash flow, you’ll struggle to know which one it is.

The good news – there’s a better way. 

Profit First: A Better Way to Manage Cash Flow

Profit First is a cash management system designed to take the guesswork out of your finances. Instead of relying on one big account to manage everything, you create multiple accounts—each with a specific purpose, such as:

• Profit
• Owner’s pay
• Taxes
• Operating expenses

Here’s how it works:

1. Allocate Revenue Weekly
   Every week, you’ll distribute the income you’ve received based on the predetermined percentages. For example, 10% might go to profit, 15% to owner’s pay, 20% to taxes, and the rest to operating expenses.
2. Spend Only What’s Allocated
   Each account acts like an envelope. If there’s $5,000 in your operating expenses account, that’s all you have to spend. You can’t dip into your payroll or tax accounts to cover a shortfall.
3. Gain Immediate Clarity
   This system makes your financial situation crystal clear. If there’s not enough in your operating expenses account, you immediately know something’s off. Maybe your pricing is too low, or maybe you’re overspending on unnecessary tools or subscriptions. Or you may simply need to wait until you receive a few paid invoices before planned expenditures.

What Happens When Interior Designers Use Profit First?

We’ve worked with interior designers who implemented the Profit First system, and the results are always eye-opening. When they moved their money from one consolidated account to multiple accounts, they gained clarity about their spending habits—and why they weren’t paying themselves.

Here’s what happens when you adopt Profit First:

• You See the Problem Clearly
  Many business owners don’t realize they don’t have enough operating cash until they start using Profit First. It’s no longer buried in a confusing financial report—it’s staring them in the face. If the operating expenses account is empty, you have to ask tough questions:
• Are clients not paying on time?
• Am I undercharging for my services?
• Am I spending too much?
• You Take Action
  Once you have clarity, taking corrective action becomes easier. You’re no longer guessing—you have a black-and-white view of what’s wrong and can start making changes.
• You Stop Sacrificing Owner’s Pay
  Profit First ensures that owner’s pay is a non-negotiable part of your budget. If you’re not paying yourself, your business isn’t sustainable – or it’s just a hobby. This system forces you to prioritize your financial well-being, just as you would for your employees or vendors.

Why Interior Designers Are Prone to Cash Flow Crisis

Interior designers face unique challenges when it comes to cash flow:

Project-Based Income
Projects often involve large upfront costs and long timelines. Payments may be split into multiple phases, leaving you to float expenses for weeks or months before getting paid.

Irregular Expenses
From purchasing materials to hiring subcontractors, expenses can vary wildly from one project to the next. Without a system to allocate funds, it’s easy to overspend.

Underpricing
Many interior designers undervalue their services, leading to thin profit margins. If you’re not charging enough to cover your expenses and pay yourself, no amount of budgeting will save you.

Profit First addresses these challenges by forcing you to allocate funds intentionally and ensuring that every project contributes to your profitability.

How to Avoid a Cash Flow Crisis in Your Interior Design Business

If you’re ready to take control of your cash flow, here are some steps to get started:

1. Evaluate Your Pricing
   Are you charging enough to cover your costs, pay yourself, and generate a profit? If not, it’s time to raise your prices.
2. Implement Profit First
   Set up separate accounts for profit, owner’s pay, taxes, and operating expenses. Allocate income into these accounts as soon as it comes in.
3. Track Your Spending
   Review your operating expenses regularly to identify areas where you can cut back. Cancel subscriptions you’re not using, negotiate better rates with vendors, and avoid unnecessary purchases.
4. Hold Clients Accountable
   Late payments can wreak havoc on your cash flow. Implement clear payment terms before the project begins, and follow up promptly on overdue invoices.
5. Plan for Taxes
   Don’t let tax season catch you off guard. By setting aside a portion of every payment for taxes, you’ll have the funds ready when it’s time to pay.

Cash flow problems are the result of choices – conscious and automatic – you make in your business. Whether it’s underpricing your services, overspending, or failing to track your finances, the good news is that you can fix these issues with the right approach.

Profit First is more than just a system—it’s a mindset shift that puts you in control of your money. By allocating funds intentionally and tracking your expenses, you can avoid the stress of cash flow crises and build a business that supports both your clients and your own financial well-being.

Don’t let cash flow problems ruin your interior design business. Take action today by talking with us at AccountSolve to create stability, clarity, and long-term profitability.