How Interior Designers Should Invoice Clients

Invoicing is one of those things that feels like it should be simple. You did the work, you send a bill, the client pays. But in interior design, where you're often billing for time, goods, services from vendors, and your own expertise in sourcing, it's genuinely more complicated than most professions. And depending on your business model, how you structure all of those pieces can vary between hourly rates, different rates per project, flat project agreements, markups on goods, how taxes are handled, and reimbursable expenses.

Here's a practical look at how most designers approach it, and what to think about when building invoices.

There's no standard model, so it is ultimately up to the designer to determine which business model works best for different project types, client relationships, and how the business is run.

Hourly. In this model time is tracked and billed at a rate which can vary by task as well as team member, if applicable. While this model is the most straightforward and easy for clients to understand, the flipside is that it can be challenging for clients to have a sense of total estimated costs in advance, which in turn might make them more anxious about every minute spent. Providing an estimated range of hours can put some concerns at bay, which can be done by leaning heavily on past project experience. It almost goes without saying, but tracking is absolutely key to success with this model, do not leave time entry until the end of the week or you will inevitably wind up entering incorrect times.

Flat fee. With a flat fee structure, the designer and client agree to the project fee upfront, which can be paid in advance, based upon milestones, or on a consistent basis throughout the project. This model works well when the scope is tightly defined and there is clarity as to specifics for each step in the process. One of the keys to success rests on past experience to help in guiding price accurately, for both designer and client. If the project runs longer than you expected, you'll have to absorb that overrun. On the client side, they may wind up with a larger bill than expected, or feel that the designer simply wants to wrap up the project and move on to the next.

Markup on goods. Handling of goods is where interior design gets interesting compared to most service businesses. Designers often have trade accounts with vendors, which means they can purchase goods at trade pricing that isn't available to the general public. The markup, charged to the client on top of that trade cost, is how many designers generate a significant portion of their revenue, and is a widely accepted model in the industry.

Combinations. Most experienced designers use some version of multiple models depending on the project phase. Design and planning might be hourly or flat fee; procurement and goods marked up; and site visits or project management might be billed at different rates. For a discussion of structures, consider that the client may be new to these billing structures, and may ask, for example, why there should be a markup on goods as opposed to just an hourly rate for the designer's time.

There's a wide range of approaches to markups on goods. Some designers don't mark up goods at all, they pass trade pricing directly to the client and may compensate by billing at a higher hourly rate or flat fee for their time instead. Others share a portion of the discount, essentially splitting the trade savings with the client as a goodwill gesture while still generating revenue on goods. Most interior designers simply apply a flat markup percentage, commonly somewhere between 15% and 30%, with 20% being a common benchmark.

There's also the situation where a designer doesn't have a trade account with a particular vendor, or the vendor does not offer trade discounts, so the designer's rate is the same as retail. Markup is still possible in that case, the justification being the time and expertise involved in sourcing, coordinating, and managing the purchase, which has value independent of any discount and is one portion of the total fees. The trickier dynamic is when a client can look up the same item online or in-store and see the retail price themselves. This is an increasingly common situation, and designers handle it differently, with some choosing not to mark up retail-priced goods for exactly that reason, while others hold their standard markup and are comfortable explaining that their fee reflects the service, not just the item.

None of these is the objectively right answer. What you charge tends to come down to the market conditions, competition, your experience level, client relationships, and what feels sustainable. Newer designers may start with no or lower markups and adjust over time as they understand what the market will bear.

What matters operationally is that your invoicing system gives you flexibility. The system you select should allow for different markups based upon client, per project for any specific client, and even allow for adjustment at the item level as situations require. Likewise for time, if there are team members who work at different rates, or you charge differently for your own time depending on the role you're playing (principal designer vs. site supervision, for example), you need to be able to set those rates at a granular level.

Designers have a reasonable range of approaches to how much detail they share with clients on invoices. There's no obligation to show your trade pricing or itemize exactly what you paid for an item. Many designers prefer not to, and that's a legitimate business decision, your sourcing relationships and what you paid are part of what you bring to the table.

But even when not sharing trade pricing, the clarity that comes with breaking things out goes a long way. A well-organized invoice that separates time from goods from reimbursable expenses reduces ambiguity, making a document that the client can easily understand and pay more quickly than otherwise.

Taxes are one of the most important things to get right, and an area where a lot of invoices fall short. Not everything on a design invoice is taxable in the same way, and how you structure your invoice can affect how much sales tax applies, whether components need to be broken out separately for the client's accounting, and whether you're handling your own obligations correctly. Always confirm with a tax professional around the requirements for your specific situation.

Goods (physical products, furniture, materials): In most states, when you're selling physical goods to a client, even as part of a broader design engagement, the transaction typically requires sales tax on the goods themselves.

Design services: In many locations, professional services like design, consulting, and project management are not subject to sales tax, while in others, they are. Make sure to confirm how your state treats these services, and always check with a tax professional if you have any doubt, getting the details right from the start will avoid revised documents, rate adjustments, client questions, and issues with tax authorities down the line.

Reimbursable expenses: If you paid for something on behalf of a client, travel, permit fees, delivery charges, filing costs, and you're billing it through at cost as a reimbursement, those often carry different tax treatment than goods or services you're reselling directly. The client is essentially paying you back for an out-of-pocket expense, and that reimbursement is often not subject to additional markup or tax. But as with many areas, it depends on the specifics and your state.

Some states have specific rules around the structure where a designer purchases goods as an agent on behalf of a client rather than reselling the goods to the client. In California, for example, if you're acting as a purchasing agent, meaning the client has authorized you to buy on their behalf and you're not taking title to the goods yourself, the transaction may be treated differently for sales tax purposes than a typical resale. The California Department of Tax and Fee Administration has guidance on this. If this situation applies to your business, it's worth getting specifics from a tax professional who works with designers and other creative professionals.

The takeaway is that whatever tool you select should make it easy for both you and your client to see what falls into which category on the invoice. By having time, services, goods, and reimbursable expenses clearly labeled and separated, the client will be better able to review the information and submit payment quickly. If the invoice mixes different categories together and doesn't distinguish between taxable and non-taxable items, the result will be questions from clients, from their accountants, and potentially from tax authorities, causing delays in payment or possible penalties later.

Interior designers should find a system that meets their needs, not too big, not too small, with the minimum requirements of:

Tracked time by client and project flows directly into invoices, and does not require you to reconstruct information manually from spreadsheets.

Handles goods and materials separately from services, with the ability to apply markup at whatever level you need, per client, per project, per item.

Categorizes line items clearly, time, goods, expenses, reimbursables, so the invoice is easy to read and the tax treatment is clear.

Lets you set different billing rates for different team members and different types of work.

Gives you a quick view of what's been sent, what's been paid, and what's outstanding, without having to click into every invoice or log into bank accounts to confirm.

Supports online payment so clients can pay by credit card or bank transfer directly from the invoice. Payments have costs attached, so there will be fees for whatever app you select, the best tools let you choose whether to absorb those processing costs or pass them through to your clients.

The end goal is an invoice that is professional, easy for your client to understand, and takes as little time as possible to produce and send. Any time you spend creating and tracking invoices is taking you away from running your business and generating more revenue.

There are an incredibly wide range of apps available that allow users to manage the combination of time tracking, goods, and categorized expenses in one place. At Track and Invoice we made the decision to focus on the needs of small business owners to quickly and easily invoice their clients, and save valuable time to focus on building their business.