The Deposit Trap: Managing Client & Vendor Cash Flow Without the Chaos
In this video, you’ll learn how to manage the financials of your design firm with precision and clarity.
If you've ever struggled with tracking client and vendor deposits, managing work in progress (WIP), or reconciling invoices, this discussion will provide the practical steps you need to take control of your project finances. In this conversation, we break down the key financial tools and workflows that will transform your approach to project accounting and boost your firm’s financial health.
Julia Nikishina, Founder of New Age Financial Consulting, is renowned for her expertise in accounting and financial strategy in the design-build space. With no fluff, Julia shares exactly how top-tier firms structure their financial processes, manage deposits, and build scalable accounting systems that offer full transparency.
Inside this session, you’ll learn the real-world practices that help high-performing firms master their finances:
Client Deposits and Financial Transparency
Julia explains why properly tracking client deposits is critical for managing project cash flow and preventing surprises. Learn how to move funds between client deposits, revenue, and project costs, and how to ensure your balance sheet is always accurate.
Vendor Deposits and Prepayments
Understanding vendor deposits can be tricky, but Julia breaks down how they represent prepayments for items tied to purchase orders. She also demonstrates how vendor deposits should be managed as part of your accrual process, and how to use vendor deposit reports to avoid mismatches or financial gaps.
Mastering Work in Progress (WIP)
WIP is an essential tool for tracking un-invoiced work tied to purchase orders. Julia takes you through the different ways you can track work in progress and explains how WIP reports give you clear insight into your ongoing projects, ensuring you can close out projects with confidence.
Invoice Management and Clearing Deposits
Learn why invoicing is key to releasing both client and vendor deposits, and how to use the right reports to ensure no work or funds are left hanging. Julia highlights the importance of clearing WIP and vendor deposits through proper invoicing and accounting.
Practical Reporting Tools for Better Oversight
Julia introduces you to several reports that high-performing firms use to maintain control over project finances. From vendor deposit reports to payment application reports, you'll gain the tools to track deposits, payments, and project status in real time. These reports help you stay on top of deposits, client balances, and vendor payments, ensuring financial accuracy at every step.
Closing Projects Efficiently
Closing a project involves more than just collecting payments. Julia walks you through how to ensure all deposits are accounted for, work in progress is invoiced, and financial reports are accurate before wrapping up any project.
Keeping Clients Informed with Financial Transparency
A key part of managing client relationships is ensuring they understand where their money is going. Julia shares how to create transparent, easy-to-read reports for clients that show the movement of funds, helping you foster trust and clarity while managing client expectations.
This session is a must-watch for any design professional who wants to streamline their accounting practices, improve cash flow management, and gain the financial insight needed to scale their business.
You’ll walk away with actionable strategies that will give you greater confidence in managing deposits, invoicing, and project finances.
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Managing client and vendor deposits, along with work in progress (WIP), can feel overwhelming at times, but when you understand how these elements come together in your accounting system, everything becomes clearer and much more manageable. In this discussion, we walk through how to handle these deposits, the balance sheet, and how to keep your project accounting on track in Studio Designer. It’s not just about numbers—it's about keeping your financials healthy and your projects running smoothly.
Let’s start with client deposits. These are funds that clients pay upfront for products or services, often tied to proposals or items in your system. On the balance sheet, client deposits show up as liabilities. This is because, depending on your contract terms, you might need to return those funds to the client at some point. The key is to track and move this money correctly: once work is completed, you can transfer the deposit into revenue or client payment. When a project closes, it’s essential to make sure any remaining deposit balances are cleared out, which is why the Client Deposit Report is crucial. This report tracks all available funds, and it should always match your general ledger. It’s your safety net when you’re closing out a project to ensure you’ve invoiced everything properly and cleared out all deposits.
Now, let’s talk about vendor deposits, which work similarly to client deposits but on the opposite side of the equation. Vendor deposits are prepayments made to vendors for products or services you’ve ordered but haven’t been invoiced for yet. These deposits are also liabilities, as you’ve paid upfront for goods or services, but the vendor hasn’t delivered on their end yet. The Vendor Deposit Report helps you keep track of prepayments made to vendors. This report shows you which vendors have deposits tied to un-invoiced items, and once a purchase order is invoiced, that vendor deposit is “relieved” and properly applied to the financials. It’s important to understand how these deposits affect your Work in Progress (WIP) report, which we’ll get to in a second. But essentially, when you make a vendor prepayment, it lives on your books until the vendor’s invoice comes through, at which point the funds are properly accounted for.
Which brings us to Work in Progress (WIP)—the status report that tracks the progress of your projects. WIP shows all items that have been started but haven’t been invoiced yet. This includes any vendor deposits that haven’t been relieved, as well as client deposits that haven’t been moved into revenue. If an item is ordered through a purchase order but hasn’t been invoiced, it’ll appear in both your WIP and vendor deposits. Keeping an eye on this report is essential, as it helps you track everything in the pipeline and avoid surprises down the line. It also allows you to see if any items are stuck in limbo, whether due to missing invoices or deposits that need to be applied. Before you close out a project, it’s vital to check the WIP report to make sure that everything’s been invoiced and that both client and vendor deposits are being moved correctly.
The process of invoicing and applying payments is the next key piece of the puzzle. Payments from clients are applied to proposals, and once you’re ready to invoice for an item, the funds are moved into revenue. But here’s the catch: to move from WIP to finalized revenue, you need to invoice those items. If you skip this step, the deposits will stay in either the vendor or client deposit category, which means they’re not properly reflected in your financials. If you make any mistakes with posting deposits, like incorrectly posting a vendor deposit, the suspense account can help you move those funds around and fix any discrepancies. Think of it as your safety net when things don’t go as planned.
When it comes to tracking all of this, several reports will be your best friends. The Payment Application Report shows you all client payments and how they’ve been applied to proposals or moved between items. This is an excellent tool for tracking money flow and ensuring everything matches up. The WIP Report, on the other hand, helps you track items that are still in progress—anything that’s been started but hasn’t been invoiced. This report is especially helpful when closing out a project, as it shows everything you need to finalize and invoice.
One of the most powerful features of Studio Designer is the ability to customize reports. You can filter them by client, item, or date, depending on what information you need. Some design firms also send their clients reports showing the movement of money in and out of items. This helps keep clients informed about how their funds are being used, including any overpayments, underpayments, or refunds. Transparency in these financial matters builds trust and can help prevent misunderstandings.
Best practices when managing deposits and closing out projects are simple but crucial. Always double-check both client and vendor deposits, along with the WIP report, before finalizing a project. Make sure everything has been invoiced, and that any deposits have been correctly applied to the appropriate revenue or costs. Additionally, whenever you’re working with vendors, ensure that there’s always an order tied to any deposit to avoid mismatches or accounting issues. And don’t forget to regularly monitor deposits and WIP, especially during year-end or when wrapping up a project, to make sure everything aligns and is accounted for properly.
In conclusion, client deposits, vendor deposits, and work in progress (WIP) are all interconnected in the Studio Designer system. By keeping a close eye on these elements, invoicing properly, and reviewing the relevant reports, you ensure that your financials are accurate and your projects stay on track. The reports you use, such as the client deposit and vendor deposit reports, as well as the WIP report, are invaluable tools for understanding your project’s financial health. With these in place, you can confidently close out projects, track client and vendor funds, and maintain financial transparency for both you and your clients.
