CVW News 2nd Quarter | 2025

Table of Contents

Revenue-Driven Best Practices for Interior Design Firms

As accounting professionals working with interior design firms, we often see patterns - what works, what creates confusion, and what helps drive and protect profitability. Below is a roundup of best practices shared by our leadership team during a recent discussion, focused on operational clarity and long-term business health.

Retainers: Keep Them Separate & Use Them Wisely

Many firms are choosing to hold retainers until the final invoice, rather than applying them at the beginning of a project. This helps maintain security throughout the client relationship and provides a layer of protection if timelines shift or scope changes.

“Retainers give you leverage,” Caroline noted. “They’re your safety net. If a project runs off track or a client walks away, you’re protected.”

We also recommend tracking retainers separately from deposits. This separation provides better clarity for financial reporting, simplifies reconciliation and tracking, and prevents confusion during tax season. Here’s how you can do it in Studio Designer.

Freight Management: Streamlining for Simplicity

Freight costs often eat into profits, but there are some practical solutions. Many firms have moved away from itemizing every freight charge, opting instead for a flat freight percentage or freight management line item on invoices.

In most cases, we recommend using a fixed freight percentage instead of itemizing each charge, which simplifies billing, reduces administrative overhead, and ensures designers aren’t losing money.

CVW's Kati Jerde shared her own experience, saying, “Some of our clients have a dedicated freight management line item. It’s been a game-changer in terms of efficiency and transparency.”

This approach not only saves time but also improves profitability. Many firms are now adopting a flat “white glove delivery fee” of around 15% - typically based on product cost - instead of itemizing and marking up individual freight charges. This model covers the full scope of logistical work, from procurement to final delivery, while clearly communicating the value of the team managing these often complex and time-consuming tasks. It also reduces the effort spent reconciling charges, supports cleaner billing, lowers the risk of under-recovering costs, and streamlines both operations and reporting.

Revenue Practices: Position for Profit

Growing a financially healthy firm doesn’t just come from cutting costs—it starts with strong revenue practices. Here are some of the strategies we see working best:

• Target High-Value Clients: Firms that thrive are intentional about who they work with. Ideal clients value your expertise, are less price sensitive, pay on time, and understand the value of the work beyond just aesthetics.
• Implement a Clear, Profitable Pricing Model: One size rarely fits all. We recommend firms evaluate which pricing model supports their workflow and profitability goals:

1. Hourly: You're paid for your time, which can work well for open-ended or consulting-style engagements.
2. Flat Fee: You're paid for your value, often based on defined deliverables.
3. Square Footage or Project-Based Pricing: Best suited for firms who have clearly defined scopes and efficient processes.

Pro-tip: We suggest reviewing Studio Designer's Pricing Guide for a breakdown of pros and cons associated with each pricing model.

• Establish a Clear Project Budget (Know Your Project Profitability): Successful firms price with intention. Your budget should factor in:

1. A cushion for unanticipated costs
2. Reasonable time delays
3. Direct costs (employee time, procurement, drawings, etc.)
4. Overhead allocation (admin salaries, software, bookkeeping, etc.)
5. Expected tax liability

• Optimize Time Management: Designers only have so many billable hours. High-performing firms streamline workflows, reduce inefficiencies, and focus their energy on high-impact activities. This means saying no to low-margin work and yes to systems that support growth.
• Leverage Technology: Automations and integrations within your project management, accounting, and procurement tools not only save time but also reduce error and help your team stay focused on design.
• Collaborate with Industry Professionals: Designers who regularly collaborate with architects, builders, stylists, and consultants tend to unlock greater opportunity. These partnerships can lead to referrals, smarter workflows, and even new revenue streams.

Review Your Data, Adjust Your Rates

Design work involves far more than product selection. Firms that clearly outline services like project management, delivery coordination, and installation tend to have healthier client relationships and fewer billing disputes.

It’s also becoming more common to:

• Charge higher rates for clients using their own credit cards or vendors, due to added coordination.
• Implement retail markups that reflect both time and value.
• Choose clients who align with their firm’s communication style and process.

We encourage firms to clearly communicate their full scope of services and to adjust fees accordingly, especially when clients use their own payment methods or vendors.

We always recommend that firms review and analyze their financial data regularly. Look at what’s working (and what isn’t) with freight models, hourly rates, markups, and discretionary spending.

“If your rates haven’t been updated in over a year, they’re probably too low and cutting into your margins,” says CVW's Kathy Powers-Risner. “Reviewing rates regularly and making modest increases helps ensure your pricing keeps pace with inflation, your growing expertise, and the rising costs of doing business.”

Pro-tip: Take a moment to review the financial comparison charts provided by your Accounting Manager each quarter. These visual trends can reveal what’s propelling your firm forward, and where there may be opportunities to improve.

Final Thought: We’re sharing these insights not as one-size-fits-all rules, but as tools to help you evaluate what works best for your business. If you’re planning any updates to your operations, rate structures, or billing practices this year, we hope these ideas offer a helpful reference point.

Interior Designer Sales Tax Series Part 2 of 4 | Understanding Sales Tax Nexus for Out-of-State Sales

Sales tax is often a topic that prompts questions among interior designers. And we don't blame you. No business owner wants to get it wrong and risk tax audits and/or penalties.

For an overview of the basics of re-selling and related sales tax, see this blog post. And to dig into the particular sales tax rates you need to charge your in-state clients, read here.

Another complex topic that needs to be tackled is how and when to tax out-of-state clients and purchasers.

A few situations may apply:

1. A design business owner may have an e-client they are designing for, and the project may involve the sale of products and materials that are shipped to that client's location in a different state.
2. Or, a designer may operate a business near a state border and have clients that live in an adjoining state.

Whenever a business owner is selling to a consumer in another state, the business owner is considered a remote seller, and a few questions are relevant:

• Have I established Nexus in a particular state?
• Does sales tax need to be charged to my out-of-state client/purchaser?
• Do I need to get a sales tax permit in another state, if I have clients in that state? AND
• What rate of tax is appropriate for this remote purchaser in a different state, in a different sales tax jurisdiction, and with a different state sales tax rate?

We will try to answer all of those questions here.

What is Sales Tax Nexus?

The overriding answer to the questions above is: Yes, you need to collect sales tax from customers in any state where your business has sales tax NEXUS provided you reach that state's NEXUS threshold.

What is nexus?

Physical nexus means a business has a physical presence in a state: they have an office, studio, warehouse, or some other brick-and-mortar space. As an interior designer, you have a physical presence in the state where you operate your business. So, yes, you charge and collect sales tax to customers in that same state. We're all used to that, but may not have been thinking of it through this nexus.

Economic nexus is a bit more complicated. Economic nexus applies to a state where you do not have physical nexus (meaning you don't have an office there), but you do business there, because you have clients located in that state. Each state has slightly different economic thresholds for establishing economic nexus. But when (and only when) sales to customers in a different state reach a certain threshold through sales, transactions, or revenue generated, will the seller need to start charging, collecting, and remitting sales tax.

A state's economic nexus threshold can be either monetary-based (cumulative value of sales made to customers or revenue generated in that state) or transactions-based (quantity of sales transactions made to customers in that state). AND, to add to the complexity, a state may change its thresholds over time. There has been a trend away from transaction-based thresholds in favor of more monetary-based nexus thresholds in recent years.

This chart, from the Sales Tax Institute, summarizes the economic nexus thresholds for each state.

Looking at Some Examples of Economic Nexus per State

So, let's look at some examples of economic nexus thresholds from a few states.

If you are selling to clients in the state of Michigan (and you yourself don't have physical nexus in Michigan, that is, those Michigan clients are remote, or out-of-state clients for you because your physical office is in another state), your economic nexus will kick in after you have made $100,000 in cumulative retail sales to clients in Michigan OR after you have had 200 or more separate sales transactions to clients in Michigan, whichever is achieved first in the previous calendar year. Either one of these two threshold options needs to be met for economic nexus to exist.

Some states dictate the previous calendar year as the measurement timeframe to be considered. Other states stipulate a preceding 12-month period. This stipulation can be tricky. If you are making a lot of out-of-state sales to clients in one of these states, you may need to monitor your sales to clients in that state on an ongoing quarterly basis to see whether you have reached the threshold in a preceding 12-month period.

Click here for the full article, including out-of-state seller responsibilities and seller reporting requirements in specific states.

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