BUSINESS MANAGEMENT 1

FINANCIAL
PLANNING
MANAGEMENT
 History and evolution
of finance

2010 2015 2020 2025

Reform Initiatives, The Assessment of Reform Continued Reforms, The Future Directions, A
Philippine government Progress, A review of the government recognized the midterm review of the 2024–
intensified its focus on PFM PFM reforms indicated that need for comprehensive 2028 roadmap is planned,
reforms, launching the only four out of eleven reforms, leading to the which will include a Public
Budget Reform Program and strategic goals set for the development of the Public Expenditure and Financial
establishing the PFM 2011-2016 period were fully Financial Management Accountability (PEFA)
Committee. achieved. This highlighted Reforms Roadmap 2024– assessment to measure the
the need for a more cohesive 2028. effectiveness of financial
approach to financial systems against international
management. standard
Short and
long-term financial
planning
Short-term financial planning typically focuses on
goals that can be achieved within one year. It involves
creating strategies to address immediate financial
needs and challenges.

Long-term financial planning looks beyond one year,

typically focusing on goals that span five years or more.
This type of planning is essential for achieving
significant life milestones and ensuring financial
security.
Financial Planning
Managemement in
Architecture
Financial planning is the process of
managing project costs, budgeting
resources, and ensuring funds are
used efficiently to complete a project
successfully.

Architecture is not just about

creativity, it’s also about managing
resources.

Poor budgeting leads to delays, cost

overruns, and unfinished projects.

Architects must balance design,

feasibility, and economic impact.
The Role of Architects in
Financial Planning Management
Architects must ensure project feasibility and
cost efficiency

Financial planning affects materials, labor, “A great design is useless if

and timelines it can’t be built!”
Good budgeting keeps clients satisfied and
projects on track.

Understanding finances helps architects work

with clients, developers, and contractors

Design Cost Feasibility Construction

Budgeting Study Execution
Concept Estimation
Project Budgeting
Estimating and allocating costs accurately
How Financial Planning
Affects Architectural Practice
Risk Management
Addressing financial risks like price
fluctuations and delays

Sustainable &
Cost-Effective Design
Choosing materials that balance cost and
longevity

Cash Flow Management

Ensuring funds are available at every stage

Long-Term Investment Thinking

Designing for efficiency and sustainability
Profitability analysis

Profitability analysis involves assessing whether

your architectural projects or business
generates enough revenue after covering all
expenses.

It serves as a financial assessment, revealing the

remaining profit once costs like labor, materials,
overhead, and other operational expenditures are
deducted.

This analysis provides valuable insights into the

strengths of your business, identifies the most
profitable projects, and highlights areas that
may require adjustments to enhance financial
performance.
 HOW TO DO A PROFITABILITY ANALYSIS?
1.Track costs 2. Calculate Revenue 3. Find the Profit 4. Assess Profit
Margins

Identify all project-related This represents the total Profit = Revenue - Costs Profit Margin = (Profit ÷
expenses, including software, amount billed to the client Revenue) × 100
materials, employee labor, for the project.
and overhead costs like
office rent.

1.Residential Villa Project 1.Residential Villa Project 1.Residential Villa Project 1.Residential Villa Project

Expenses: Revenue: ₱5,000,000 Profit: ₱5,000,000 - 1,500,000 (Profit) / 5,000,000

Labor: ₱1,500,000 ₱3,500,000 = ₱1,500,000 (Revenue) = 30%
Materials: ₱800,000
Overhead Costs:
₱700,000
Other Expenses: ₱500,000 2. Commercial bldg. Project
Total Expenses: ₱3,500,000
800,000 (Profit) / 8,000,000
2. Commercial bldg. Project 2. Commercial bldg. Project (Revenue) = 10%
2. Commercial bldg. Project
Expenses:
Labor: ₱3,000,000 Revenue: ₱8,000,000 Profit: ₱8,000,000 -
Materials: ₱2,000,000 ₱7,200,000 = ₱800,000
Overhead Costs:
₱1,200,000 A high profit margin
Other Expenses: indicates that the project
₱1,000,000 was both cost-effective and
Total Expenses: ₱7,200,000 financially rewarding.
INVESTMENT IN TECHNOLOGY AND TOOLS
Investing in appropriate technology and tools is essential for improving
efficiency, accuracy, and professionalism in architectural projects.

Utilizing the right resources not only speeds up task completion but also
enhances the quality of your work, making your services more attractive to
clients.
USEFUL TECHNOLOGY
TOOLS

Design and Modeling Software (e.g., AutoCAD, Revit,

SketchUp)

Rendering Tools (e.g., Lumion, V-Ray, Enscape)

Project Management Software (e.g., Trello, Asana,

Monday.com, Procore)

Cost Estimation Tools (e.g., RSMeans, PlanSwift, CostX)

Time Tracking Apps (e.g., Clockify, Harvest)

FINANCIAL MANAGEMENT

Managing finances is one of the key

responsibilities of architects who own or lead
firms. It helps them balance their design
responsibilities with financial stability.

They can ensure the firm's growth and

sustainability by effectively handling financial
resources.

Architecture is not just about design—it is also a

business. Like any other business, its main goal is
to generate and maintain profits.
PROFITS = REVENUE - EXPENSES

Good financial planning should always aim for a reasonable profit.

During difficult financial periods (called "lean years"), businesses may have
little to no extra savings. However, in highly profitable years, firms can set aside
up to 50% of their earnings as a financial reserve.

Investments should grow at a competitive interest rate, ideally matching the

bank’s standard rate plus an extra percentage that ensures a fair return.
 FINANCIAL PLANNING

Financial planning involves setting business goals and tracking progress

through reports to ensure those goals are met.

For a business to manage its finances effectively, it needs clear benchmarks to

compare its current status with its desired future status.

These benchmarks come from key business objectives, such as profit targets,
hiring plans, and the cost of delivering quality services.
 ANNUAL FINANCIAL PLAN
REVENUE PROJECTION STAFFING PLAN INDIRECT EXPENSE PROFIT PLAN
BUDGET

This estimates the expected This outlines the necessary This details the operational This establishes the desired
income from various staff and their associated costs that support the staff profit level and how it will be
projects. costs. and business activities, but achieved.
are not directly tied to
specific projects.
STRATEGIC
PLANNING AND
GROWTH TACTICS
 Importance of business plan

A well-structured business plan acts as the blueprint for success in

Foundation for Success architectural firms. It provides a clear roadmap, helping the firm
navigate challenges and capitalize on opportunities effectively.

It helps define the firm’s vision and mission, guiding decision-making

Strategic Direction: processes and strategic initiatives.

It enables the firm to optimize resource utilization, including staffing,

Resource Optimization: technology, and operational expenses, to maximize productivity and
profitability.

Risk Management and Adaptability: It helps identify potential risks and develop mitigation strategies,
reducing the impact of uncertainties.

The business plan serves as a communication tool for stakeholders,

Communication and Accountability: including employees, investors, and clients, ensuring transparency
and alignment of expectations.
 CORE FOUNDATION OF A BUSINESS PLAN
why the business exists and Details the specific steps and
what it stands for strategies to achieve the targets.

FUTURE
PURPOSE TARGETS ACTIONS
GOALS

long-term direction and Sets specific and quantifiable

aspirations of the business. goals to track progress.
Royal Institue of British Architects (RIBA) APPROACH
TO SUCCESSFUL ARCHITECTURAL PRACTICE
STRATEGY 1 STRATEGY 2
INTERNAL CAPABILITIES FIRST CLIENT-FOCUSED GROWTH

Assess financial Conduct industry

capacity research
Review staff Identify emerging
expertise client needs
Define core services Optimize workforce
Select projects that accordingly
align with the firm’s Develop
strengths competitive pricing
strategies

Strategy 1 starts with internal evaluation and ensures the firm operates within its capacity.
Strategy 2 begins with market demand and adapts the firm’s resources to meet client expectations.
TACTICS FOR FINANCIAL GROWTH

Managing Risks and

Probabilities

Planning for Future Growth

Cutting Costs and

Increasing Profit

Using Technology for

Growth

Expanding Services and

Markets
2029
Major Financial
Factors
2030

2031
Keeping up with changing legal regulations.
2032 Client confidentiality & data security
concerns.
2033 High competition & market saturation.
0 20000000 40000000 60000000 80000000 100000000 Integration of legal technology in practice.
 Major Financial Factors
Projected revenue increase over 5 years.

Revenue Generation Cost Management Cash Flow Management

Talent Acquisition & Retention Market Adaptation Technological Integrations Regulatory Compliance
Revenue Generation
Revenue is the primary financial driver for
architectural firms.

It comes from client payments for design

services, consulting, and other project-
related activities.

Diversifying services, acquiring high-value

projects, and maintaining client relationships
are essential strategies for increasing
revenue.
Cost Management
Operational costs include salaries, rent,
utilities, software licenses, marketing, and
materials.

Effective cost control ensures profitability by

minimizing unnecessary expenses and
optimizing resource allocation.Â
Cash Flow
Management
Challenges with irregular payments,
delayed invoices, and unpredictable
project timelines.

Proper cash flow management ensures

that a firm can meet its financial
obligations, such as payroll and overhead
costs, without financial strain.
Talent Acquisition &
Retention
Attracting and retaining skilled professionals
is a significant financial consideration.

Competitive compensation packages and

opportunities for professional development
are necessary to maintain a talented
workforce.
Market Adaptation

The Philippine construction industry is

experiencing growth, with a 9.2% annual
increase in 2022, partly due to government
infrastructure programs.

Architectural firms must adapt to this

dynamic market by aligning their services
with current trends and demands. Â
Technological
Integration
Adopting Building Information Modeling (BIM)
and other advanced technologies can
enhance efficiency and project
management.

However, the initial investment and training

costs require careful financial planning. Â
Regulatory
Compliance
Navigating local building codes,
environmental regulations, and permitting
processes can incur additional costs and
time.

Staying informed and ensuring compliance is

essential to avoid potential fines and project
delays.
Market Comparison
Industry Market Size (2025) Annual Growth Rate Key Trends

Technology $5.2 Trillion 12% AI, Automation, Cybersecurity

Smart Hotels, Personalized

Hospitality $1.5 Trillion 8%
Services

Legal Services $900 Billion 6% Digital Transformation, ADR

Gene Editing, Personalized

Biotech $1 Trillion 10%
Medicine

Sustainable Investing,
Finance & Investment $100 Trillion 7%
Fintech
FINANCIAL
STRATEGIES
In business management, financial strategies involve the
methods and actions a company uses to manage its financial
resources effectively, ensuring long-term growth, profitability,
and stability. These strategies include planning, control, and
monitoring finances to meet both short-term and long-term
objectives

In architecture, financial strategies focus on how an

architectural firm manages its finances to ensure profitability,
growth, and sustainability. These strategies are essential for
handling the business aspects of architecture, helping firms
overcome financial challenges, make informed decisions, and
optimize resources while delivering high-quality design
services.
FINANCIAL
STRATEGIES
Financial strategies play a crucial role in any business, as they
ensure the efficient allocation of financial resources to facilitate
growth, stability, and long-term success.

While financial strategies broadly focus on managing costs,

optimizing revenue, and mitigating risk, in the field of
architecture, they must also address project-based income,
cash flow challenges, and the need for long-term investments
in technology and talent.

Effective financial planning and management in architecture

enable firms to deliver high-quality services to clients while
maintaining financial health and competitiveness within the
industry.
 ELEMENTS OF FINANCIAL STRATEGIES
Risk management : Helps businesses mitigate financial risks and protect
their economic value

Capital structure management: Determines the optimal mix of debt and

equity to fund operations and projects OTHER ELEMENTS TO CONSIDER

Financial planning: Helps businesses anticipate financial needs and lay

the foundation for their future trajectory

Budgeting: Enables businesses to allocate resources effectively and make Planning

informed decisions Controlling
Organizing and directing
Decision making
Investment strategy: Involves evaluating investment opportunities to
Cost structure analysis
determine which ones align with goals and have the potential to generate
Profit potential estimation
significant returns
Accounting
Working capital management: Involves managing current assets to
maximize shareholder wealth

Cash flow management: Involves ensuring there is enough money to

cover debts, payroll, regular bills, materials, and inventory
 TYPES OF FINANCIAL STRATEGY

INVESTMENT STRATEGY COST STRATEGY

This type of strategy seeks to invest in options that generate It refers to the resources that a business has to cover its
profits for the company. This is usually achieved through financial fundamental expenses. This strategy aims to consolidate the
instruments such as investment funds, stocks, government financial situation by increasing a company’s assets
bonds or raw materials that generally involve a long-term period (properties, cash, inventory) and reducing liabilities (debts and
and will mean a return of capital greater than the initial obligations).
investment.

WORKING CAPITAL RISK MANAGEMENT

It is characterized by reducing operating costs and making a It focuses on identifying, managing, and minimizing those
business more profitable. To achieve this, it reviews the internal and external factors that affect the management and
current structure of procedures and budgets or the organization of the company. Thus, the fulfillment of
automation of some processes to maintain the quality of objectives will not be at stake. Although it is possible to
products and services, at a lower cost. prevent most of the risks, this strategy also offers ways to
mitigate and even find opportunities in them.
 BASIC STEPS OF
FINANCIAL STRATEGY

1. ANALYZE YOUR CURRENT 2. MAKE PREDICTIONS

SITUTATION

3. MEASURE YOUR
PROGRESS 4. MONITOR YOUR PROGRESS
 INCOME
This is the most common objective in financial
strategies and is linked to the liquidity and
performance of a business.

EXAMPLES OF
COSTS
FINANCIAL Another common objective of financial strategies, as
they seek to minimize them without affecting the

STRATEGY quality of your product or service.

RETIREMENT
Can also be applied to something as important as
your retirement.
 Financial Planning
Why Financial Planning Matters:
Achieve Goals: Buy a home, start a business, retire comfortably.
Stability: Manage income, expenses, avoid overspending.
Prevent Debt: Live within means, manage existing debt.
Build Wealth: Save, invest, grow assets.
Prepare for Emergencies: Emergency fund, adequate insurance.
Secure Retirement: Plan, save, ensure financial independence.
Tax Efficiency: Reduce tax burden through strategic planning.
Business Growth: Effective resource allocation, forecasting.
Reduce Stress: Peace of mind through proactive financial
management.
Wealth Transfer: Smooth transfer of assets through estate
planning.
Financial Planning
Financial Planning Basics:
Assess Current Situation: Income, expenses, assets,
liabilities, net worth.
Define Financial Goals: SMART goals (Specific, Measurable,
Achievable, Relevant, Time-bound).
Create a Budget: Allocate funds for expenses, savings, debt
repayment. Track spending.
Reduce Expenses/Increase Income: Cut back on spending,
explore income opportunities.
Plan for Retirement: Determine desired lifestyle, estimate
income needs, contribute to retirement accounts.
Manage Risk: Obtain insurance, diversify investments.
Review & Adjust: Regularly review and update your plan.
Financial Planning
Types of Financial Planning:
Personal: Budgeting, saving, debt management, insurance, retirement, estate
planning.
Business: Budgeting, forecasting, capital structure, investment, risk
management, tax planning.
Retirement: Saving, investing, income planning, estate planning.
Investment: Asset allocation, risk tolerance, investment strategy, monitoring.
Tax: Income tax planning, tax-advantaged accounts, capital gains, tax-efficient
investments.
Estate: Wills, trusts, power of attorney, healthcare directives, minimizing estate
taxes.
Education: Savings plans (529, ESA), scholarships, grants.
Debt Management: Repayment strategy, consolidation, refinancing, student loan
planning.
Cash Flow: Budgeting, tracking expenses, emergency fund.
Risk Management: Insurance, diversification, liability protection.
Financial Planning
Financial planning is the process whereby
performance goals are established and reports
are prepared to measure whether these goals
are being achieved. It should be part of the
strategic plan of every architectural practice. The
financial plan is a set of guidelines, not rules,
based on trends and the best estimates. The
revenue forecast is the starting point, and it
serves as the basis for other line items.

Note: Revenue is the total amount of money a business

makes from selling its products or services before taking out
any costs or expenses
Financial Planning
Effective financial management requires guideposts that show where a firm is versus where
it wants to be next month, next year, and beyond. For an architectural firm, these guideposts
might include revenue milestones to ensure financial stability, benchmarks for staffing
efficiency to balance workload and costs, or expense thresholds to avoid overspending on
overhead costs (i.e., indirect expenses - rent, office supplies, utilities, etc.).
 Why is Financial Planning
Important?
ough m o ne y?
m ak ing en
Are we
Do we ha
ve the rig
ht team s
ize?
Can w e aff ord our ex pe n ses
while achieving our goals?
 Four Components of Annual
Financial Plan
REVENUE OVERHEAD
PROJECTION STAFFING PLAN EXPENSE BUDGET PROFIT PLAN

outlines anticipated defines the size identifies the establishes and

revenues from projects and cost of the indirect costs of budgets the profit
under contract, those staff required to supporting the staff required to sustain
in the negotiation
provide the services as it provides the the firm and allow it
stages, and estimated
outlined in the services outlined in to meet its goals
revenues from projects
revenue projection the revenue
not yet obtained
projection.
MAJOR FINANCIAL
PLANNING FACTORS
PROFITABILITY
The ability to create an excess of revenue over
expenses.
Architects ensure that they will not incur
more expense than revenue on a project or
on a firm-wide basis.
Regardless of whether the firm uses the cash
method or the accrual method for its
accounting, losses eventually result in a cash
drain—more is expended than is taken in.
MAJOR FINANCIAL
PLANNING FACTORS
LIQUIDITY
The ability to convert an asset to cash with relative
speed and ease and without significant loss in value.
In operating their practices, architects acquire both
fixed (long-term) and current (short-term) assets.
Fixed assets (long-term) - are assets such as real
estate, leasehold improvements, furniture, fixtures,
equipment, and automobiles that they do not
intend to convert to cash in the foreseeable future.
Current assets (short-term) - include both cash and
other assets that must be converted to cash,
especially accounts receivable (the value of services
billed but not yet collected) and work in progress
(the value of services performed but not yet billed).
MAJOR FINANCIAL
PLANNING FACTORS
LIQUIDITY
To keep a practice financially viable, the architect must
maintain the liquidity of the firm; this is accomplished by
invoicing regularly with the goal of continually
converting work in progress to accounts receivable. Then,
to convert accounts receivable to cash, the architect
must follow up by assiduously maintaining collections.
Whether architects like it or not, they are extremely
exposed to economic cycles. Since architects receive
most of their revenue from services provided to the
construction sector of the economy, and since the
construction industry is one of the most cyclical
industries in the economy, architects are vulnerable to
the regular decrease and increase of activity in the
economy.
MAJOR FINANCIAL
PLANNING FACTORS
SOLVENCY
The ability to meet financial obligations as they
come due. It is the firm’s ability to pay its bills.
Solvency and profitability are closely related; a firm
that is unprofitable will, in the long run, need more
money to pay its debts. In the extreme, the inability
to pay debts when they come due leads to
insolvency and bankruptcy.
Cash management is a systematic procedure for
forecasting and controlling the cash that flows
through the firm. The objective of cash
management is to ensure that adequate cash is
always on hand and that cash surpluses, when they
exist, are invested wisely.
THE WORKING CAPITAL RECEIVABLES
Working capital is the minimum amount of liquid It is critical to convert receivables to cash in a
capital needed to sustain the firm in business. consistent and timely manner. Although it is
Specifically, it is the minimum amount needed to advisable to keep track of individual invoices
maintain the flow from cash to work in progress to rendered for collection purposes, it is also valuable to
accounts receivable and again to cash. know the rate at which all invoices are being
collected.
Working capital = Current assets - Current liabilities
Average collection period (in days) = Accounts
Current assets - include cash or other assets that receivable / Average revenue per day
are readily convertible into cash (such as work in
progress and accounts or notes receivable). Architects are well advised to keep the average
Current liabilities – are liabilities that come due collection period as close to 30 days as possible,
within the next 12 months. although this time period will clearly be difficult to
meet with certain kinds of clients.
Thank You