If you can instantly find the receipt for the new phone you got that doesn’t work, you could tell me right now what your sales were for the month of May, and filing your taxes was a breeze, you don’t need to read this post. Go make art.
Four simple tools can help you run your art business with less effort, so you have more time in your studio. Use these tools to understand how close you are to making the kind of money you want or need.
1. Your Art Business Bank Account
- Run all income and expenses through this account. Do not mix business and personal funds so that you simplify your life at tax time.
2. Your Art Business Credit Card
- Have a separate card for all your art business expenses so you don’t have to sift through dry cleaning and groceries to find the items you can deduct.
3. Your Art Business Records & Filing System
- Buy a box or two of hanging file folders and a plastic file box or a file cabinet. Look at the tax forms you file or consult a tax professional and setup your records of business income and expenses, so that they align with the categories on the tax form.
- Get a scanner and file everything digitally. Make sure to give each file a clear name and date, e.g. Art Sales Receipts- June 2012. (If you use this method, make sure that you have more than one back up of the scans, e.g. at home on an external drive and an online back up service.)
4. Your Art Business Bookkeeping and Accounting
- If you don’t like dealing with numbers, hire someone. Bookkeepers record transactions. Accountants analyze and interpret the results, and help you navigate tax laws, reports and payments. Both can produce monthly or quarterly reports. Well worth it!
- Even if you hire help. I suggest that you at least:
- Know what records and receipts you must keep and how long you need to keep them.
- Understand basic concepts like gross income (money coming in before expenses or taxes are deducted from sales, grants, donations, investments, interest), expenses (money going out for of making, packaging, shipping, distributing, insuring your art; overhead costs to run your business like rent, electricity, etc.), and net income (money left in your hands after all expenses, including taxes have been deducted).
- Understand simple financial reports of your business that summarize your assets (tools, equipment, furniture to make your art and run your business) and liabilities (loans, credit card debt, outstanding payments)
- Document all income and expenses in columnar accounting books where you record every entry by hand, Excel spreadsheets or software programs, like “Quicken” or “Quick Books” for do-it-yourself bookkeeping.
“There are some things I absolutely ALWAYS do. I ALWAYS record my sales receipts in my excel spreadsheet the day they come in…okay, sometimes it’s the next day. This spreadsheet automatically computes my GE tax (that’s similar to a sales tax to those of you not living in Hawai‘i), and keeps a running tally of it so I know how much to pay when it’s due. I ALWAYS deposit my income on the first available bank day…this includes any charge card sales I accept…In addition, I file receipts regularly, in preparation for filing next year’s tax returns.” Watercolor artist Patrice Federspiel
What do you always do to keep track of your money and what advice do you have for other artists? Please post your comments here or on Facebook and Twitter.
Related posts and tools to simplify your money matters
Read: Art World Insiders: Advice for Artists Who Want to Succeed in Any Economy
Read: Create Your Personal Economy -- Change Your Stories About Money
Do: “Making Money as an Artist: Taking Charge of Your Bottom Line."