Finance best practices for photographers: Bookkeeping your business.December 14th, 2021
When you decided to start your own photography business, you knew you were signing up to be your own boss. But you might not have realized all of the other hats you inherently assume by being a business of one: HR director, IT department, head of marketing, CFO and so on.
Finance in particular is one area that gives many photographers a headache. And believe us, we’re right there with you: We’d much rather be behind the lens or editing a wedding shoot than crunching numbers. But staying on top of your finances is necessary to grow your business, determine your target salary and set yourself up for long-term success – all of which enable you to do more of what you love.
While bookkeeping is essential, it doesn’t have to be difficult. Here, we’ll give you a crash course in photography bookkeeping 101 to help you keep your photography business on the path to profit.
Why photographers need a bookkeeping process.
All businesses need a bookkeeping process, and photography isn’t exempt. Whether you’re brand new to the game or have an established client base, you likely have money coming in and going out from a variety of sources.
It’s important to track and organize these transactions to understand just how successful your business has been and can become. This can be done through an online bookkeeping software, hiring a professional bookkeeper or by simply creating a spreadsheet to record your income and expenses.
No matter the method, setting up a simple, organized process for managing your finances is necessary to inform future business decisions. It can also tell you whether your session and product pricing is in line with the amount of sweat and hard-earned cash you’re investing in your business.
If for nothing else, bookkeeping your photography business is imperative to correctly file and manage your taxes. By setting aside time each week to save invoices and receipts, categorize your expenses and revenue streams, and calculate a monthly salary that works for both you and your business, you’ll have more structure in your accounting process to correctly determine the amount of taxes you owe.
This structure is especially helpful when it comes to the end of the year. Instead of digging through credit card statements to remember how much you paid for the lighting gear you bought seven months ago, you can easily find details of all your purchases in one place. This will save you a ton of time that could otherwise be spent penciling in fun holiday shoots. Better yet, it can help you avoid being audited by the IRS.
Understand your cash flow.
The key to success for any business is understanding where your money comes from and where it goes to make sure you’re on track to profit. Examining cash flow helps photographers answer critical questions like:
- Am I spending too much or too little?
- What is my ideal take-home salary?
- Am I selling photos and prints or just sessions?
- Should I raise my prices?
- What is a realistic income goal for next year?
Tracking cash flow is especially important in the photography world, which often has unpredictable income due in part to busy and less-busy seasons. Photographers need to make sure the profit they make during their busier times is enough to carry them through months of sparse shoots.
Taking the time to acknowledge where money went throughout the year can also help photographers manage their spending and prepare for future expenses that may be necessary or recurring, such as a subscription to editing (or bookkeeping!) software. It’s important to know your assets and liabilities to calculate future economic benefit or create a plan to eliminate any debt.
Enacting a bookkeeping system keeps your photography-related finances in one place, which makes it easier to identify patterns in your earning and spending. For example, if you discover that you earned three times the profit in the summer than you did in the winter, you’ll know to set aside some of those summer earnings to get you through slower months.
Insights like these can also inform other aspects of your business, like marketing. If you know you barely have time to sleep in May and June, you might avoid advertising specials for Mother’s and Father’s Day. Conversely, if you know that you struggle to book sessions in November and December, you can offer to shoot mini sessions for family holiday cards or market your event photography skills for Thanksgiving Day parades.
Plus, easier reporting means an easier tax season – and no one likes a tough tax season.
How photographers can improve their financial literacy.
Now that you know why bookkeeping for your photography business is important, you’re likely wondering how to get started. There are multiple easy steps you can take to begin organizing your finances.
Work on your savings.
Keep track of what you spend your money on, and ask yourself what value each purchase brings to your business. While you might want an excuse to buy the hottest camera on the market, does it have features you’re currently missing that will enable you to charge more for shoots? Does the economic benefit outweigh the expense?
A simple way to decipher your spending patterns is to categorize and label your expenses so you can easily see where that money went. If you’re using a spreadsheet, this can be done by color-coding cells for a quick visual of what categories may need some attention.
Understand how much you’re spending.
Is the bulk of your spending going toward necessities? What do you consider to be a “necessity” for your business?
Take the time to think through which of your purchases you actually needed and which ones were just “nice-to-haves.” This can help you identify areas to cut your spending and make you think twice the next time you consider a similar purchase. It can also help you uncover other ways to cut down costs, such as paying for less online storage space if most of it is going unused.
Separate business expenses from personal spending.
We can’t stress this point enough, as conquering this step will make every other aspect of your bookkeeping easier. To keep you from mistaking personal expenses with business ones, set up dedicated bank accounts and credit cards to use solely for your business. This will help you prove what expenses were truly for your business and can save you from an audit.
It’s also useful to have all of your business income flow into one designated account, as it helps you easily determine how much money you’re bringing in. When comparing this number to your expenses, you should get a clear picture of whether you’re making a profit and how large that profit is. It also makes it easier to determine a reasonable salary and consistently pay yourself the money you’ve worked so hard to earn.
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