By Clay Schudel
Last month I wrote about getting more control over your life by getting a better understanding of your finances. Click here to read that post! If you are just getting started, or don’t know where to start, here are a few useful tips:
1- Organize your paperwork. Whether you’re making your living as an artist / performer or if you’re just getting started as a working artist (but all of your income is from a day job), remember to take your business seriously.
l Get into the habit of keeping all bills in one place, so that you can easily put your hands on them, and commit to visiting your home “financial center” at least once a week. Develop a simple system that works for you and stick to it – for example, if you need to, use a red pen to write at the top of each bill the due date so you never get stuck paying a late fee for a credit card bill or miss an important payment.
l If you’re an individual artist your business expenses and personal living expenses are likely mingled; this makes it extremely important to save your records in an organized way so that when you file your tax returns you can claim every legitimate business expense as an independent contractor against any income, to make sure that you only pay taxes on any profit that your business made. Do this organizing as the year goes along. If you are going to claim a deduction, you’re going to need a record of:
When: The date of the transaction
Where: Where you bought the item
What: What the item was
Why: What purpose it served in your business
Try making a simple spreadsheet with these columns:
Date | Category | Vendor | Cost | Purpose
Make a note on your receipts (“rent; costumes; business meeting”) and file them as you pay them; $10 spent at Staples now on a few file folders will save you so much stress at tax time, digging through every drawer in your apartment and trying to remember what these receipts were for.
· If you’re prefer saving digital copies of your receipts, there are several phone apps that allow you to photograph and save a cloud based copy of your receipts; probably the two most popular ones are Shoeboxed ($9.95 a month, but this app has many other mobile accounting features than just organizing receipts) https://www.shoeboxed.com/features/
and the much more basic One Receipt (free app) http://www.onereceipt.com/
2 - Evaluate and understand your income and your expenses. Knowing what you spend, and what your income is, over a period of time will let you make intelligent budgets, better use what resources you have, and do all kinds of short and long-term planning. As I wrote last month, the program that I still rely on MOST OF ALL is one that almost everyone already has if they have a home computer – the old fashioned Excel spreadsheet.
· Start by listing regular income and expenses you know will happen or feel pretty sure about:
Make a thorough list of your regular income, and note when it happens; you should put down things that happen monthly (a job that pays a salary every 2 weeks), a few times a year (do you a get quarterly royalty check?) or once a year (do you usually get a tax refund every May? Teach a paid workshop every summer?)
· Make this same list for your known fixed expenses. Be as thorough and as realistic as you can; after you list your large and regularly repeating expenses like rent, utilities and internet, take a good look at your cash or credit card spending and try to understand your patterns and to group your spending into categories; use your bank and credit card statements to help you note regularly repeating automatic payments you may not think of (Netflix? Insurance premiums?) and notice when your credit card payments themselves are due.
Lining these two categories (Income & Expense) up side by side in two columns will go a long way towards showing you the bare bones of your financial picture and will help you see cash flow gaps that you have to prepare for or changes you want to make in your spending.
Follow the links below for pre-loaded templates!
Microsoft Office (maker of Excel) has lots of preloaded Excel spreadsheets that you can download from the Office website, and easily modify for your own uses.
SCORE, a nonprofit that provides mentorship services for small businesses and entrepreneurs also has many templates you can download and modify to help you analyze your expenses and cash flow
Here’s a very simple cash flow forecasting spreadsheet that I created using Excel
You don’t need to be stressed out about the money side of your creative business. A plan that’s simple enough for you to actually keep up with (and doesn’t take too much time away from your real work of making art) is the one that’s right for you.