Whether you are a professional cameraman or photography has become your hobby, knowing the fundamental aspects of bookkeeping and tax planning is vital. Understanding the financial side of operations helps you avoid troubles with the tax authorities, maximize profits and form a strategy to reach long-term economic success. In this article, we’ll look at the essentials of accounting for photographers and tips from economics experts on improving your finances.
The Importance of Bookkeeping in the Photography Industry
Every entrepreneur working in the photo business should think about forming a bookkeeping system of a certain level. Competent accounting allows you to assess your level of professionalism and ensure constant control of capital inflow and outflow. Consider other arguments in favor of professional financial management:
- Monitoring variable expenditures: many photographers are well aware of the associated fixed costs, e.g., using equipment to organize a shoot. However, dealing with unexpected expenses is much more difficult. Reliable bookkeeping avoids scrambling when expenditures vary significantly from month to month.
- It guarantees the safety of financial papers and bills: when you run a photo studio, you can easily track emails, invoices, and other documents manually. But as your business grows, you need to know where the capital is going, which counterparties owe you how much, and when they will pay you.
- Grow your organization’s potential: professional accounting doesn’t just focus on the current situation. Every time you improve the recording, you create new opportunities to expand your customer base, successfully invest capital and increase earnings.
Don’t think of bookkeeping as a dull and frustrating job. If you are a cameraman who wants to establish a stable and prosperous business, accurate bookkeeping is the tool to help you achieve your final purpose.
Keeping proper financial records is time-intensive and small mistakes can be costly. BooksTime makes sure your numbers are 100% accurate so you can focus on growing your business.
Key aspects of accounting in the photography business
You don’t need a financial education or special skills to manage your finances effectively. Knowing the basic terminology helps you clear up the confusing things when you open your ledgers.
Assets and obligations
Assets include all your property, e.g., various camera and lighting equipment and a photography studio. At the same time, obligations are debts and spending that you need to pay, including a bank loan. Increase your resources whenever possible and strive to minimize costs.
Revenue is your earnings from the implementation of professional activities. When you provide a service to a client, such as a photo shoot, the account is credited after the customers receive and pay the bills. You can also earn money through special projects or successful investments.
The main expenses in the industry
Keeping track of your expenditures is about creating a record of everything you have purchased to grow your business. The most famous categories of expenses include:
- purchase of equipment,
- maintenance or repair of existing devices,
- creation and implementation of an advertising campaign,
- costs to organize training and business trips (food, transport),
- various legal fees.
Most of these expenses can be used to reduce the tax base. Consult which spending categories can be applied as tax deductions and keep all receipts to show them to the IRS representatives if the need arises.
Bookkeeping techniques in the photography area
If you begin a business in the photography industry, you need to decide whether to use the cash basis or prefer the accrual technique. Your choice affects how and at what point you record operations. Each method is effective, but it’s crucial to analyze your unique needs when deciding.
The cash method allows recording financial manipulations at receipt or withdrawal. Imagine that you rented a room to organize a photo shoot. The location owner bills you in July and requires you to pay in August. It means you must record the operation in August, even if the users are located in July.
The accrual system is more sophisticated than the cash method since operations are recorded when they are performed. If you rent a location in July, you must report such expenses in July, even if payment occurs in August, since you performed activities that generated income in July.
Single or double entry
When starting a business, you must utilize single or double entry.
Single-entry tracking involves tracking a business’s assets, liabilities, and income through a single entry of each operation. As we can comprehend from the name, such a system enumerates capital inflows and outflows with a plus sign when you deal with revenues and a minus sign when you work with spending. Suppose you sell a set of photographs; you register the money received as income with a positive value.
The double entry provides for the registration of each economic operation twice, in the form of corresponding debit and credit entries in the balance sheet. If you’ve sold self-made images and are double-entry bookkeeping, you need to record an increase in the cash account and increase the revenue account simultaneously.
The main mistakes photographers make when working with finances
It is one thing to be a talented photographer and quite another thing to create a profitable photography business. Looking around, you will see many specialists who know all the technical aspects of creating the perfect shot and are going through hard financial times. Other photographers who seem less qualified are opening one photo studio after another. To be successful as a photographer, talent alone is not enough; you also need to have business knowledge and avoid the following financial mistakes:
- Lack of separation of personal and commercial finances: people for whom photography is not the primary source of income often use one bank account to make all financial transactions. Experienced bookkeepers recommend registering a separate account to make business operations; it allows you to eliminate many problems when performing an audit.
- Setting prices without computing the cost price: before compiling a price list, it is necessary to determine the cost of services. It includes all direct expenditures arising from creating and processing photographs. Your time is a significant cost item many photographers don’t add to their expenses. It’s your most valuable asset; you should be paid for it, even at the minimum hourly rate.
- Lack of insurance: if you get paid to take pictures, that’s a business. In doing so, you expose yourself to the risk of damage to expensive equipment and litigation. Whatever happens, spending on an insurance policy worth several hundred dollars a year will help resolve any problems quickly.
The optimal way to manage expectations and protect your business is to sign an agreement with your customers. It is crucial to indicate each party’s scope of work and obligations in official documents. It makes it easier to hold any party to the contract accountable if it violated its part of the operation.
Recommendations on how to improve your accounting
Now that you know some of the features of accounting for photographers and what mistakes beginners make, it’s time to organize the most profitable and prosperous business. Here are a few tips from economic experts to help talented camerapersons thrive:
- Don’t leave economic computing to the last minute: often, creative people put off their finances for a day, two, or three, and then it turns out that the tax deadline is already tomorrow, and you haven’t even started. If preparing financial documents on the last day takes 12 hours, isn’t it easier to spend 15 minutes once a week on this to clean up the books?
- Keep backup copies of receipts: if you must prove to the IRS that all business expenses were legal, you must show the appropriate receipts. Paper documents often get lost or fade quickly, so we recommend making digital copies.
- Automate everything you can: if you’re selling a lot of commodities, you won’t have the time or inclination to keep a record of every operation. We recommend using the services of various marketplaces, e.g., Etsy, or implementing payment processors to automate activities.
When it comes to accounting for photographers, correcting mistakes can be difficult. Indeed, there are things that you will initially find difficult to understand, but you can ask friends who also run their businesses. If they are not ready to help you, it is worth paying a financial specialist to get advice.
The most famous bookkeeping programs
Even if you have a dedicated online photo studio management platform, you will most likely need a dedicated digital accounting product, or you can select an all-in-one solution. Let’s analyze what products are most famous in the photography industry:
- QuickBooks Online is a cloud-based product with a mobile application. This flexible, scalable solution meets the needs of photographers with invoicing, service provider expense tracking, trip, mileage monitoring, and financial reporting capabilities.
- FreshBooks is a cloud-based bookkeeping platform based on the principles of double entry; you can access it anywhere and from any gadget; the main thing is to have Internet access. FreshBooks offers invoicing options essential to being a professional photographer, including automatically generating invoices for loyal clients and converting offers and estimates into bills.
It is impossible to give a universal answer to which accounting application is more suitable in different situations. We recommend that you study several programs, analyzing their functionality, subscription costs, and ease of use.
Who Should Do Your Bookkeeping?
Surely you already understood that without careful bookkeeping, you would not be able to achieve business prosperity, but who should clean up your finances? Perhaps you want to be in control of every aspect of your business and are willing to figure out the numbers yourself, or don’t have the time to track and record every operation?
Independent work with finances
Many photographers are successful in bookkeeping, especially if they have a small number of operations to record monthly. And even if your business is actively developing and you do not have time to provide services to everyone, there are several variants of how to make order in the records:
- Use spreadsheets, e.g., Excel, to record each operation. Most likely, you will need some experience or knowledge in the financial area if you decide to go down this path.
- Implement digital solutions: special invoicing software will help ensure proper bookkeeping practices. It will also help to classify all procedures to avoid problems with tax authorities correctly.
You would rather take amazing pictures than sit at a table and analyze numbers. However, regularly monitoring your monetary operations will save you a massive headache at the end of the financial year.
Seek assistance from professionals
If working with numbers is not your forte, you can partner with a financial proficient. Delegating part of the economic powers to third-party specialists requires certain expenses, but you will be sure your finances are in order.
You can recruit a full-time bookkeeper and add their activities to your payroll or use a third party, e.g., a CPA organization or independent accountant. Outsourcing financial tasks is a cheaper and more effective solution if we speak about a business with a small volume of monthly operations.
Are you just starting your business in the photography area? Have you been in business for a long time, but your current accounting system makes a lot of mistakes and takes longer than you would like? In this case, we recommend that you consult Bookstime financial specialists. We will review your accounting books and documentation procedures to detect inaccuracies and offer practical solutions. In addition, our specialists are ready to develop a flexible accounting system that adapts to your business’s personal needs and priorities.