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Photographers spend most of their time focused on creating beautiful photos for their clients. Yet, to be successful, it is also important to focus on building the business side of the process. That means monitoring income and expenses while also tracking funds for tax purposes. Having a solid accounting solution in place is critical to ensuring your business thrives year after year. Accounting for photographers does not have to be complex, and there are several ways to do it.
There’s much to know about accounting for a photographer. Let’s break down some of the key components to getting you on the right track.
Why Is Accounting for Photographers Important?
Most often, accountants spend their days booking clients and working on developing images – along with all of the other work that goes into creating stunning photos. Yet, there is a need to manage the financial aspect of your business as well. Doing so can help ensure that you have a strong focus on how well your company is doing. So, why is this important?
• Verify your charging enough. It’s hard to know that you are charging the right amount to your customers if you do not have a good idea of all of your operating expenses. That includes everything from the materials you need to the cost to lease a space. Accounting services can help you to see what you need to charge to ensure your company is profitable. This helps you to know how much you need to make from each project you do to run your business.
• It enables you to show proof of your business success. Whether you hope to expand your business or secure a loan to buy new equipment, you’ll need to demonstrate on paper what your company is worth or that it is making a profit. This is critically important not just now but for years to come.
• Invoicing is easier. Some of the best accounting software programs provide invoicing tools that help to streamline the process. It handles the entire process for you and helps you to avoid losing invoices or simply forgetting them. It can help you track how much you have out in invoices as well helping you to make better decisions overall of your company’s health at any given point.
• Credit card acceptance is possible. Another core benefit of using an accounting software program is that you can use it to accept credit cards, depending on the type you purchase. Choosing a software program that fits your specific business is a good idea, but often, these tools make accepting and tracking credit cards easy to do.
• Tax time is easier. Having an accounting system in place throughout the year makes it easier for you to tax plan. That’s critical for any photographer since most of your clients are likely a service you provide just one time during the year. It is important to have accurate records to document all of the details of your taxes.
These are just a few of the core benefits of using an accounting tool to manage your business. It is a critical investment simply because it provides you with outstanding access to your photography business’s financial health at any given time.
What Do You Need to Do to Manage Your Photographer Accounting?
There are a lot of components that go into the accounting process for photographers. It’s important to have either a professional service or an accounting software program to help you gather all of the necessary information to provide a clear picture of your financial health. Here are some of the details you need to gather and use in the accounting process.
To maintain your books for your photographer business, you need to have access to key documents and reports. That includes the following:
- All of the invoices you’ve sent to customers throughout the year
- All receipts for purchases you have made for your business such as paper, inks, digital software, furnishings, as well as computer systems
- Your tax returns for the year (you should keep at several years of returns on an ongoing basis in case the IRS needs to verify them)
- All statements from your credit card companies (as they relate to your business)
- All statements for bank accounts for your business
- If you have employees, keep a file of all of your payroll records, including what you pay yourself
- Documentation and costs related to your business, such as insurance documentation as well as your business licenses and ownership documents
These documents provide you with information to balance your books and create reports to show details about your company’s financial health at any point.
Choosing the Right Accounting Method for Your Photography Business
One of the steps in setting up and managing the accounting for your business is determining the accounting method you will use. There are two main options: Cash or accrual.
The method you use will determine how and when you will record the financial transactions you have within your business. If you plan to use an accountant, he or she can provide insight that’s more specific to your business.
Using the cash method
One of the options you have is to use the cash method for accounting. It is simple and straightforward, which is beneficial to most smaller photography companies. Here, you record transactions based on when the money changes hands – such as when you pay a bill or when your clients pay you.
For example, if you pay for a location for the holiday season in November, but you use it through the month of December as well. In this method, you would record the expense in November, even though you used it the month after.
The cash method is easier to manage when it comes to balancing your purchases and payments based on your credit card or bank statement. It’s easy to set up and manage overall because you’ll use these transactions to help you verify the process.
Using the accrual method
In this method, you’ll record transactions when the money changes hands. This method is focused on matching expenses to revenue. In the above example, you would record the transaction of paying for the space in November and December, based on when you used it.
In this method, you will better match the actual activity of your business with your management of the business. You’ll record the transaction when you are receiving or using it.
Choosing the Right Solution for Your Photography Accounting
Accounting solutions for photography businesses are numerous. However, here are a few things to keep in mind when making a decision.
#1: Do it Yourself
Perhaps one of the most common options for startup photography professionals is managing the accounting process on your own. That means handling the entire process of estimating costs, managing cash flow, and keeping expenses paid on your own. Some companies still use paper to do this, though there are plenty of easy-to-use software programs to help a person do it themselves.
For example, you can use a simple spreadsheet to calculate and manage your financials. It does not have to take long to input data and keep track of all of your expenses. However, that process takes time. If you plan to do the work yourself, it is critical to understand that you’ll need to set aside a few hours a week to just manage the books. It may also be wise to take a bookkeeping course that can help you manage the process effectively.
If your company is just starting, you may wish to try this method as a first step. Just be sure to keep track of all of the details above to help you manage the process.
#2: Hire a Professional Accountant
If you have built a strong business, or even if your company is just starting to get off the ground, the management of your accounting will be a bit more complex. More so, most photographers lack the time to put into managing their books on their own. Hiring an accountant is a viable solution for many reasons. It provides you with the tools you need to ensure your financials are always in line, but you do not have to worry about doing the work yourself for it.
Hiring a professional is a good option for many companies. Outsourcing this process does not have to be challenging since the software many organizations use can retrieve your financial information automatically, reducing the amount of paperwork you have to do.
You have several options. You could hire an accountant who will manage your books for you on an ongoing basis. Or, you could work with a company that does it all automatically using the software. Either option is going to be more expensive than doing the work yourself, but it may pay off to those who need a formal process and want to be more hands-off in this aspect of their business.
#3: Do It Yourself with Software
It may sound overwhelming to invest in accounting software. It does not have to be. Accounting software programs are far more streamlined and efficient today than they were a few years ago. That means you may have the ability to use these software programs with ease. These programs are a good middle option compared to doing the work yourself or trying to navigate hiring a formal accountant.
If you plan to use software yourself to manage the process, there are a few things to keep yourself on track.
- Pick a software solution for photographers. That means choosing something that can help you as an entrepreneur that’s based on your company’s needs. Do you have employees? Do you handle most of your transactions on your own?
- Choose software that is easy to learn or offers a formal educational program to help you to get the most out of it. You really want to be sure the tool can help you with all of your needs, including helping you gauge your company’s financial health at any time.
- Ensure you budget the time in your day to manage the tasks of the software program. That includes ensuring you have time to update or upload transactions, account for any expenses, or run reports.
How to Choose Accounting Software for a Photography Business
Many of today’s business owners will find that the photography business accounting software approach is ideal, no matter if you hire an accountant to do the work with you or not. Choosing the right platform for your business is important. Here are a few tips to help you choose wisely based on the features these programs offer.
One of the most important parts of an accounting program may be to ensure it is easy to use with any other methods you are using. That includes any type of software you may be using now. Also, check that it can be integrated with your existing bank account.
Many software programs can help track transactions by logging into your bank account, credit cards, or other financial tools. This can cut down on the amount of time you have to invest in the process.
Find out what type of financial reports the program offers. For example, can it tell you how profitable your transactions are?
Look for a program that is easy to use and manage. It is always a good idea to pay close attention to the features it can offer to make your business more successful but still not get in the way of managing your company.
Disclaimer: Please keep in mind that the content of this post is not intended as tax, accounting or legal advice. The information presented here is for informational and educational purposes only. Before engaging in any transaction, be sure to discuss these matters with a trained, licensed professional.