Why is bookkeeping needed for artists?
Do you keep a record of the income and expenses of your art business? A good bookkeeping system helps you to do that. As an artist, you need to keep track of how much you earn by selling your artwork and how much you spend on supplies, equipment, materials, etc. Bookkeeping is a process of organizing, categorizing, and recording financial transactions. This is essential for any business; the arts are no different from any other industry when it comes to accounting needs.
There are two ways to handle your bookkeeping. One way is to hire a bookkeeper or accountant. They can help you understand how much money you are making from your art and how much expenses are getting in the way of your profits. Depending on the type of person you hire, they may also be able to help you set up bank accounts and pay your taxes. This makes it easier for you to focus on your art without taking time away to work on your books. Having an accountant can be great for the bottom line of any artistic venture. Artists excel at the creative process, but can often feel bogged down and frustrated with the business side of things like bookkeeping. This is one of the easiest business tasks to outsource. An accountant or bookkeeper handles all of that while allowing you to focus on what you do best- creating art.
Another way to handle your bookkeeping is to do it yourself, but you should understand how you can do it efficiently. Don’t worry! In this article, we will share some bookkeeping tips and tricks for artists that will help you to do this efficiently, and make the experience less frustrating.
Top 7 bookkeeping tips and tricks for artists
The art industry is a difficult field for bookkeeping. It's difficult to keep track of all the pieces, time, and money involved in creating a piece of art. With these 7 tips, you'll be able to better manage your finances as an artist. Bookkeeping is one of the most important aspects of running a successful business. The following are some of the top 6 bookkeeping tips for artists:
1. Keep an eye on your cash flow:
This will help you determine how much profit you're making on each piece you sell. This includes amounts paid for your artwork, prizes, awards, fellowships, and endowments. When you buy anything related to your artwork, always keep a receipt for it. Anything like bills, invoices, check stubs, EFT transfer backup, etc. is important to keep on file in case you are ever audited. Keep a record of your income and expenses in a spreadsheet, this helps you to learn whether your business is in a loss or gain state in that particular month or the year. You should also keep track of your other expenses like
2. Organize your tasks:
Don’t let your bookkeeping strategy turn into the junk drawer version of your business. Staying organized ensures you are able to find the information you need, make important calculations to see where your business stands and file your taxes with more efficiency. You may want to organize by tasks, which helps you to keep track of transactions associated with each task. You can also sort each element into monthly and quarterly reports.
3. Track your time:
Tracking your time can be very insightful. It can help you calculate how much a piece of art should cost, or even teach you that you need to learn to work faster. If you want to do a thorough time/cost analysis make sure to list all your tasks and the time to be spent on each task. This can help give you an overview of where you are spending time and which of those things is most and least profitable. As an artist, you want to spend more time on your art creation. But, you also want to be strategic and ensure you are putting time into avenues that produce income. If any (unnecessary) task doesn’t give you any income do not waste your valuable time on that, instead, you can invest in other important work.
4. Track your materials:
This will help you figure out what materials are costing the most money and what types of materials are worth investing in more heavily (i.e., cheaper or more expensive). Some of this depends on where you are in your art career, and what you are able to afford in that phase. If you feel buying a material that is expensive yet helpful for your art business growth then you can buy it. If it isn’t helpful to your business, do not waste your hard-earned money.
5. Keep track of inventory:
You want to ensure that when someone orders artwork from you, they get it within a reasonable amount of time so they don't feel like they're waiting forever for their purchase to arrive. You should know which art piece is sold, which one is left with you, and which pieces are with a gallery or exhibition.
6. Open a Business Account
It is always a better idea to maintain business and personal bank accounts separately. Opening a business bank account helps in many ways:
7. Seek help from a professional accountant:
Businesses are undergoing significant changes in the modern era. There is a need for qualified accountants to help with the management of all day-to-day transactions and finances. From income tax filing to building budgets, a qualified accountant can be an invaluable resource for any business owner. Having an accountant on your side will make it easier to set up bank accounts, pay taxes, and more. Note that a “bookkeeper” may be able to help you with some tax-related forms, but cannot file taxes. For tax filing and tax advice, you need to work with an accountant.
What are the best tools for Bookkeeping? How to choose the right tool!
There are plenty of tools or apps for bookkeeping. However, you need to choose them according to your needs and abilities. Consider the following points while choosing a tool:
Top 5 best free bookkeeping tools
This list is based on “Best Free Accounting Software (2022)” by Forbes
1. NCH Software (for Financial analysis)
2. ZipBooks (for invoicing)
3. Sunrise (profit and loss statements)
4. Truly small invoices (for freelancers)
5. Wave accounting (best for ease of access)
Whether your art business is small or large you must adopt bookkeeping habits so that you can adequately track important financial information with efficiency. Bookkeeping plays an important role in helping you make financially sound decisions to grow your business.
Share your thoughts about bookkeeping! What’s working for you? Share your suggestions for bookkeeping tools in the comments section!