Jan 02, 2024 | Financial Matters,
By Sue Greenberg, executive director
As we begin 2024, here’s a suggestion that will pay off: Take deliberate control of your creative business by making a commitment to recordkeeping. A complete set of records will help you track your income, assets, and expenses. Additionally, your records (including how you spend your time) are among the most effective tools for assessing how you are doing (financially), projecting cash-flow, re-evaluating your approach to pricing or setting fees, establishing priorities, and planning for the future. Good records will help you draft a compelling grant proposal or commission budget.
How about taxes? Without complete and well-organized records, you’ll be unable to prepare and support your tax returns, especially Schedule C, which is filed when you earn income through self-employment or a limited liability company (LLC). Even worse, you may pay more taxes than you really owe if you misplace a receipt that could translate into a deduction. If you’re audited, you’ll be expected to prove that your records reflect your entire income and expenses, typically on a calendar-year basis.
Start with banking. You can make recordkeeping easier by having a separate credit card and a separate checking account for your creative business. If you use digital wallet apps like Venmo, Apple Pay, PayPal or Zelle set up business accounts.
Invoices, contracts, copies of checks, receipts you give customers, bank records (which can be exported into Excel), W-2 Forms, and IRS 1099 Forms will make up your income paper trail.
Your assets are the property and equipment you use for your business. Keep a complete and detailed record of these assets, including when you acquired them and the cost. These records will allow you to properly depreciate the assets and report the correct gain or loss upon disposal.
To track expenses, your records should include who was paid, for what, when, and why. Sales receipts (Hint: scan or copy those fast-fading thermal paper receipts.), credit card statements, and bank transactions. Other important records are regular entries in your calendar and a business-mileage log. Popular mileage apps include: Mile IQ, Everlance, TripLog, and BizXpenseTracker Live.
Does recordkeeping seem daunting? The secret is to come up with a system (or mix of systems) that works for you. It can be a notepad, large labeled envelopes, Excel or Google spreadsheets, Quicken or QuickBooks, or apps such as WAVE Financial, Xero and Freshbooks. Since many artists are partially or totally self-employed for tax purposes, you may want to look at Schedule C, where you’ll see expense categories. They’re flexible (e.g. advertising could be your website).
Finally, don’t make your recordkeeping system too cumbersome or you’ll fall off the wagon — just like those new gym members with good intentions in January who stop working out in March.
photo: Amanda Mills USCDCP on Pixnio