RECORDKEEPING RESOLUTIONS As we look ahead with both hope and uncertainty to 2021, here’s a suggestion that may help you overcome that nagging feeling of being held hostage by the pandemic: Take deliberate control of your creative business. That involves…
By Sue Greenberg, executive director
As we look ahead with both hope and uncertainty to 2021, here’s a suggestion that may help you overcome that nagging feeling of being held hostage by the pandemic: Take deliberate control of your creative business. That involves making a commitment to recordkeeping. You can simplify the process by using a separate credit card and checking account for your creative business.
A complete set of records will help you track your income, assets, and expenses. 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, setting priorities, and planning for the future. Records will help you draft an evidence-based grant or commission budget. And, as we’ve learned during the pandemic, accurate records are needed when filing for unemployment benefits.
How about taxes? Without complete and well-organized records, you’ll be unable to prepare and support your tax returns. Even worse, you may be paying more taxes than you really owe if you miss an estimated tax payment or misplace a receipt that could translate into a deduction. If you’re audited, you will be expected to prove that your records reflect your entire income and expenses, typically on a calendar-year basis.
Income: Invoices, contracts, copies of checks, receipts you give customers, bank deposit slips, W-2 Forms, and 1099 Forms will make up your income paper trail.
Assets: Your business assets are the property and equipment you use for your business. Keep a complete and detailed record of these assets, showing when you acquired them, how much they cost and how much you use them in your business. These records will allow you to properly depreciate the assets and report the correct gain or loss upon disposal.
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 slips, and cancelled checks are good primary records. So are regular entries in your calendar and your 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 that works for you. It can be a notepad, large labeled envelopes, Excel spreadsheets, Quicken or QuickBooks, or apps such as Mint, YNAB and Yodlee Money. 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 by March.