This is the fourth blog post from a new series to help you create a business plan in 2014 using our guide The 2014 Photo Business Plan Workbook. Download it here.
Step #4: Fix Your Finances
Are you depositing money from your photo jobs directly into your personal bank account? Are you living from gig to gig? Have you been putting off acquiring insurance because it costs too much? Are you unclear on which items you can legitimately deduct from your expenses when you file your taxes?
Most freelance photographers slide into the profession without thinking about it from the perspective of developing a healthy business. But a single lightstand hitting an event guest, or an IRS audit, can terminally affect your business.
If your photography is your occupation, then you need to treat it as a job, not a hobby. This means maintaining a level of professionalism and accountability.
Your business needs at a minimum:
- a separate bank account and credit cards to separate business and personal charges
- an accurate bookkeeping system
- equipment and liability insurance (you might want to consider errors & omissions insurance in case your CF card becomes unreadable)
- a cash flow plan to ensure your spending does not outpace your income
We recommend sitting down with an accountant sooner rather than later so that you understand the reporting obligations that your business has in your jurisdiction, as well as information on your tax obligations. Under- standing how timing your purchases can impact (or even reduce) your tax burden will help you make better decisions about what equipment you buy and when you do it.
Example: Cash flow is not a hard concept and you don’t need an advanced degree in accounting to create your plan.
Try this simple exercise: project out all of your desired equipment needs, and other business costs (travel/trans- portation, communications, business meals, insurance, office expenses, etc.). Note specifically whether any of these costs must occur at specific times. Then look at your revenue (monthly) from the previous year. If you do everything the same in 2014, and clients continue to pay their bills, will you cover your expenses? Can you create a cushion to protect yourself and still honor your obliga- tions in case any one client doesn’t pay on time? If not, you need to determine ways to generate more income by either increasing sales or increasing the price of your current product and services delivered.
For more tools and resources to help you complete this step, download the Workbook today!