Are They Equal to Your Artistic Talent? Part 1
As an artist, you have many attributes and qualities that are not easily found in your non-artistic counterparts. Although it’s argued that everyone has some artistic abilities waiting within themselves, the difference is that YOU have taken the necessary thoughts and the steps to hone your unique talents.
Given your time, energy and money are generally spent building your artistic persona and creations, there often is little time left to advance your entrepreneurial skills. However, if you are selling your art or have the intention of doing so, it is to your advantage to know certain money principles that will help you as an entrepreneur.
The idea of considering yourself as a “business” is not the term that many artists like to be associated with. However, that just adds another dimension to your talents and what you are capable of creating. Remember that a business is created and built – especially one that is based on your specific talents – therefore you are still involved with creating!
Presented here are a few strategies to keep in mind for your general application; they are applicable to both your personal and business finances – and in some ways this bridges the gap between the two. There are also practical steps that you may take to help move you forward.
#1: Building Your Money Confidence
Often the idea of effectively dealing with money can be problematic as there may exist, a lack of confidence. Keep in mind that confidence comes from familiarity – think of when you have created one of what you consider to be your best art pieces (whether that is painting, sculpture, words or song).
Connect yourself to the confidence that you felt when you created it. Alternatively, you could find something else that gives you confidence at an extraordinary level and immerse yourself in that mindset. If you think about this when you work with your money and you keep referring back to this confidence, over time you will hopefully find a “confidence correlation” that will help you.
You will further build confidence through working with your practical money skills and your mindset. You need some structure in place that you may use over-and-over-again and once you know how to work within it, you can become enlightened about what it is telling you.
#2: Working with Your Uneven Cash Flows
This is often referred to as cash flow management. As you likely earn uneven commissions, payments and fees, it very important for you to have a method of dealing with and working with them in a way so that you have money available when you need it.
A good strategy is to pay your bills just in time (so you keep your money longer in your possession), collect on outstanding amounts owed to you faster, obtain deposits and always think about ways to keep money in your coffers not someone else’s.
Make a list of all of your clients and how much they have paid you and what they owe – be sure to put their deposits against the final purchase price.
Approach these clients for payment of outstanding amounts – you earned it and they agreed to it when they engaged your artistic services through buying your offerings. For new clients or other interested parties, request an upfront deposit on your work. Even if this is considered an unknown practice in your circle, remember that you are a business person AND an artist and that is a practice of what successful businesses do!
#3: Documentation, Receipts and the Rest
In order to lower your taxable income, you need to have the proper documentation in order to claim and to back-up your tax return in case you were to be audited by your tax authority.
Now you could establish a formal bookkeeping system so that everything would be included within it. While this can be a little over-the-top, be aware this doesn’t need to be complicated OR difficult. Aside from all of the electronic options and apps that can help you with this, the key here is actually doing it! Remember that tax calculations cannot be made if you don’t have a good set of financial records.
You could start with keeping a money journal of every transaction that you have entered into. You should have a journal that shows your money inflows that is, the money you have earned and your money outflows, the money you have spent or set aside.
Buy a book (some people find this more fun!) or create a table/spreadsheet on your computer or other media and record:
Money Inflows:
How You Earned This Money
– that could be who you sold your art work to and/or the engagement of your artistic services – the point is you want ALL of your money inflows related to your artistic work.
Amount of Money Received
– what was the amount you were paid for each entry above; be sure to exclude the sales tax, if applicable.
Date
– this refers to the date that you received this money.
Work-in-progress
– some tax laws want you to document work-in-progress (WIP) for art that is not completely finished and remains to be ready for the marketplace. Depending on where you live, if this is applicable to you than make an estimate of what you believe the value of that is.
Money Outflows:
How You Spent This Money
– include all of your purchases that were related to creating your art, so that you may keep track of them for tax purposes. Be sure to keep the receipts as backup.
Amount of Money Paid
– enter the amount you spent for each item in relation to creating your art. Of course this could also include your overhead expenses such as, marketing, legal fees, banking charges, etc.
Date
– record the date the purchase was made that is shown on your receipts.
Any other relevant details
Also, you need to reconcile your bank account every month – this will determine if your inflows and outflows presented in your records is correct. Know that financial institutions can make mistakes, although it isn’t frequent, you want to be sure that you are keeping your eye on everything.
The purpose of your money journal will ensure that you have documented proof of your artistic earnings as well as the applicable expenses incurred to produce and bring to market your work. It helps you to keep track for your own purposes and will give you a book of original entry in case you were to be questioned, reviewed or audited by your tax authority.
Of course, you can also use a handy app that will also work, just ensure that it is properly secure!
