Bookkeeping Tips for Artists

Written by Eddy Hood

Artists typically enjoy producing art more than they enjoy producing business records. However, artists who want to make money from their work should adopt good business practices to ensure a long-lasting income stream. Bookkeeping is the backbone of good business practices. Good bookkeeping allows businesses to understand their profit margins, know how much money is in the bank, and confidently file their taxes. Artists who don't enjoy math might find bookkeeping confusing, but there are many resources available that explain bookkeeping for freelance artists and those who are forming small businesses.

What Does Bookkeeping Accomplish?

The main goals of bookkeeping include:

• Tracking all income
• Keeping tabs on all expenses
• Collecting documentation, including receipts and contracts, which will be useful in corresponding with clients and with government tax authorities

Daily Bookkeeping Tasks

Bookkeeping is largely made up of a series of repeating tasks, so setting up simple systems to schedule and complete the steps of this routine can help artists run their businesses efficiently while focusing on their art. Tasks will need to be completed on different time scales, so plan out your routines accordingly. For instance, daily tasks will include:

• Counting cash on hand
• Checking bank accounts
• Looking over expenses and income

Weekly Bookkeeping Tasks

Weekly bookkeeping tasks focus on keeping necessary supplies and labor available and efficiently billing for completed projects to maintain a healthy cash flow.

• Send out customer invoices.
• Record customer payments.
• Issue payroll checks.
• Order needed supplies.

Monthly Bookkeeping Tasks

Monthly tasks allow for the owner to see a bigger picture of the business and should let the artist focus their attention briefly on what art has sold, what art is available to be sold, and what commissions are outstanding before returning to their creative work.

• Reconcile the checkbook or ledger for the business's bank account.
• Follow up on outstanding invoices.
• Update inventory.
• Review cash flow for the month.
• File all receipts and other financial paperwork.
• Create a monthly profit statement.

Quarterly Bookkeeping Tasks

Many freelancers and small-business owners will be required to file quarterly tax documents accompanied by estimated tax payments. Even if an artist doesn't need to file quarterly, looking over and updating tax information every three months will make completing an annual tax return simpler.

• Update profit and loss statements.
• Follow up on delinquent invoices.
• Pay quarterly payroll tax if needed.
• Pay sales tax to local government(s). Some localities require monthly sales tax payments.
• Make a quarterly income tax payment, if paying taxes quarterly. If not, consider estimating the amount of taxes that will be due in an annual payment and setting aside 25% of that amount.
• Review inventory and update it if needed.

Annual Bookkeeping Tasks

Annual financial tasks should allow the business owner to take a larger view of the financial health of the business, understand where money is being spent, and hopefully find ways to run the business more efficiently.

• Decide on a course of action on severely delinquent accounts and outstanding invoices.
• Review tax returns with an accountant.
• Pay federal and state taxes.
• Develop year-end financial reports, including a profit and loss statement.
• Create the next year's budget.

Additional Resources for Artists

• Top Ten Accounting Tips: Indiemade offers a list of basic financial tips geared toward makers and artists on this page.
• Contract to Commission an Artwork: This form provides a useful template for creating a contract to use when someone commissions a piece of art.
• A Freelancer's Guide to Basic Bookkeeping: Artists who freelance will find this guide to setting up their bookkeeping system very useful.
• An Artist's Guide to Financial Planning: The Creative Independent offers a comprehensive guide to finances and financial planning specifically geared toward artists.
• Seven Simple Tips for Setting Up Your Art Business Finances: Good bookkeeping practices begin with setting your business up correctly. These tips will help artists start their businesses successfully.
• Online Bookkeeping for Your Business: Bookkeepers no longer have to physically be present in a business or studio space to provide services. An online bookkeeping agency can provide the same level of service as an in-house bookkeeper at a lower cost.
• The Surprising Key to Artistic Freedom? Running Your Studio Like a Business: Artsy.net provides an in-depth look at how good business practices, including following bookkeeping principles, allows for artistic freedom.
• Are You an Artist? The IRS Actually Decides: The IRS has multiple criteria that distinguish hobbyists from professionals; this Observer article explains how the IRS makes the distinction.
• A Simple Tax Guide for Artists: The Void Academy offers an easy-to-understand guide regarding artists and federal taxes.
• Erase Your Tax Frustrations: Preparing tax returns is a burden for artist-entrepreneurs, but a professional service can remove that burden and ensure that taxes are properly filed.
• A Short Guide to Doing Your Taxes as an Artist: Which artists qualify as a business? What expenses qualify as potential deductions? Which tax schedule should be filed? This quick guide provides easy-to-understand answers.
• Tax Information for the Self-Employed: The IRS website hosts an informative guide to handling your tax obligations when you're self-employed.
• How to Manage Your Finances as a Freelancer: There are many aspects to managing finances as a freelancer, including budgeting, taxes, and setting the rates charged. This article is aimed at all freelancers, but artists will find the information especially helpful when considering their finances.
• The Ultimate Freelancer's Guide: Everything You Need to Know About Getting Jobs, Getting Paid, and Getting Ahead: Before artists can worry about filing taxes, they need to make money! Learn about getting jobs, getting paid, and managing income and expenses effectively.
• Freelancers, Here's How to Do Your Taxes: Forbes has published a series of articles explaining finances for freelancers, and this entry focuses on taxes.
• How I Manage My Income as a Freelancer: Read a personal account of managing finances as a freelancer with a variable income.
• Basic Bookkeeping for Your Small Business: The basic principles of bookkeeping apply to all businesses, and learning these principles can assist all business owners with their accounting.
• The Nine Most Common Small-Business Bookkeeping Mistakes and How to Avoid Them: Inc. examines the most common bookkeeping errors and how business owners and freelancers can keep from making them.
• Record-Keeping for Artists: The Basics: Record-keeping is an important part of good accounting practices. However, knowing what to keep and for how long can be confusing. This guide simplifies the process.
• Open a Business Bank Account: The Small Business Administration offers a guide to opening a business bank account.
• How to Separate Your Personal and Business Finances (And Why You Need To): Should freelancers and small-business owners separate their business and personal finances, and if so, how? This guide explains why and how to go about it.
• How to Start a Business: A Step-by-Step Guide: There are many aspects to setting up a new business, and this step-by-step guide walks new business owners through the entire process.
• A 30-Point Checklist for Your Startup: Businesses who begin correctly run more efficiently. Following this checklist can ensure that your business is established effectively.
• Professional Practices for Artists: Establishing professional practices as an artist allows an artistic career to blossom. These practices can help grow careers and profitable businesses.