This week’s post is a guest post written by Allan Branch.
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1. Use an online accounting service
An online (cloud-based) accounting application have all the benefits of desktop software but enables you to work anywhere you want, as long as you have an internet connection. Bonuses include no software to download, no annual upgrade fees and you can feel relieved knowing that your information is safely secured online if something ever happened to your computer or office.
2. Schedule a set time for bookkeeping
We know that you would rather be out shooting amazing pictures than sitting at your desk managing the books. However by keeping up with your bookkeeping needs on a regular basis; it becomes a small task rather than a scary one later. You’ll also enjoy the benefit of seeing how your business is performing financially, in real-time.
3. Invoicing & Income
One of the most important steps in accounting for your business is developing a simple, standard method for sending invoices and receiving payments. In addition to managing your income and expenses, most online accounting applications have an invoicing feature, as well as, payment tracking. There are other applications available as well, such as Freshbooks.com, that are specifically made to create, send and track invoices. With any method chosen, the invoice should be sent over as a finished document not one that can be edited, such as a word file. Also, when recording income from a deposit for future work, be sure to carefully categorize and not report during the incorrect time frame.
4. Track those expenses
Anything related to your business can be reported as an expense. By keeping track of expenses in addition to income, you can calculate the actual business earnings as well as identify tax deductible opportunities. Organizing your expenses is easy with online accounting applications as well as apps such as Shoeboxed, where you can turn receipts into digital data for safe keeping. Examples of expenses include equipment and software costs, marketing, travel, mileage, business meals, and vehicle maintenance (if using it for business), and utilities such as internet and phone. It is important to note that if any of those are reimbursed by the client, you can’t use it as a deduction.
5. Learn about business taxes in your area
Taxes are confusing and different in every area but it's important to ensure that you have the correct information and record them accurately. In the US, there are three main types of taxes — Federal Income Tax, State Income Tax and State Sales Tax. Federal Income Tax and State Income Tax are on your income, however, State Income Tax is only required in some states. It is your responsibility to do your own withholdings and claim annually, although it’s suggested to pay estimated taxes quarterly to avoid the stress of a large bill at tax time.
Sales Tax collections are required in some states on session fees and mandatory in all states for products sold. This tax should be added to your prices for your clients to pay. Even if you have no clients for a taxable period, you must file a sales tax return and input zero or you can be charged a fee. Depending on the area your business resides, local sales taxes may need to be collected in addition. Additional tax information can be found in this article or use Teaspiller.com to locate a CPA in your area to consult with. If you’re not in the US, consult with your accountant to see if there are similar taxes to be collected in your country.
Knowing your tax laws will help you be prepared in case you ever have to go through a tax audit. Click here to read 3 Tax Audit Tips Every Photographer Should Know Before Ever Being Audited! to learn more about the audit process.
However you manage your accounting, remember that doing so is a vital part of keeping your passion a profitable one.
What is the most difficult part of keeping track of your finances? Leave a comment below and share!
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