The end of the year is near...which means it is time to make sure my business accounting records in order.
As with many artists, the business side of art is always less attractive than the creative. Still the truth is, when it comes to running an art business we all need to get serious about finances. Even artists have a fiduciary responsibility to ensure we’re meeting the legal requirements.
So I spent the morning going comparing my Quickbook entries to my bank records and receipts. Fortunately, my years in corporate America taught me to keep an organized set of records, and to be reasonably prompt in my financial book-keeping, so it is not as painful a task as it seems to be for many of my friends.
Here's some of business practices that helped make today less stressful.
- Be specific: When I get a receipt for a sale or an expense I not on it what it was for ( sales, product supply, office supply postage, etc)and I note how an expense was paid (cash , check, credit, debit) this makes it a lot easier to reconcile by bank accounts later on.
- Be organized: It saves me a lot of grief having a separate filing system for my business receipts and paper records. If my business is every really flush I would like to get one of those fancy electronic scanner organizers. For the moment I find that a unsophisticated a large expandable file folder with twelve separated sections (one section for each month) does the job. After noting on the receipt what it was for (see above) I place each receipts as I get it into a envelope marked with the month then put it into the appropriate month section of the divided folder. I find that keeping the receipts in an envelope, as opposed to loose in a manila file folder ensures that they don't fall out of the folder and get mixed up.
- Keep accurate records: You might like to purchase an accounting system like Quickbooks or Xero, or you could use a spreadsheet or ledger book, but you definitely need a system to track your earnings and expenses. I use a Quickbooks.
- Update often.I jot my business mileage into a inexpensive notepad I keep in my car, then I update my mileage and sales and expenditures into Quickbooks at least once a week. ( I try to keep all my purchases confined to one day a week so I can focus upon the creative side the rest of the time, but during some times of the year, that isn't possible so then I make entries more often. .
- Keep business and personal finances separate: For tax purposed you need to have a dedicated business account and, probably (as I’ve discovered) a credit card. This helps avoid the dreaded tax sin of co-mingling of business funds with your personal finances.
- Cross check monthly records: When my bank (and credit card) statement comes in at the end of each month, I check the receipts I have collected for that month against statements. Once all is recoiled on the paper end, I double check the entries into Quickbooks. Then I file the bank statements in the expandable folder in that months section. At the end of the year all my tax receipts are in one place
- REVIEW AGAIN at the end of the year. I print out all my bank statements and credit card statements and compare them to my Quick book entries. That's what I was doing this morning. Since I've stayed on top of it throughout the year this review worked in my favor. I found some missed entries for expenses in sales taxes paid, bank fees, and cash expenditures for parking; and some mileage entries that had been missed. Nothing earth shaking, but it definitely helped clean up some minor accounting discrepancies