This article gives a complete overview of all aspects of finance for photographers, giving professionals all the information they need to know to manage the financial side of their business, from how to pay the necessary equipment to how to allocate tax.
Looking to start a photography business?
Photography is a good career choice if you are creative and have technical expertise.
Working for yourself as a professional photographer might be a dream come true, but not managing your finances correctly could see your hard work end in a nightmare.
What equipment do I need and how will I pay for it?
As a photography business owner, there are some essential pieces of equipment that you will need.
• A good quality camera (costing up to $8,000)
• Camera bag
• Lighting and backdrops (costing up to $800)
• Lenses (costing up to $3,000 per item)
• Studio space
• A computer and editing software (costing up to $3,000)
Other intangible products that you will need are:
• A payment platform so you can collect payments from your clients.
• Business license which can be gained by registering your business with your local or state government. This can cost up to $1,500.
• Insurance to protect your equipment if it gets damaged or stolen.
So, how do you pay for all of these things? There are a few options to consider.
1. Apply for photography small business loans
To be considered for a loan, you need a good business plan that explains to the lender how you will spend the funds and how you will repay them. Taking out a loan is a big commitment and should be thought about carefully. Get answers to the following questions before deciding if it’s the right thing for you and your financial situation.
• What are the financial requirements? Conduct a financial analysis of your business.
• What loan periods are on offer and which ones can you afford to repay?
• Will you receive any penalties for late payments?
• Do you only need equipment funds or are there other costs involved?
• How soon can you repay the total loan with interest? Are there any fees for early repayment?
• Will the lender accept start-ups or do you need to be in business for a few years before being considered?
• Does a bad credit score matter to the lender?
• Should you factor in invoice financing into the loan?
2. Rent or buy second-hand equipment
When first starting out, new photographers will often make less profit and rent the gear they need instead. Whilst you’re paying for something that you don’t actually own, it’s better for your finances in the long-term to rent something rather than pay out high initial prices for something that you may decide not to use in the future. Once you’ve started making regular money from your photography business you can invest some of the profits you’ve made into buying your own equipment.
If money is tight, consider buying second-hand equipment but make sure it’s good quality and not damaged.
3. Sell stuff
If you’re looking for a quick way to earn enough cash for your photography business, sell items around your home that you no longer need.
Hosting a garage sale doesn’t require much planning and can make a decent amount of money. Start by decluttering a room in your home at a time, cleaning and pricing each item as you go. Advertise your garage sale in your local community by posting flyers and using Facebook community groups.
If hosting a garage sale isn’t your thing, there are lots of places that you can sell online. Facebook Marketplace is a good place to start. eBay and Craigslist are other options to consider advertising your belongings. If you don’t have many items to sell, you can still make money by reselling items online. Spot bargains at garage sales or in thrift stores and resell them online for a profit.
Set up a dedicated account
Dedicated bank accounts make managing your finances easier because it’s separate from your current account which pays for things like your mortgage and food. A dedicated account also makes your business appear more professional to clients as it’s held in your business name rather than your own name.
Having all of your income revenue and financial records in one account will allow you to quickly and easily check that your finances are on track. As a new business owner you don’t want to be wading through your personal accounts and expenses to identify your business ones. As your business gets bigger, having only one account could make things complicated when working out how much tax you owe.
Create a budget
In the same way that a budget is essential to keeping control of your personal expenses, a business budget will enable you to see where your money is going and plan how you will meet your business goals.
Expenses – businesses have fixed and variable costs. For a photography business, your fixed costs might include monthly subscription fees for software, travelling costs and renting equipment. Variable costs could include an assistant for a large shoot or location shooting fees.
Income – even though you may have just started your photography business, you will need to predict how much money you expect to generate over the next 12 months. To do this, use estimates based on earnings from previous months and any signed contracts that you have from clients.
You should continually revisit your budget and adjust your income and expenses accordingly. If you’re spending too much on your business expenses, make some cutbacks or find cheaper alternatives.
An emergency fund – just like in your personal life, unexpected things can happen that cost money. Aim to put aside enough money in an emergency account that will cover your running costs if you don’t earn enough money one month or are unable to work due to illness.
Paying yourself – don’t forget to include a salary for yourself in your budget. To figure out how much you can afford to pay yourself, take away your expenses from your income and see what’s left. Don’t get disheartened if there’s not much left. During periods of business growth, you earn more money, you can pay yourself properly for your hard work.
Set business goals
How much income would you like to make from your photography business? What do you need to do to get there?
Goals are the motivation businesses need to grow. Examples of small business goals include:
1. Focusing on improving the customer service and experience that your clients receive.
2. Developing your relationship with other organisations and giving back to the local community.
3. Setting financial goals to increase revenue.
4. Growing and expanding your business by hiring new members of staff.
Choose your short-term goals based on your business priorities. Only focus on things that move you one step closer to your long term objectives.
Keep track of your business finances
Bookkeeping is the daily recording of the financial transactions and information related to a business. Accurate records are vital so the transactions need to be correct, up-to-date and detailed.
You can either hire a bookkeeper to manage your business finances on your behalf, or if you’re just starting out it can be done yourself.
Doing your own bookkeeping – if you know the basics of Excel, many people keep a record of their transactions in a spreadsheet. The downside to manually inserting data is that human error could give you the wrong data. Alternatively, you can purchase bookkeeping software or accounting software such as QuickBooks or FreshBooks that act as a guide towards correct bookkeeping practices, ensuring that you are properly recording everything that you need to.
Hiring someone – a helping hand to do your books is great but it can be costly. You can either hire an in-house accountant who is on your payroll or use the services of a third party company. As a new photography business it will be more cost-effective to either use a firm or independent bookkeeper. Ultimately doing your own books is the cheapest option but it’s crucial that you get it right, so if you feel like you can’t manage your transactions it’s better to ask for help.
The documents you need to keep for at least six years are:
• Invoices you send to customers
• Receipts for business purchases
• Tax returns for your business
• Bank or credit card payments and statements used for business activity
• Payroll records, if you hire any staff
• Other financial activity statements for your business such as investment accounts
Next, you’ll need to decide whether you use the cash method or the accrual method for bookkeeping.
The cash method is a popular choice for small, start-up photography businesses that want to make it easier to match your books to your bank account. With the cash method you record the transaction when you pay for things. For example, you rent a venue for a photo shoot in March. The invoice is due in April, which is when you would log the transaction even though you used it in March.
The accrual method works in the opposite way. In the example given above you would log the transaction in March even though you don’t pay for it until April. The accrual method pairs expenses with the income you made during the same period. It can get quite complicated but it can give larger businesses a clearer picture of its financial health.
Invest in an accountant
If you are struggling to take care of your business finances, consider hiring an accountant or financial advisor. But what does a financial advisor actually do? They basically provide businesses with advice on how to manage their money more effectively.
The benefits of hiring an accountant are:
Better financial planning – as a small business owner you don’t get the big company perks such as a retirement plan and private healthcare plan. A financial advisor can help you plan for the future and keep you on track to meeting your goals.
Effective cash flow management – what should you do with your business profits? Is it better to invest in your business or save it in your business account? A financial advisor can help you put your earnings to good use, making sure that when your cash flow is low you will have enough to keep your business afloat.
Save time – managing your finances can take up a lot of your time, which is time that you could be out earning money as a photographer. Financial advisors are an asset to your business and can help you save money in the long term through careful financial planning. They allow you to focus on your business while they keep everything running behind the scenes.
Allocate your tax
When it comes to paying tax for your photography business, there are different types that you need to be aware of.
Federal income tax: this is the tax on your personal income. Your federal filing status is important if you hire employees or file as a corporation rather than as a sole proprietor.
State income tax: state income tax is money you owe to your state government on your personal income. You may be able to pay annually or quarterly depending on the rules in your state.
States sales tax: this type of tax will vary by location, so it’s important to check with your local state government to determine when, how, and if you need to issue sales tax for any services or products that you sell.
You may be able to choose whether to pay it in quarterly repayments or file it as a lump sum at the end of the year, but it’s important to check the rules in your state. If you don’t pay your taxes you may face a penalty.
Managing your finances as a photographer
Your ability to manage your finances is just as important as your creative eye when it comes to running a business in the photography industry.
The tips in this guide should help you understand what you need to do but don’t be afraid to ask for help in the form of an accountant or financial advisor.
Our personal finance blog contains a wealth of information to help you make the right financial decisions in your life.