Closing out your year-end books is a great time to assess the financial health of your photography business. It’s very important to keep tidy books throughout the year, however, even if you currently have some catching up to do, you will still want to take a deep look into your expenses at the end of each year (or even better – the end of each quarter!) to ensure 1) you recording everything you are actually spending to support your photography business, and 2) you are not spending more than your pricing structure can support. Consider it a check-up for your business.
Here are 7 steps that I recommend walking through before you finalize your income statement for the year.
1. Be sure to print a receipt for all of the credit card fees you pay on each sale & add these to your expense log.
Depending on the service you use to collect automatic payment, card fees may not automatically load into your expenses. For example, if you collect payment via PayPal or Venmo Business, you will have to log into your account and print a statement for the year that shows all of your activity. This will list cash in/cash out, as well as the fees that you were charged per transaction to use their service. You will then likely have to manually add this to your expenses under Cost Of Goods Sold – Merchant Fees.
And this brings me to an important reminder regarding Venmo. If you use this service you MUST have a Venmo Business account. You cannot use your personal Venmo account to collect payment for goods or service or you risk loosing your money! Simply put – if you are using a service that does not charge you fees to collect payment for your business, it it likely not an allowed service. All electronic processing services charge businesses fees.
2. Print your gallery sharing service sales report and make sure you have included any fees and lab printing charges.
If you sell through your gallery sharing program, they are charging you a fee on each sale. This is not the same as a “commission”. Most gallery sharing services DO NOT charge commissions, however, they all charge service transaction fees, just like any other electronic payment service provider. You want to be sure to include these fees in your expenses.
In addition, if you have your gallery service provider fulfill your orders (meaning they send the prints/products to your clients), make sure you also include any lab costs associated with that sale. For example, I use 17 Hats as my studio management tool. When I sell through Shootproof, that sale automatically records in 17 Hats as income. The credit card fees and lab costs, however, do not automatically record. I need to manually add those by running a report within Shootproof that shows the details of my sales. I recommend running this report quarterly and adding all associated lab costs and fees.
3. Don’t forget to remit any sales tax owed to your state.
Sales tax is due at the start of each quarter for everything collected in the three months prior. You will need to remit any sales tax you collected on behalf of your client AND any sales tax that your selling service collected on your behalf.
For example, if you sell through Shootproof, they will collect sales tax from your client, however it is your job to remit it to your local Department of Revenue. Your gallery sharing service WILL NOT remit the sales tax they collect from your clients! They send this money to you instead as it is your responsibility to remit to your state. If you use a studio management tool like 17 Hats, there is a sales tax report built right into the program that will show you what you need to report and remit. If your gallery sharing service (like Shootproof) is linked to your studio management tool, it will also show you what you need to remit that was collected by them.
4. Check all open invoices.
When closing out your books, check any open invoices. Make sure these invoices are for upcoming services rather than past services. If they are for past services did you receive payment and forget to record it? Has payment not been received? Follow up and clean up any open invoices that should no longer be listed as receivables.
5. Tie 1099’s to your income report. Issue any necessary 1099’s.
If you did work as an independent contractor and you were payed over $600, then you will receive a 1099 from that company. You have to report all 1099’s received with your year-end tax return. A common example of this is if you teach for an education platform such as Click Photo School. You will want to ensure that your income reported on the 1099 ties to what you have recorded on your books.
Also, if you hired someone to work for you and you paid them over $600, you must issue them a 1099, and a second copy gets remitted to the IRS. Common examples of this are if you have an administrative assistant or a second shooter that assists you with weddings. You can find additional information on how to issue a 1099 here: https://www.irs.gov/businesses/small-businesses-self-employed/reporting-payments-to-independent-contractors
6. Check your books to ensure you have 12 months of all your recurring monthly payments.
As photographers we often rely on services that we pay monthly for to support our business. It can be helpful to print a detailed report of all your expenses for the year and check to make sure you have 12 months of all of your subscription services. Common subscription or monthly services used by photographers include:
- Adobe Lightroom/Photoshop Subscriptions
- Google Storage or GSuite Fees
- Facebook Ads
7. Check to ensure you have included all on your yearly online subscriptions services
In addition to the fees that we pay monthly, you will also want to ensure you have included any annual fees you pay for services that support your business. Common services used by photographers include:
- Gallery Sharing service fees
- Domain Hosting Fees
- Website service fees
- Your studio management program and/or bookkeeping program
- Planoly/Later or other social media scheduling service
- Crash Plan/Backblaze or other backup services
- Client Styling Service fees such as Style & Select
- Canva or other graphic design services
In addition to the 7 tips above, you will want to ensure you have updated your milage log. This is something photographers should be doing on an ongoing basis, but it can sometimes be hard to remember. An app like MileIQ can help.
And of course don’t forget all your other fees – lab costs, insurance, LLC filing fee, etc. You don’t want to miss a penny of allowed deductions!
Closing out your books is also a very important time to check sales and profits against your annual goals. I recommend doing this quarterly. Keep your eye on your per session earnings goal – Are you hitting it? If not, is it because you are spending too much or not charging enough? Maybe both? It’s never too late or too early to make an adjustment. The quicker you correct an issue with your spending or your pricing, the quicker you will be back on track to meeting your earnings goals.
Want to learn more about running a successful and sustainable photography business? Join me for my Click Photo School Classes Business From The Ground Up: Launching Your Photography Business and The Profitable Photographer: Your Guide To Sustainable Pricing.