I know, I know, this isn’t the most exciting topic in the world to talk about. Cameras, lenses, how we made an image…all of that is WAY more fun than talking about bank accounts. What photographer doesn’t like talking shop? But what’s the purpose of talking about all of that if we can’t support ourselves. If you just want photography as a hobby, that’s awesome! There’s absolutely nothing wrong with that. It’s a great way to release your artistic side, and capture some memories of your family in the process. If you’re like us, and want your art to support your lifestyle then you need to talk about the boring stuff…like bank accounts. The only way you can stably support yourself financially is to have a system set up for the money you bring in and the money that goes out of your business. It’s absolutely necessary. Oh, am I being to serious for a Monday morning? Oooops sorry : ) I know it’s a lot to take in this early on a Monday, but stick with me, and I promise it’ll be worth it!
About a month ago, I wrote a post on “setting up a photography business“. In that post, I briefly hit on the bank accounts we have set up for our business, and today I wanted to break those down a little more for you. I’m going to put a few disclaimers on this post. Disclaimer #1: this works for us! It’s not the best system, or the only system, but it is a system. I highly encourage anyone who collects any money (even if it’s only a dollar) for their photography services to talk with an accountant and a banker on how to handle those funds. Disclaimer #2: for this system to work, you have to keep up with it weekly. I sit down every Friday (or Monday morning if I run out of time on Friday), and do my paper work/bank transfers. The entire purpose of our system is so that we can run a successful & profitable business will planning for those unexpected financial surprises.
Are you ready? Do you think you can handle a little serious conversation right now? If not, go grab some caffeine and come back! I promise this will still be here : )
We have 4 business checking bank accounts for our business. 4 sounds like a lot, but it’s not that complicated as you’ll seed. I say business checking too, because it’s important that your accounts are protected under your LLC license and are not under your personal name or you could lose everything if someone were to sue you. Business accounts typically charge small fees, but talk with your banker and it’s possible that he/she might be able to wave some of those. No promises, but it’s at least worth asking.
Account #1: Operating Account
Any money that we receive goes into this account first. It’s the workhorse account for our business. When we set this account up, we made sure it had a high transaction limit (I think we have 100 or 200 a month), because we knew that this account would see a lot of action. We send everything into this account first, because we want to have a record of all our money. For us, it was easier to have it all go straight into here than trying to divvy it up between accounts when we deposit it into the bank. This is also the account that I write my salary checks from. We pay ourselves bi-weekly, to match when Kyle gets paid from work. I’ll be honest and say I forget which week to write myself a check, but thankfully I have a husband who loves handling finances that happily reminds me : ) Lastly, we pay all our bills out of this account! None of our other accounts even have checkbooks or debit cards. Everything comes out of this account. The other accounts are strictly for holding money until we need or want to spend it, which is when we transfer it over to this account.
Account #2: Taxes Account
We automatically put 25% of all incoming money into this account, plus all money we’ve collected in sales tax. The last thing we want is to get stuck with a huge tax bill that we weren’t prepared for. That’s stressful! But it can be avoided if you set the money aside before hand. We all have to pay taxes, so technically that money is already spent. So instead of having it in our operating account where it could potentially be spent, we move it to the tax account and leave it til the tax bill comes around. I love knowing that tax bubble is there! It takes so much stress off me! 25% is the number that works for us, but again talk to your accountant to make sure that will work for you. We also look at this as a savings account, because anything we don’t end up paying in taxes at the end of the year is ours to keep! YAY!
Account #3: Product Account
This is an account we created for when our clients pre-purchase products (like wedding albums). When they purchase an album with their booking package, it’s typically going to be 12-18 months before we actually purchase that album for them. First, the wedding has to happen, and then the album has to be designed, edited and approved. So we just go ahead and set that money aside as soon as they give us the wedding deposit. As if it’s already spent, because, really, it has been. I can’t tell you how often I meet a newly married bride who is dealing with a nightmare of a situation regarding their wedding album because their photographer didn’t put the money aside. Wedding albums cost hundreds (if not thousands) to produce at our cost. If you aren’t prepared it’s a very easy way to go out of business. Don’t do that to yourself. Put that money away and don’t touch it until the album is ordered! Once the album is ordered, I then transfer the money back into the operating account, because again all of my money comes and goes from that account…including album purchases.
Account #4: Emergency & Savings Acccount
It’s not 4th on the list because it’s not important. In fact, it’s very important! This account is a non-negotiable for us. We ALWAYS put 10% of the money we bring in into this account. Not 10% of our profits…10% of what we bring in. Having a nest egg is very important when running a business. What if a camera breaks, and I need to replace it now? No problem, we already have that money set aside. We look at this account as an emergency/savings account. We keep a minimum balance in there that will replace a camera at any time, and the rest is our savings. We try to keep it in there for big things like buying a new house, but we also use it for upgrading our equipment so that the money isn’t coming out of our daily expense operating account. We sit down and discuss it together any time we’re planning on spending the money in this account. Currently, it’s a baby saving account for unexpected hospital bills. Not planning on those, but if there is a surprise we’ll be a little bit more prepared because we are saving along the way : )
Sorry to be so serious for a Monday! Well, only kind of sorry. I want your business to grow, and managing your money is a very important part of that! Hope this helps, and if you have any questions, I’m more than happy to try and answer them. And if I don’t know, I’ll direct you to someone who does : )
And because every post is prettier with a picture, how cute was Saturday’s couple?! Just look at them!!! So stinking adorable!