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"Creating Your Own Destiny"
Mission Statement - Studio Operations & Management
To develop successful entrepreneurs who have a clear-cut sense of purpose and realistic, meaningful, achievable goals.
Financial Management
"Photographers have a reputation as haphazard business people. Acting on the
principle that commerce is anathema to art, many photographers just let business
take care of itself.
"Unless you track your finances, you can't get a line of credit, a mortgage, or even
a lease, in some cases. You can't tell if your creative fees are high enough. You
can't tell if your costs are out of control. You can't minimize your tax liability. You
can't plan for college costs or for your retirement. And you can't make good
day-to-day decisions, such as whether to buy rather than rent a piece of
equipment, whether to spend more or less on advertising, or whether a particular
assignment or stock contract is worth the money, to cite just a few examples.
"Granted, bean counting can be a bore. But it pays off, according to those who
make a habit of it. They range from freelance assistants just breaking into the
business to veteran assignment shooters grossing more than $1 million a year.
'One of the most successful photographers that I ever worked with really got into
this stuff when he was an assistant photographer. I find that the ones who
take an interest in it early on are the ones who tend to be more successful than
the others'."
PDN - Bean Counting 101 for Photographers
Business Structure
There are legal formalities involved in setting up the structure of any new business. In choosing which structure to adopt,
there are two considerations to consider:
- Protection from personal and financial liability in case the business fails.
- The manner by which you and your business will be subject to income tax laws.
Your accountant, lawyer or financial advisor will help you decide which strucure will best help you to minimize your financial liabilities and taxes.
 Review the following: ((You'll have to register to view the following - it's free)
Opening Bank Accounts
Since it is necessary to keep your business and personal accounts
separate, it will be necessary to open a separate bank account for
your enterprise. As a matter of fact, some advise that you should
open three business accounts:
- A "regular" checking account where all sales and any other monies
received are deposited. All operational expenses to include your salary
are paid from this account.
- An "interest earning" checking account in to which weekly deposits
are made to cover sales tax collected. Quarterly or monthly, a check
will be drawn on this account to pay sales taxes to the state. This
will keep you up to date with your tax obligations.
- A "money market" account earns higher interest than a bank checking
account. A regular monthly amount can be deposited for future
capital expenses or to serve as "rainy day fund".
Don't let the cost of a checking account by the sole criteria. Consider
the importance of convenience and customer service.
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Bookkeeping & Accounting
To be successful at your enterprise, you have to make money, and to make money you have to be a competent businessperson. To be a successful businessperson you'll need to know about financial management. No matter how skilled you are at creating your product, providing a service, or marketing your photography, the money you earn will slip between your fingers if you don't know how to efficiently collect it, keep track of it, save it, and spend or invest it wisely.
Poor financial management is one of the leading reasons that businesses fail. In many cases, failure could have been avoided if the owners had applied sound financial principles to all their dealings and decisions. Financial management is not something that you can leave to your banker, financial planner, or accountant — you need to understand the basic principles yourself and use them on a daily basis, even if you plan to leave the more complicated work to hired professionals.
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Financial Statements
"Financial terminology is the language of business, and money is its unit of measure. What you earn (income), what you spend (expenses),
and what is left over (profits) are all expressed in dollars and cents....Thus, it is a crucial first step in starting a profitable business to be able to set realistic income goals, develop a credible plan
to acheive them, and recognigfze and handle any events that would threaten your financial success"
Geza Szurovy,Profitable Photography
To have a clear understanding of how your business is doing financially, and the ability to predict and plan for
the future, a sound understanding of basic financial statements is essential. Financial statements will help you to:
- identify unfavorable trends and tendencies in your business's operations before the situation becomes critical.
- monitor your cash flow requirements on a timely basis, and identify financing needs early.
- monitor your performance against your financial plan, if you have developed one.
Simply put, financial statements are periodic summaries of the results of business transactions that change the content
and amount of a business's assets, liabilities and equity.
The three financial statements that follow are part of every business' financial management process:
- Cash Flow Budget
Is a projection of your business's cash inflow and outflow over a certain period of time. The
primary purpose of using a cash flow budget is to predict your business's ability to take in more cash than it pays out. This will give you some indication whether or not your business can support you.
- Income (or Profit & Loss) Statement
A summary of the revenue and expense transactions over a period of time, usually a year. It tells you:
- the income the business has earned during the accounting period.
- the costs or expenses that were incurred by the business during the period.
- the difference between the costs and incomes for the period, or net profit (or loss)
Unlike the Cash Flow Budget, the Income report will also include accounts receivable, accounts payable and depreciation.
"Among the myriad reports you can generate, the most important for a small business is the profit-and-loss statement, or P&L. From your accounts receivable and accounts payable data, it tallies all income, all expenditures and resulting profits or losses for a certain period of time -usually monthly, quarterly or annually. It is the best indicator of business performance over a period of time.
"P&Ls are powerful and versatile financial tools. For starters, they answer the
question: How much does it cost per day just to be open for business? You
simply add up all the operating costs on the P&L and divide by the number of
working days in the reporting period. The result can be the basis for important
business decisions.
"P&L statements also enable you to calculate your "break even" point-how much
income you have to generate at your particular level of expenses in order to start
turning a profit."
PDN - BeanCounting 101 for Photographers
- Balance Sheet
A statement as of a certain date, of the business's assets, liabilities, and equity.
The Balance Sheet has three components: assets, liabilities, and owner's equity (or net worth).
It's called a balance sheet because there is a balance between assets on one side and
liabilities and equity on the other. Owner's Equity is on the liability side because in effect
the business "owes" (thus a liability).
Read the following:
Complete the following:
- Download Cash Flow Projection spreadsheet from eCompanion Doc Sharing
- Cash Flow Assignment (Class handout)
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