How should I keep my records?
Even if you hire a bookkeeper or an accountant, the better you keep records of your income and expenses the easier it will be to understand what’s going on with your art business and this will save you money. Here’s a progression showing how I’ve encountered business records working as a bookkeeping consultant.
Shoe box. Wow, not just one year of receipts in a shoe box but this client wanted me to go back through the previous year and get all his expenses organized. Even if this is what you decide you will do, at the very least make a note on the receipt what the payment was for. When you hand over your shoe box to your bookkeeper at least he or she will be able to identify and categorize the expenses.
Keep a paper ledger. Every time you make a sale or a purchase write down the date, the amount, and what you sold or purchased. You can have columns set up for the various expense categories and then simply total the columns to know how much money you’ve made and what you are spending. Be sure to save all of your receipts!
Computer Spreadsheet. This is basically the same as the paper ledger but formulas will do the calculations for you and you can know at any time what your income and expenses are.
Bookkeeping Software. There are many different types of software available at just as many different prices. There are inexpensive household versions of accounting software that will track income and expenses but a little more sophisticated record keeping is worth the expense. You’ll be able to track inventory, print financial statements, and watch cash flow. You will save money at tax time when your tax accountant doesn’t have to plow through records to complete your tax return.