As soon as you start accepting money for creative services, you’ve entered into the realm of taxes, accounting, and financial reports. Keeping accurate financial records is a necessary part of running a business. If you aren’t at least minimally organized on this score you’re going to end up scrambling just to fill out your tax return—or to answer your accountant’s questions in preparation for April 15th.
Creatives tend not to be “numbers people.” There’s something about the artistic mind that runs counter to balance sheets, P&Ls, and charts of accounts. More often than not, when it comes to finances, creatives choose to hand those tasks over to a part-time bookkeeper.
Consider Becoming Your Own Bookkeeper
If that’s what you’ve done, I’d like to challenge you to rethink that decision. There is so much to gain from learning how to do your own books. Especially since managing the books for a creative services company is much easier than it is for other business models. You have no inventory, few physical assets to depreciate, and a much lower volume of transactions than others.
Financial Insights Drive Business Decisions
One of the main benefits of managing your own books is gaining a vital source of information that functions as a feedback mechanism for making larger decisions about your business. Every business owner makes important decisions about the kinds of projects they take, how much to charge, who to hire and when, and so much more. In order to make good decisions, you have to have good information. The ebbs and flows of your financial performance is a huge source for this kind of insight.
The Key Making Bookkeeping Simple
If you do your own books, you will need to manage them consistently on at least a weekly basis. In fact, weekly updating is the key to easy bookkeeping. When you reconcile your bank statement weekly it should take all of three minutes. That’s because there just aren’t that many transactions to process in one week. And with fewer transactions, there is much less likelihood of errors that can throw off a reconciliation. Or, if there is one, it’s super to spot, since there aren’t many items to investigate. In contrast, if you only manage your books monthly, or even less frequently, tiny errors can become huge mysteries.
What’s more, when you update your books weekly, the routines involved start to become second nature. Practice makes perfect. But if you only open up QuickBooks when you have to answer your account’s questions during tax season, simply locating needed reports can feel like a maze.
By doing your own books weekly, you not only create an extremely helpful data resource but, by reviewing them weekly, you’ll be keeping your hand on the pulse of your financial performance. As a business owner, having this information top of mind is invaluable.
Using a Real Accounting System
If you decide to take me up on this challenge you’ll need to invest in a real accounting system like QuickBooks or Xero. The typical invoicing systems that most creatives rely on won’t provide you with the reports you need to gain the insights contained in your financial information. There is no doubt a learning curve to Quickbooks, but YouTube is chock full of resources on how to set up your chart of accounts, reconcile statements, manage invoices, and pretty much anything you’ll need to know.
There are certain basic blocking and tackling skills that every entrepreneur needs to master. Tracking your finances is one of them. Once you get over the learning curve, the effort to maintain your books is minimal, but the rewards that come from knowing what’s happening with your money is invaluable!