Best Business Practices for Photographers [78]
What Is Your Overhead?
Someone has to pay your overhead, and in the end it's you, but amortizing your overhead over each assignment you expect to do will mean that you pass on to your clients your cost of being in business—something that every other successful business does. If you've been running your business for awhile and you don't know what your total overhead is, it's time to sit down and take one of those non-shooting days to get a handle on this.
First, have a look around your office space. Think about supplies, software, computers, cameras, lighting, accessories, phone and data services, desks, filing cabinets, hard drives for data storage, offsite data storage, and so on.
Next, sit down with your past 12 months' worth of credit card statements and banking statements and see what items you charged that could fall into the category of overhead. Do not count any film processing (if you're still doing that), shipping charges (if you bill each client for their shipping), or other items that are associated with your cost of goods sold or items that are reimbursable expenses by the client for each job.
Take this collection of expenses and review it with an eye toward annual totals for each item. Some might be biennial (computers and cameras) and others will be monthly (data services, cell services, rent/mortgage, and so on), but by making the necessary calculations, you will begin to see a larger picture come into play about what your true overhead is.
Back in the Day: The $40 Roll of Kodachrome
One of the things that arose when the bean counters at the media conglomerates began to try to cut costs and increase profitability of their companies (and thus justify their jobs) was that they began to look at photographers' invoices. The bean counters' personal familiarity with purchasing consumer-grade film at $5 or so a roll did not jibe with seemingly exorbitant prices for rolls of film on the invoices.
What these accountants did not consider was that in order to best have film ready for a client, it had to be ordered and either shipped to you or picked up via courier and brought to you. This incurred an expense. Then, professionals didn't take the film out of the shipping box and shoot an important assignment—they shot a test roll (or two) under controlled conditions and had it processed. This incurred an expense. Then the film came back from the lab— another expense. Then there was time involved to determine the best settings for the use of that film. This was an expense. Then there was the cost of storing the film in a refrigerator. Another expense. Then there was the waste when you were required to have your film xrayed twice during your trip, and you had to attribute 20-plus rolls of film to "waste" and trash it. This was an expense. All these expenses contributed to a cost per roll of film that was higher than the accountant's $5 roll of film he dropped into his happy-snap camera for family photos, yet he decided that this was an area in which they would establish a new policy regarding only reimbursing actual expenses. This made matters difficult because how do you amortize a courier charge over 20 rolls of film delivered among the numerous other items and then provide the client with receipts? My answer is that I don't.
Our policy—my policy—detailed on my website, which stood for years in response to client demands for receipts back when film was the default medium to deliver photography, is as follows:
We do NOT supply clients with receipts for any expenses. We do this for several reasons:
We are independent contractors, not employees. When tax time comes, the IRS requires us to provide receipts to verify expenses deducted on our tax return. The IRS does NOT require you to have those receipts on hand.
It is critical to the success of our business to maintain a proprietary suppliers network—an absolute cornerstone