Best Business Practices for Photographers [89]
A Few Insurance Endnotes
A word about insurance and taxes: First, consult your accountant (see Chapter 11), but there are varying degrees of deductibility for health, life, and disability insurance and the like. Because businesses that offer their employees insurance can deduct that expense of serving their employees, the laws are changing on both federal and state levels about the percentage of deductibility of these insurance expenses. Make sure you are maximizing your benefit by discussing the variety of insurance types with your accountant. Business insurance is deductible, so I see no reason why you shouldn't have it.
Chapter 11 Accounting: How We Do It Ourselves and What We Turn Over to an Accountant
I can't say I know many photographers who enjoy the accounting side of business. In fact, I know more accountants who've left the field to become photographers. There are so many financial transactions to handle—and I'm not even speaking of those photographers who have a large number of invoices. I am referring to the need to track expenses, expense types, vendors, tax records, cash receipts, reimbursement paperwork, and such, before you even have many invoices to handle. How about those credit card bills? That's just one check to MasterCard, Visa, or American Express, but you've got meals, equipment expenses, and numerous other categories of expenses on that one bill. How do you handle all those things? My solution? Accounting software, coupled with a great accountant.
Software Solutions: The Key to Your Accounting Sanity
There are several accounting solutions, from Microsoft Money, to fotoBiz, InView and StockView by Hindsight, and QuickBooks by Intuit. All have their strong suits, and I encourage you to look carefully at all of them to determine which one works best for you, and check with your accountant of choice to determine which he or she uses so you can easily exchange files. Using software, you can track your expenses, bank account balances (many via online integration directly with your bank), credit cards, and cash outlays. Further, by using accounting software, when a lender asks for a profit and loss statement (referred to as a P&L), a statement of income, or other forms, these statements and reports are mouse-clicks away, and they are accurate (or at least as accurate as the data you put into them). Almost all software solutions are available as 30-day trials or as demos. For my office, our solution for accounting is QuickBooks, which is available for both the Mac and the PC. Although we use separate software for estimating, our invoicing, bank accounts, and check writing all take place in QuickBooks. One challenge is documenting every expense you make on behalf of the business, so that you are deducting all those expenses from your taxes and conveying that information to your tax preparer accurately and in a format he or she can understand.
Retain Those Receipts and Don't Give Them to Clients
In Chapter 8, I outlined why we do not release our receipts to clients. I will restate what our policy is again because it's an important point:
Our original policy, detailed on my website, 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 on our Schedule C. 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 of a profitable business, and in an insecure environment we do not wish our competitors