Best Business Practices for Photographers [95]
We don't use these words—longitudinal accounting—to describe what we do, but it is what we do, when you think about it. We (should) look at everything along the line of impact, and the concepts—across the spectrum of photography and specifically across every photographer's business—apply. Considering all aspects and facets of your business and how efficiencies in one arena can have a significant impact in other arenas allows you to become more profitable and more efficient.
Reimbursing Yourself: Say What?
Your business and personal expenses are, and should remain, separate. Any time you make a personal (or any non-business) purchase with a business check or your business credit card (and you'd better do this only once in a blue moon) or you withdraw money from an ATM connected to your business' bank account, it is essentially the same as if you owned a brick-and-mortar storefront business, and you walked up to the cash register and removed that amount of money in bills. At the end of the day (or month or certainly year), the business will require you to either document that expense as a draw or provide receipts showing that the removed money was used for business purposes.
Here's how I handle this. Suppose I go to the ATM and withdraw $200 from the business account on February 5. Initially, I classify this as a draw, until such time as I have receipts in hand for those expenses to validate that they are business expenses. Suppose that in June, I have some downtime and a collection of receipts from the beginning of the year for cash expenses (parking, taxis, small office-supply purchases, and so on). Hopefully I have noted on parking receipts the assignments each one correlated to; however, if I've not done that, it is easy to track an assignment or business-related trip into downtown by date and time and then validate that as a business expense. Suppose my receipts subtotal $86 for five garage expenses in January, $18 for three cabs, and $46.20 for the office-supply store purchase. This totals $150.20. I would take a blank piece of paper and attach all the receipts in groups by type, note the totals for each group, and handwrite a note on it about when I was "reimbursed" for the expense: "Reimbursed by ATM withdrawal on 2/5." However, this leaves $49.80 unaccounted for. This I treat as a draw, so I would note on the piece of paper "Draw: $49.80." I would then go to the line item in my accounting software, split the line item, and assign each subtotaled amount to the correct expense category, including the line item for a draw. I would then file the piece of paper with the receipts under "petty cash reimbursements" in my tax records folder for the current year. Now my accounting software has an accurate accounting of what it had previously listed as a draw, I am properly reimbursed for my business expenses, and whatever unaccounted-for amount between the receipt total and the ATM total becomes a draw. Often I am able to get within $10 of the ATM total.
Another example would be if a spouse made a purchase on the business' behalf, or you had to use a personal credit card for a business expense. (Again, this should be once in a blue moon.) In this case, suppose the expense was for $350—maybe a new flash that either you bought en route to an assignment because yours had broken, or perhaps your spouse was out running errands and you called to ask her to pick up your lab order. In both cases, suppose a personal credit card (or check) was used. There are two ways for you to be reimbursed. The first would be for the business to issue a check to you or your spouse for the exact amount, with the receipt filed with the business expenses. In this instance, I would again attach the receipt to a blank sheet of paper and note the details of the expense. Most importantly, I would record that