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As an artist, managing your finances can be a daunting task. But with the right tools and guidance, it doesn't have to be. In a recent episode of the Art Coaching Club podcast, I had the pleasure of hosting Ashley Ford, a business accountant and founder of Pretty Penny Accounting. We delved into the world of finance for artists, discussing everything from inventory management to tax write-offs and budgeting.
Overview of Pretty Penny
Ashley's firm, Pretty Penny, is a virtual accounting firm that helps female entrepreneurs understand the financial side of their businesses. They not only provide accounting services but also offer teaching programs and resources to empower business owners.
Tax Write-Offs for Artists: What You Need to Know
One of the most common questions Ashley receives from small business owners revolves around what expenses can be written off and how to track them for tax purposes. Many business owners, including artists, are unaware of the expenses they can write off or are hesitant to do so out of fear or lack of knowledge. A few significant write-off to consider are the home office deduction, art supplies, framing costs and more.
The Benefits of Tracking Expenses and Separating Finances
Ashley and I emphasized the benefits of tracking expenses on a monthly basis rather than waiting until tax season. We also recommended separating personal and business finances by having a separate bank account or credit card for the business. This separation provides clarity on business expenses and makes it easier to track and manage finances.
When to Hire an Accountant or Bookkeeper
Ashley explained that there are two scenarios where it makes sense to hire an accountant or bookkeeper. The first is when a business owner has a good handle on their finances but lacks the time to manage them effectively as their business grows. The second scenario is for those who prefer to outsource the financial aspect of their business from the beginning.
The Role of Advisory Accounting and Finding the Right Service Providers
Ashley differentiated between bookkeeping, which focuses on accurate record-keeping of past financial information, and advisory accounting, which involves looking forward and making informed decisions based on financial projections.
We also discussed the importance of finding service providers that make you feel comfortable and understood. I shared my experience of finding Ashley on Instagram and feeling a connection.
Understanding Forms and Budgeting
We touched on understanding forms like the 1099 and W-2. Ashley explained that the W-2 is for employees, while the 1099 is for contractors.
We also discussed the concept of budgeting and how it can be reframed as a "spending plan." By creating a spending plan, you can determine how much money you will need for supplies, software services, and paying yourself.
The Importance of Treating Your Small Business as a Legitimate Entity
Ashley shared her personal experience of starting her business and how even when she wasn't making much money, she took the necessary steps to legitimize her business. I agreed with Ashley, emphasizing the importance of mindset in entrepreneurship.
Tools and Resources for Small Businesses
To conclude, Ashley shared the tools and resources available to help small businesses track their budget and prepare for tax time. They have various tools and resources on their website and on their Instagram page.
In the end, our conversation underscored the importance of understanding and managing your finances as an artist. With the right tools and mindset, you can balance your creativity with your finances and thrive in your artistic journey.
Want to listen to the full episode? Click here to listen!
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