You never really know your cost of doing business until you start doing business. No matter how thorough you are in your advance planning, it’s likely that expenses you never imagined will impact your bottom line.
The best way to learn the true cost and profit margin of your business is to track your income and expenses. This may sound elementary, but it can be quite a challenge if you’re operating a small business with a handful of employees. Because I’m no expert in tracking my expenses, I hired a bookkeeper, started using Quickbooks and retained an accountant to review my finances quarterly and prepare my tax documents.
It’s important for me to pay attention to my finances so that I can stay focused on my goals. This means taking the time to record any payments received for my bookkeeper to reconcile, as well as saving all of my receipts and making regular transfers from my business account into my savings.
An Independent Contractor Is a Small Business Owner
A common mistake among freelance photographers is failing to track expenses and revenue. I made this mistake when I began freelancing for newspapers. I didn’t equate being an “independent contractor” with owning a small business. I generated receipts for my customers, paid quarterly estimates, kept a stack of receipts of my expenses, and that was about it. As a result, I didn’t have a clear picture of what was coming in and how much was going out.
Each year, when I filed my tax return, I discovered how much money I made and how much I spent against my earnings. After several years of this, I could see that I was just treading water. And that’s how it seems to go for most freelance photographers.
I finally realized that an independent contractor is a small business owner, and I resolved to put all the numbers together. I found that by learning how much operating my business cost, I had the knowledge I needed to grow the business and become profitable.
Hit the Books to Grow Your Business
By returning to my books regularly and examining my expenses and my revenue over time, I’ve been able to plan ahead and make better business decisions. I’ve also been able to invest in my business, handle more debt when I needed to, and save more for the future.
Learning what your actual cost of doing business is, and then learning how to manage it, is a fundamental step to shaping a photography business that can grow and prosper.
[tags]photography business, photography advice[/tags]