You have your pricing structure set up, so you know and understand how to price your individual pieces of artwork. However, you need to take into account your overheads and ensure you have sufficient cash flow to cover the cost of these.
Simply put, cash flow is the movement of funds in and out of your business. If you are to apply for a business loan or investment, it is highly likely you would need to provide a cash flow forecast. This document can help you forward plan and grow.
When taking a look at your expected cash flow, it is important to understand your expenses throughout the year. By forward planning and looking at things objectively, you can hope to eliminate any financial surprises. As the saying goes, ‘cash is king’! One of the first things you prioritise is any expenses you would expect to incur. This includes a vast array of items including any rent you may have (relevant if perhaps working from a studio), art materials, printing and postage costs, general utility bills and costs of any paid advertising you are undertaking. Then you need to consider your revenue, how much are you bringing in each month from your work? These need to at least balance out, but of course, ideally, your income needs to exceed your outgoings to ensure you are making a profit. The easiest way to look at this is, ‘I need £x to cover £x’.
Cash Flow Forecasting
By producing a cash flow forecast, this allows you to work out methodically and objectively what your expected income and outgoings are each month throughout the year. This can be produced using a simple spreadsheet, alternatively, ask your bookkeeper or accountant to help out if you are unsure. Additionally, there are many templates available online for you to download and use. List down all your outgoings month by month in this spreadsheet. From here, you can work out what you need to produce and sell to cover these costs. Of course, within the art industry, this can be tricky to work out as selling your work can be variable from month to month but if possible, look at previous years and check for any reoccurring patterns such as a sales peak in the run up to Christmas. Make sure you are regularly updating and reviewing your cash flow forecast so you can keep track of your business revenue.
It is always a good idea to work out where you could possibly make cost savings. For example, can you purchase your art materials in bulk? By doing so, you can often benefit from smaller delivery charges or at least save on these by ordering once rather than having lots of smaller deliveries. Also, some suppliers may offer you discounted rates for bulk purchases. Further to this, when it comes to having your work printed, we offer a print on-demand service. Therefore, you are only paying to have the prints of your artwork or photography produced on-demand – when they have been committed to by your customer. Ideally, you will already have this cash in your bank too as hopefully your customer will have already paid for you to commit to the print order.
If you are shipping your orders yourself to your customer, can you negotiate your delivery costs? If using delivery services, perhaps you could meet with a representative from said company to try and reduce some of these expenses.
In summary, it is important to spend some time forward planning and understanding these aspects of your business. By having a plan, you are less likely to incur any unfortunate expenses and surprises. Also, never forget the tax man! Remember, as a self-employed artist or photographer, you must complete, file, and pay your self-assessment tax on a yearly basis and should be included in your cash flow forecast!
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