Part I: Finance Structure for Artists? Yes, the Fundamentals
OK. I am harbouring fleeting apprehension writing this mini-series, as I fear these articles may well be glossed over by those eyes it is intended for. Still, I hope it can serve as a guide to budding artists and creatives through the structure that is finances.
Embarking on a journey as an artists comes with its set of unique challenges. Among these is understanding finances. From my recent career change, my personal experience shows me that many artists find numbers and spreadsheets a bit daunting – an antithesis to the brushstrokes and prints and sculptures which they fell for. Having walked this artistic path full time, I can honestly say that managing finances is an integral part to the artists’ palette as the artwork itself. Being partial to spreadsheets (my IBM ex-colleagues may vouch for me here), and having had to train business leaders to manage their empires, perhaps I have sufficient offerings here to demystify some of the financial essentials that every artists need to know.
In Part I, I am introducing the broader concepts, with details and examples to follow in Part II.
BUDGETING FOR ARTISTS aka: What Budget? aka: “I don’t need a budget!” Pro tip: Yes you do. This is your compass. A budget is a plan to outline what money you anticipate receiving (your income), and how you plan on spending it (your expenses). This helps you understand where you expect your funds are coming in from and where they are going; the idea is for you to remain financially sustainable and can continue to invest in your art. Consider it as planning your art supplies for the year, only encompassing your life and body of work.
GRANT APPLICATION I applied for one, got one (Thank You Get Set Solent – through you I made it to The News newspaper!). It wasn’t a walk in the park, but I have first-hand knowledge that without having a budget, or the know-how to build a budget, you are less likely to be in receipt of a grant. For many artists, grants are a valuable source of income. Having chosen to walk this creative path, I can vouch this is indeed true. A grant application process is not simple, but understanding the financial specifics helps alleviate a lot of the pain, AND increase your chance of success. Knowing your financial structure puts you ahead of the play as you can clearly articulate the purpose of the grant – be it for materials, studio space or exhibitions – and demonstrate the positive impact it will have on your artistic journey.
PROFIT AND LOSS (P&L) (Income Statement) aka Income statement This statement displays revenues, costs of goods sold, and expenses during a specific period, typically marked as a quarter of a year. It tells you if you made a profit or loss, over a given time frame. For instance: you sold five original prints this year, but also bought printmaking supplies like ink, carving tools and premium paper – and you paid for a workshop. The P&L tallies it all up for you to show you the net results.
CASH FLOW PROJECTION You guessed it, this is about the flow, the movement of cash in and out of your business, or to be precise, in and out of your bank account. This helps you plan for periods where sales may be slow, but expenses remain constant (studio rent, anyone?). Understanding cashflow ensures you have sufficent picture on hand to create buffers for when you need to cover your costs.
BALANCE SHEET This shows a snapshot of your financial position – your business’ net worth – at a specific moment in time, showcasing what you own as assets, versus what you owe others as liabilities. What assets? This could be your finished but unsold painting, prints, photographs or sculptures, and your art tools and materials, papers, brushes, your printing press, that special brayer you love so much. Include your bank balance in here. As for liabilities, this could be any outstanding payments for studio rentals, or artists insurance that you need for the next trade stalls. Take away liabilities from assets, and you have equity. Equity is what your business net worth is.
Right, then, knowing these concepts help you as an artist navigate the financial waters. It might not be too easy at first – but it’s not Astrophysics or Quantum Mechanics, either. Because it’s only Accounting. Ha.
With a bit of knowledge and planning, you can secure your financial foundation, and this allows you to pursue that which you hold dear in this path: creating.
So far, so good. Here’s the message to drive it home: Financial stability is key to artistic freedom. Grasp the basics and secure your future.
What does this translate to is: Act now. Set a budget. Track your expenses. Secure your art’s future. All it takes to maintain afterwards is 30 minutes of your time per week. I know this because I did this and shall do so again.