Photography, more so than many other businesses, can have real peaks and troughs in the flow of work.
For wedding photographers, for example, summer is usually hectic with more clients than can be handled, while winter can be a dead zone.
Those who depend on pitching for photoshoots for corporate clients will be aware of the lull around Christmas and then again in August when decisions get delayed and offices empty.
Fashion photographers, product shot specialists, sports photographers all have their own defined seasons and big events.
In this context, it’s vital to have a strong handle on your cashflow – to understand how money is going in and out of your business as income and expenditure.
It’s a strong indicator of how healthy your business is in reality, right now, because more than turnover or profits, it reflects your ability to keep the lights on, purchase essential supplies and cover the rent.
Your ability to survive jolts and shocks is also determined by your cashflow position. If someone fails to pay for a big job on time, or at all, can you absorb the hit?
If your editing suite or a specialist camera fail at a key moment, and aren’t covered by insurance, do you have the liquidity to acquire a new one? Or would it bring your business to a temporary halt?
Forecasting and tracking
One of the most important parts of managing your cashflow is forecasting – forcing yourself to look ahead and make a realistic assessment of how your business looks in the coming months.
Forecasting isn’t fortune-telling and nobody expects a forecast to be 100% accurate.
It’s really just educated guesswork based on your knowledge of your own business, the ups and downs of your particular part of the photography industry and assumptions made from performance in prior years.
It can be hard to be objective, though. The temptation is to be either over-optimistic or severely pessimistic and neither is helpful on their own.
A good thought experiment, though, is to set out three scenarios.
First, your best guess at what will happen realistically – how many jobs will you book in the next quarter? Are average fees up, down or about the same? Do you need to purchase new photographic equipment to meet the terms of a brief?
Next, force yourself to envision the worst-case scenario. That regular client finds a new supplier for their annual team photoshoot, for example, or the agency you’re signed up with cuts the rates it pays for editorial images. What if the van you use to transport kit needs replacing? What if the rent on your studio goes up? You get the idea.
Then, to cheer yourself up, imagine a really good quarter: you’ve got more clients than you know what to do with, all of those big pitches in the pipeline are successful, and you happen to take a photograph that goes viral worldwide.
Finally, think through financial contingency plans – not just for the worst case but also the best.
If you’ve got tons of work coming in, can you cover the immediate cost of delivering it while you wait for clients to pay their invoices? How could you use a sudden influx of income to weather the next dip in trade?
Focusing on the worst case can also help identify where efficiencies can be achieved. There might be investments that could wait until next quarter or next year, for example, or standing fees such as mobile phone contracts that you’ve been putting off renegotiating.
Improve your invoicing
One particular thing that disciplined cashflow analysis often highlights is the need for more efficient invoicing.
Late payments are one of the biggest problems affecting cashflow for photographers and, indeed, most businesses in the UK: in response to a recent government consultation, 97% of respondents said they’d been paid late.
While the Government works on addressing this at a structural level – current proposals are for the Small Business Commissioner to issue fines, among other measures – there are a few things you can do yourself to get paid more promptly, more often.
First, make sure your invoicing process is efficient.
Secondly, make it as easy as possible for people to pay you for photographic work you’ve done – set out the options for payment and bank or payment service details in black and white.
Finally, ensure you’re absolutely clear about payment terms, including any late-payment fees you’ll charge.
If you’ve undertaken a photo shoot from another business and told their finance team you want paying within 60 days, for example, and they don’t pay on time, you’re allowed to charge interest at 8% plus the statutory rate set by the Bank of England.
On top of that, you’re also allowed to charge a fixed sum for debt recovery:
- £40 for any late payment below £1,000
- £70 for late payments at £1,000+
- and £100 if it’s above £10,000.
Let software do the work
For smaller operations such as freelance photographers, FreeAgent is best. It gives you the option to generate smart-looking, easy-to-read invoices and send them as PDFs via email.
That gets them to your clients as quickly as possible and, assuming you’re setup to receive online payments, which you should be in 2019, means they can transfer what they owe in an instant.
FreeAgent will even chase late invoices for you if you like, leaving you more time to do more of what made you become a photographer in the first place.
More generally, using software such as FreeAgent or Xero (ideal if your business is larger) can really make a big difference to your ability to feel in control of cashflow.
With instant readouts of how much is in the bank, how much you’re owed and any pending payments, there’s no longer any need to scramble around for information from multiple sources.
Alchemy provides a full range of accounting services for photographers including bookkeeping and management accounting. Talk to us for advice on your business’s cashflow and for help setting up cloud accounting software.