As videographers, we tend to focus on the creative side of video production. However, if you want to take your videography to the next level and turn your skills into a profitable business, you will need to know a few things about accounting and budgeting.
Accounting doesn’t have to be challenging or scary. It’s actually quite simple when you have the right tools. Let’s take a look.
Good accounting is the first step
Learning how to manage your finances will allow you to price your services appropriately. That means knowing both your base expenses and the actual value of your services. It also means taking your desired net income into account. Your pricing must not only accommodate your needs but also reflect your value.
Understanding your costs will allow you to accurately budget so that you don’t end up losing money on client work. Understanding the financial state of your videography company will also make your business run smoother on the whole.
For one, you will be able to discuss budgets and negotiate more easily. You will also be able to audit your business faster and more efficiently. Banks and other business professionals are more confident working with a business owner who understands their finances.
Good budgeting and accounting practices also helps you analyze ways to increase profit. At the end of the day, it will only benefit you to learn this information.
If you don’t learn accounting best practices, you are a high-risk business owner. People may take advantage of your lack of knowledge. Theft and fraud will be harder for you to detect if you are not aware of where your money goes.
Let’s jump into the necessary skills you’ll want to acquire as you move from hobbyist to business owner.
Learn to communicate
Communication is essential in any business. There’s a reason almost every job description asks for “excellent oral and written communication skills.” But what exactly does this mean and how can you excel in these areas?
When it comes to your business, using professional language. Combine this with proper delivery and you have the difference between a professional and an amateur. This is especially true for emails and presentations.
As a business owner, not only will you have to communicate with your team, but you’ll also have to pitch and coordinate projects with investors and even bigger businesses.
With this in mind, it never hurts to take a communication class or workshop. Another great practice is to record yourself giving a pitch or talking through your finances to hear your dialog and recognize potential areas of improvement.
Organizational skills can be very beneficial for you as a business owner. Try to always keep your paperwork, receipts and bank accounts organized in an established system. A great tip to remain organized is to have a set destination for each of these things and create a schedule to ensure you take the time to sort it. For example, make Wednesdays a receipt scanning day to ensure you don’t miss any transactions week to week.
Planning each project
After your general business operations are organized, it’s time to plan your individual projects. What is your typical project budget? Make a budget spreadsheet that you can reuse for each shoot with space for estimated costs. As you move forward, adjust those estimates to the true costs.
Prior to the shoot, preparing a contract will protect both you and your client. This not only makes the relationship more professional, but it will also outline all of your expectations and will act as proof for the agreement.
It is important to note the payment schedule such as the deposit, payment and editing terms in the contract. As an example, you could ask for a 30% deposit due 14 days before shooting, 50% halfway through the production dates, and the final 20% once the project is edited and completed.
It can also be helpful to include in your contract that the production company owns exclusive rights to the footage until the payment is received.
Include an invoice with your contract as well to verify the amount being paid and keep track of finances on your end. You can always update and resend the invoice if any changes occur. Also include the forms of payments you accept.
When preparing an invoice, there are a few recommended details to include.
- Your name/company name.
- Your mailing address (for checks, tax paperwork, and other correspondence)
- An invoice number (for your records)
- Contractor/employee name and information
- Project name
- Due date
- The date the invoice was prepared.
- A detailed listing of charges (e.g., item, production, day rate/hr rate).
- Any additional lines needed (like tax, discounts, etc.)
- A total line
Having all of this in your invoice will make it easier to collect your money.
Every producer is different
The ability to think critically is also essential when it comes to budgeting for your shoots and tracking spending. When looking at the numbers, you must be able to spot patterns and come up with a coherent short and long-term strategy.
Try to think outside the box when you encounter a problem. This will allow you to develop a solution unique to you and/or your client.
Another skill that goes hand in hand with critical thinking is your ability to analytically forecast. This is extremely helpful when you are seeking to predict your future growth and if you are looking for investors. Being aware of your financial predictions and sales forecast will truly allow you to know your business and your projects inside and out.
To learn more about the fundamentals of business accounting, check out these sources:
- The 10 Bookkeeping Basics You Can’t Ignore: https://www.score.org/resource/10-bookkeeping-basics-you-can’t-ignore
- Small Business Accounting and Taxes: http://www.accounting-degree.org/small-business-accounting/
- 6 Fundamentals Every Modern Entrepreneur Needs to Succeed: https://www.entrepreneur.com/article/236004