Has your hobby turned into a creative side business and become a source of income? You’re one of many who have benefited from the handmade revolution over the past decade, leading the trend for a love of crafts that have a more personal touch.
You may have started making jewellery or sewing as a fun pastime and now you find yourself actually earning an income from the thing you love doing.
You may be a full-time self-employed crafter or your business may provide a part of your income, alongside a day job.
Either way you’ll need to think about finances for your creative side business.
As long as you are organised, you’ll be able to price your work correctly, record expenses and submit your tax return. Monetary control means you’ll be able to keep enjoying your craft creatively and financially.
This article offers you advice on how to manage your finances while working on your creative side business.
Record your spending
Think about everything that you need to run your business, which includes things such as sticky tape and ribbon, and record every one.
Typical expenses include:
- Tools and equipment
- Gift boxes
- Thank you notes
- Business cards
- Jiffy bags and packing items
- Online selling site fees
- PayPal fees
- Bank fees
- Craft fair fees
- Training and courses
- Printers and computing
Open another bank account
You may have started out buying beads or skeins of yarn with your disposable income via your personal bank account but as you start to run your venture as a business, you’ll need to separate your finances.
Open a basic current account so you can keep track of income and expenditure, rather than having to sort through personal bills when it’s time to do your accounts.
It can also be helpful to open an instant access savings account to ensure you put money aside for tax, fees and any customer refunds that may crop up.
Most creative and media business owners will self-assess as a means of paying tax, which is easy to do online. The deadline for online self-assessment tax returns is 31 January for the previous financial year – for example the deadline for the 6 April 2017 to 5 April 2018 tax year is 31 January 2019.
You can file any time after the tax year is over and it is good to get it out of the way.
If you have a job alongside your business, you will need to pay tax on your craft income after your PAYE income. You will also have to pay National Insurance at the standard rate, and student loan payments if applicable.
Pricing your work
One of the things that will set you apart from other crafters and sellers is your pricing. Being able to set a realistic price for your time, skills and materials will allow you to produce quality pieces, and have time to develop new products and learn new techniques.
Being able to record your expenditure will allow you to see how much it costs to make each line. From there you can add cost for time, postage and packing and then incorporate profit. If you aren’t sure of the cost of anything, you may under-price your work and your skills.
Running a business alongside a day job
Having a good hold of your finances will really help you keep crafting as well as holding down a day job, and it doesn’t have to be time consuming if you have the right resources.
Having online accounting software at your fingertips (accessible from the cloud) and a method to organise expenses and sales will let you enjoy the best of both worlds – crafting with a secure salary too.
Do you dream of quitting your day job?
You’ve had lots of interest, you’re making lots of sales, wouldn’t it be great to quit your day job and devote all your time to your handmade business? You can’t do this without a strong understanding of your finances.
Start to care as much about the profit margins as you do about finding the very best canvas for your paintings. Being able to see if your business could be viable can be achieved with financial planning. Here are some things to consider.
Are you making enough profit?
What we talked about with regards to pricing earlier is the first step to making your business viable. Use your accounting data to study whether you are charging enough. and where you can charge more by adding value.
Where do your customers come from?
Are you selling more on one online selling site compared to another? Or is your website achieving the best results? Seeing which places work best from you will allow you to make better marketing decisions.
Can you save money on equipment and supplies?
Your accounting reports will show you what you are spending money on and how often. If you see that you use 9ft of silver wire every three months but you are buying 3ft every month, you may save more by buying it in bulk instead.
Are there trends in your income?
Christmas is obviously a big time for any retailer but are there any other peaks? Events such as Valentine’s Day, Mother’s Day, Father’s Day or Easter could bring more business too. And note the quiet times, so you can boost your income or use it for marketing and product development.
How much do you need to earn to quit your job?
The cold hard truth. How much do you need to sell to equal your current income? Do the sums and work out a timeline for achieving this.
Final thoughts on managing finances for a creative side business
Staying on top of your finances is important for any company. If you can do this for your creative side business, you’ll be giving yourself a better chance of success.
Think about where you are spending your money, buy the right equipment as an when you need it and use your accounting software so you can stay on track.
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