Financial Tools for Artists: Who Checks on Your Health?

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Artists face unique financial challenges—from irregular income streams to managing personal and business finances effectively. Choosing the right financial tools for artists to build healthy personal finance practices ensures stability, well-being and growth. 

First, let’s review the most common and important tools for ensuring long-term strategic financial growth. Then, look at how a financial advisor might help you to better use those tools and finally we will consider how you can plan for the future with an advisor.

(Attend our Pro-session with Financial Advisor Christina Snyder to learn whether a financial advisor should be your next step. Join our Coworking with Creatives invite list to not miss out on future Pro-sessions.)

Monitoring Your Financial Health

At the center of your financial health are two critical financial tools for artists: a balance sheet and a cash flow statement. They will look different for everyone, but should provide the same essential information.

Financial Tool for Artists 1: A Balance Sheet

Download our sample balance sheet.

Think of it as your general physical health. A balance sheet provides a snapshot of your financial situation at any given point, detailing your assets (what you own), your liabilities (what you owe) and net worth. This overview helps you understand your net worth, which is a crucial indicator of financial health. The balance sheet is the big picture of your wealth.

How to use it

First, start by entering accurate values in the respective asset fields, including liquid assets (like cash, checking and savings accounts), investments (such as retirement accounts, crypto, stocks), real property (your home or other real estate), and personal property (vehicles, art, etc.).

This will help visualize the distribution of your assets and understand where your wealth is concentrated. Balance is important for well being.

Next, on the liabilities side, input all current debts including mortgages, car loans, credit card debt, and other personal loans. A properly setup balance sheet will subtract your total liabilities from your total assets to calculate your net worth. 

Regularly updating this sheet (e.g., quarterly or annually) will help you track your financial progress over time, identify areas for financial redistribution, and make informed decisions about savings and investments. The balance sheet is a very good indicator of long term financial well being.

Financial Tool for Artists 2: A Cash Flow Statement

Download our sample cash flow spreadsheet.

Think of it as your fitness. A cash flow statement is designed to monitor how money flows in and out of your finances monthly, helping you manage your cash effectively to avoid shortfalls and optimize savings and investments. In early stage business CASH is king. If you can’t pay yourself cash to live, buy supplies to make your products, or pay staff to work you will be out of business shortly thereafter.

How to use it

Cash flow is defined by a time period, usually a month, but could be shorter or longer. To begin, enter all sources of income in the income section, including salaries, freelance payments, owner draws and investment returns. Next, detail your expenses, categorized as fixed (rent, mortgage, car payments) and variable (groceries, entertainment, unexpected expenses). A tool like the sample spreadsheet will calculate the total income and expenses over a time frame, providing a clear picture of your net cash flow (total income minus total expenses).

Then, use this report to identify delays in payments, opportunities to grow income streams, trending spending patterns and areas where you can cut costs. For instance, if you notice a lag in payment for certain services you may consider revising your invoicing or if you see a consistently high expenditure in discretionary categories, consider setting stricter spending limits. Additionally, track the ‘Net Cash Flow’ over several months to gauge the consistency of your savings or the frequency of dipping into savings for regular expenses.

By maintaining diligent records and checking in regularly, you can fine-tune your budget, confirm your payment structure works for outlays of cost of goods or services, and ensure that your spending aligns with your financial goals. You can adjust as necessary to manage seasonal fluctuations or life changes. Being proactive will greatly improve your financial stability and growth. Cashflow will impact your profit (or loss) and your wealth (or struggle to live).

Getting a Second Opinion

Ultimately, good financial tools for artists should be simple and flexible enough to account for the ebbs and flows of creative business. Producing and analyzing these financial documents can be a first step towards financial health.

If you feel like your financial health is in need of support, why not consider seeing someone who can help? A financial advisor might be the person you need to see. They will be able to help adjust your balance sheet and alter the trajectory of your cash. Ultimately, they can ensure you get the most out of these tools, learn to read them, and identify the changes that will have the biggest impact on your financial health.

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Cash Flow for an Artists: What Is It and Why You Need to Pay Attention to It

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Have you ever opened your banking app to look at your balance, only to find it’s much lower than you thought it would be? Not my favorite feeling either, but if you have encountered this sensation, then you’ve experienced the effects of cash flow!

If there never seems to be enough cash on hand for your creative endeavor, consider signing up for our business of art newsletter.

 

Just like you need to keep an eye on your personal account balance to make sure you have sufficient funds to live, so too do you need to pay attention to what’s coming in and going out of your business to sustain your practice. That, in a nutshell, is cash flow. 

When mastered, strong cash flow for an artist can make the difference between a business that’s healthy and one that’s no longer in business, or the difference between making more art or waiting for the next check. Let’s take a closer look at what cash flow for an artist  is, how to ensure you have a positive cash flow, and the impact that it can have on your arts business. 

 

What Is Cash Flow?

Cash flow is the movement of money through your business. Typically speaking, money coming into your business is revenue, while money going out of your business is expenses. Cash flow for an artist takes into account both revenues and expenses to date, as well as future revenues and expenses. In this sense, it’s also a forecast of what you can expect financially.  

Cash flow is calculated over a duration of time. Frequently it is analyzed over the course of a month, but you might also calculate the flow for a day, week, quarter, or year. A month tends to be most helpful as “bills” or invoices from vendors are usually calculated on a monthly basis. 

What Is Positive Cash Flow?

Cash ebbs and flows; sometimes we have more cash on hand, sometimes we have less. Having a positive cash flow for an artist means that more money is coming into your business than going out. It’s a sign that your business is healthy. It’s important to note that this doesn’t necessarily mean you’re profitable, as things can change over time. 

The dynamic nature of your cash position makes it important to look at your cash flow monthly. Consistent check ups allow you to a) ensure you’re not spending more than you’re taking in and b) adjust your forecast of revenue and expenditures of future cash flow to keep sufficient funds on hand to stay operational. And yes, when you are in business for yourself you can control the expenses and revenue. You can put more energy into marketing and sales to increase revenue, and you can reduce costs by changing vendors for products and services.

Additionally, a cash flow report for a certain period is often required by banks and lenders in cases where you need to take a business loan. 

 

How to Calculate Cash Flow

There are a number of ways to calculate cash flow for an artist, some more complex than others. If you’ve invested in an accounting tool, they frequently offer a cash flow report, but it’s good to still understand how it’s measured. 

A basic cash flow formula looks like this:

Income – Expenses

So, for example, let’s say last month you sold $5,000 worth of art. But you also spent $3,000 in expenses such as supplies and materials, studio rent, utilities, etc. during the same time period. You therefore have a $2,000 positive cash flow for the month; i.e. $5,000 revenue – $3,000 expenses = $2,000 cash flow) .

You can certainly project the same numbers out over a time period, but it’s important to take into consideration that both revenue and expenses are likely to fluctuate over time. That is, you’re not going to necessarily bring in $5,000 every single month, and your expenses may shift based on your business activities. 

But, let’s say you want to project your cash flow for the next four months. That’s a little trickier, particularly for an artist with revenues and expenses that fluctuate. A cash flow report might look like this:

January February March April
Cash at beginning of period $5,000 $7,000 $5,000 $9,000
Estimated Revenue  $5,000 $2,000 $6,000 $3,000
Estimated expenses $3,000 $4,000 $2,000 $3,000
Final Cash on Hand (change in cash + cash at beginning) $7,000 $5,000 $9,000 $9,000

 

Of course, your cash flow report should be more detailed, with itemized expenses and potentially income (particularly if you have multiple income sources). 

Ultimately, putting together a cash flow report and reviewing it on a monthly basis will help ensure you’re staying on top of expenses, operating within the bounds of your income, and whether or not your business is on a positive track. 

Your cash flow report can also help you prioritize your activities. If you need more revenue, you may want to work on your sales or marketing. If you have ample cash on hand, it may be time to invest in new equipment or more materials. Understanding cash flow for an artist, can give you more time in the studio with better gear to make the things you want to make!

 

Want help putting together a cash flow statement? I’m happy to help! Set up a time to chat with me or check out one of our Coworking with Creatives sessions. 

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