Wednesday, August 15, 2007
Cash Flow 101
Inside every successful photographer there's a successful businessperson. One of the most important aspects of making a living in this field is managing your resources to keep your cash coming in.
Today, because cool people like Everard Williams, cochair of the photography department at the Art Center in Pasadena, are willing to share their secrets of success with me, I can give you the scoop on one of the best industry services available to photographers.
Fred Kaufman runs Photo Associates, Inc. (www.photoas.biz), a financing partner for creative professionals. Say you get booked by a major advertising agency to shoot a fabulous campaign, but you're a little light on cash flow. Once the job awards, you can go to Photo Associates with your PO number and make arrangements to borrow some bucks to produce the job. After the job is finished shooting, you fill out paperwork to “assign the account” to Photo Associates. This gives them the legal right to collect on the invoice you issue to the ad agency. Because Photo Associates has maintained a fantastic reputation for 25 years and they know the majority of the account people at all the agencies, they do a great job of getting paid quickly. Once they collect the funds from the agency, they issue you a check in 24 hours minus their fees.
As of this writing, Photo Associates charges 10% of the borrowed amount over 30 days and 6% if they get paid within 30 days of you borrowing the money. Provided that your credit record is in good shape and your dealing with a known advertising client or magazine, Photo Associates offers an incredibly savvy way to do business.
Everything Is Negotiable: Vendors
Setting up accounts at labs and rental houses is standard practice and incredibly important for managing your cash flow. If you shoot a job on May 1 that requires $1,500 of rental equipment, the rental house isn't billing you for that until June 1. If you've given them a credit card to charge, you won't be responsible for paying that amount until anywhere between June 20 and June 30, depending on the grace period extended to you by your credit card company. (If you use an American Express “charge” card, this process is a lot easier to keep track of because they don't allow you to carry a balance from month to month.) This leaves you a little breathing room as you wait for slow-paying clients to come across with the money they owe you after the shoot is done.
If you hire assistants, makeup artists and other talent-oriented individuals, pay them right away out of your advance. Having a reputation for paying within seven days of the shoot wrap puts you in a fantastic position to negotiate rates for future shoots, which adds to the profit margin of the job. The same goes for your lab and rental house vendors. Develop a solid reputation for paying your bill on time, and you'll be able to negotiate a 10% to 20% discount on a rental package every once in a while. This is an important option when you're trying to squeeze a little profit out of a fun, yet low-budget job.
Everything Is Negotiable: Clients
Some clients will write you a check upon delivery of the images. Some will try and hold off your final payment for 60 days or more. Those who hold you off are manipulating their cash flow in much the same way you are. For those clients, it may be beneficial to give them an incentive to pay you early. A 1% to 3% discount off the balance due for payment within seven days of delivery is a standard practice. Your decision should be based on your cash flow. If you have a good amount of cash in the bank and the interest you're paying on your debt is small, it might be worth it to hold out and wait. But if you're trying to get rid of a credit card balance with a nasty interest rate, you'll benefit more financially by giving up a few points on your final bill.
Know Where You Stand
One thing that can affect your business more than anything else is your credit record. It's updated once a month by all the creditors with whom you have an account. I can't stress enough the importance of paying your bills on time, even if it's only the bare minimum. If your credit record is in good shape, you always have options for expansion. You can go to www.creditexpert.com to get your credit report and see where you stand.
Page 4 of 5