Managing Your Money

Budgeting and Financial Management

A lot of artists I come across are a bit scared of finances, maybe because they were one of the kids who thought of maths as something they couldn’t do. Yes, your job is primarily to make brilliant art, but if you’re an independent (freelance) artist you’re almost certainly managing your own finances, which will at the very least include budgeting for your projects (and ensuring you don’t overspend), and completing an annual tax return. Here’s a quick guide to dispel some of the fear:

Budgeting
Budgeting involves little more than basic arithmetic, and with spreadsheet software such as Excel now widely available (or free programmes which do similar things – check the internet and see links below), it is far less of a chore than a maths test. Good reasons to need to know how to write and manage a budget include:
•    Writing and monitoring a budget accurately means you’re less likely to spend more than you have.
•    Budgeting helps you to bring your project to more fully to life, and to work out whether it’s feasible. It means you have to ask yourself questions such as  – what will it cost to get the people, props, music, gigs, etc you need? What if money was no object, or what if you have to self-finance? Is it still do-able? Could you do it as a one person show out of a suitcase, or does it have to be the epic you first dreamt of?
•    If you (aspire to) receive funding for your work it’s essential that you can convince funders you can be responsible with their money. You’ll almost certainly have to submit a project budget when you apply and demonstrate that you’ve monitored it and not gone over budget.

Expenditure
At its simplest a budget is just a list of everything you need to spend to make your project happen.

Income
A budget should balance – expenditure must match income.  For performing artists earned income might come from a range of sources such as:
•    ticket sales from performances
•    merchandise sales (eg. programmes, t-shirts, DVDs)
•    income from running workshops or classes
•    commission fees from venues or festivals

Inkind Support
‘Inkind’ support is anything you are offered for free which has a monetary value and you would otherwise have to buy. Common things given ‘inkind’ include:
•    rehearsal space
•    people’s time and expertise

Funding
If your earned income doesn’t cover your project costs you’ll either have to cover the shortfall (eg. by borrowing some money or adjusting your expenditure), or by finding other sources of income. The usual way to do this is through raising funding. Funding is money given to you to make your project happen, rather than in direct exchange for goods or services (earned income).  Broadly speaking funding falls into:
•    Public – money from public sources such as taxation, lottery ticket sales (eg. local authority, Arts Council)
•    Private – money from private individuals and organisations (eg. donations from individuals or companies, crowdfunding, sponsorship, trusts & foundations)
(There’s a free workshop for Troop members on funding coming up on 24th February.)

Monitoring a Budget
Your budget should be the heart of your project management. You should estimate your likely expenditure and income before you start, and monitor these at regular intervals throughout the life of the project to ensure you are sticking as closely as possible to your projected amounts. If you find that you need to exceed your budget in one area of expenditure, is there another area where you might able to make a saving? Having all your calculations on a spreadsheet with the totals automatically calculated will enable you to put in adjusted figures along the way to see the effect of any changes on your ‘bottom line’. At the end of your project if you’ve monitored it properly you’ll know whether you’ve broken even, or made a surplus (profit) or a loss.

A cashflow is also a useful document – it’s a chart of when you expect to receive and spend money for your project which helps you anticipate moments when you might not have enough in the bank to cover necessary expenditure. Knowing when these ‘pinch points’ will be in advance means you can take evasive action – for example by delaying an item of expenditure or borrowing some money to tide you over.

Top Tips for Sound Financial Management

  • Overestimate your expenditure and calculate your income conservatively to avoid any nasty surprises.
  • Always add a contingency – an allocation of extra money to cover any unforeseen expenditure. This can be anything from 2% upwards of your overall expenditure. (A higher contingency should be included where your budget calculations contain more unknowns.)
  • Write both a best and worst case scenario budget, and play with variable items to give yourself an idea of which areas you can realistically reduce or increase depending on a variety of possible scenarios (eg. if you do / don’t get all your funding or box office income).
  • Learn how to use Excel or a similar spreadsheet programme, which will save you considerable time and effort in financial management. There are some excellent free tutorials on YouTube. There are also free programmes which are similar to, and compatible with, Excel such as Calc which comes with LibreOffice.
  • Keep a separate bank account for your artistic projects. You don’t need to be a registered company or charity to produce your own artistic work (whether as an individual or group), but it is useful to keep your project finances separate from your personal finances, particularly when it comes to the stage where you are receiving funding and other forms of income such as box office fees. When you’re first starting out a ‘basic’ personal banking facility is sufficient (rather than a business bank account). This is a personal bank account which usually gives you either a cheque book or bank card and access to online banking facilities, but you won’t be allowed an overdraft. This helps to keep you in the black and keeps all your project finances in once place, making it easier to monitor. When you become more established and are turning over larger sums of money and running regular projects you might need to open a business bank account, and if you become a registered charity at any point, you become eligible for a charitable bank account which usually provides free banking.

Useful links:

Articles on various aspects of financial management and funding for theatre artists:
housetheatre.org.uk/resources/category/finance/

Writing a budget:
housetheatre.org.uk/wp-content/uploads/ideastap-How-to-write-a-project-budget.pdf
money.co.uk/guides/how-to-write-a-budget.htm

Moneysavingexpert’s guide to downloading free software:
moneysavingexpert.com/shopping/free-office-software

Basic courses in financial management for performing arts companies:
itc-arts.org/training/timetable/financial-management--2