Selling my photography: the big questions

lesquamloon

Let me begin by stating that I fully understand that you (the folks at Wave) are focusing on service businesses for now, and that I know I will be needing to use one of your inventory workarounds. But I love this product enough that I very much want to do just that. My hopes are that we will grow together, and that a few years from now when my sales warrant paying for your various services, you'll have evolved to include your own inventory feature or the ability to handshake with someone else's.

That said, you always seem to genuinely want to hear individual scenarios, so I'm going to explain my situation in detail in hopes that it can help not only me but others in a similar bind. Here goes:

I'm a high school French teacher whose photography hobby has turned into a side business selling fine art prints of my work, as well as cards and calendars, and probably more kinds of swag as time goes on. Most of what I sell is landscape and nature photography (I live in the particularly photogenic lakes region of New Hampshire), and photos of France and other travel destinations.

After successfully shooting a few weddings some years back, I made the executive decision never to add that kind of stress to my life again. So for the moment, my business is just selling my art (as opposed to what I have come to realize you have in mind when you include photographers in your target clientèle.)

I discovered Wave last October when my first calendar took off (in my world that means I sold 150 of them for 20 bucks apiece), and I needed a tool for invoicing. As an accounting newbie, I was thrilled that you could take me through the introductory steps so quickly and fluidly that I was sending professional invoices in no time.

Knowing that I would eventually be wanting to get all of my information into Wave once I understand how businesses work, I have been meticulous about creating an invoice for every sale I have made to date.

But because I haven't yet understood enough, I haven't entered any data into Wave on the the COGS side. Instead, I have kept a separate spreadsheet with a chronological list of all of my purchases of prints, cards, calendars, and other supplies, giving each purchase a PO number. (And I know POs aren't on your road map, and will accept that too, for now. 😉)

I have a record of all of my equipment purchases, and plan to enter it all into the system and depreciate it all.

I have records of travel expenses and charitable contributions to enter.

And now that I have read "The Accounting Game" cover to cover (I highly recommend it to creative types needing a fun way to learn), done all of the lessons at the very user-friendly DWMBeanCounter.com, and devoured your own phenomenal Fearless Accounting With Wave, I know just enough to be dangerous.

But I don't want to get it wrong—which brings us to the nitty gritty.

---

So I have several different revenue streams (look at me throwing out the fancy terms):

1. WEB SALES: I sell prints directly through a WordPress website using Photocrati e-commerce. I have the option to drop ship through my photo lab, but for now I'm just getting stuff printed on demand, having it sent to me for quality control, and then sending it on.
2. RETAIL STORES: Several area stores are selling my cards and calendars. They purchase them from me at double what it costs me to make them and sell them at the same price that I have them on my website.
3. ART GALLERIES: A few galleries have approached me about selling my work through them on commission.

I am hoping and praying that all of this can be tracked in Wave.

So here, in a somewhat jumbled mess, are the first hurdles I have as yet to overcome:

1. An individual card sells for $6 and a boxed set of $4 goes for $20. I don't have the exact numbers at hand, but let's say that the finished goods in question consist of a 2 dollar card, a 20-cent envelope, and a 10-cent plastic sleeve (and a 15-cent box for the boxed set) .
   I realize I can't account for each item in Wave, but should I be creating a Product for each item when I enter their purchase? How do I make Wave know that the cost of this good sold was 2.30? I know I need a journal transaction like in your Fish Food example , but it doesn't take me through all of the important details... I have read every word about inventory in Fearless Accounting and on your site and in this forum, and still don't know where to begin.
2. At the moment, I have just a few product accounts (as a result of creating invoices) : individual cards, boxed sets, and calendars. Am I correct in assuming that I can use each product account for many SKUs? And is it going to work for me to continue in this vein and make a separate product account for each size and type of print? And do I check off both that "I'm selling this" and "I'm buying this" in the product description to account for where I get it from as well as where it goes to?
3. And here's a big one: I have mostly used my personal credit card to purchase raw materials and prints. (I finally just opened a business bank account, but I will still want to keep using the card for the air miles). Can I upload all of its transactions and delete everything except business-related ones? When I first got Wave I was given the impression that I could have a separate personal account and watch my personal finances too. Can I theoretically upload all of the transactions in my personal bank account, PayPal, business checking, and credit card, and then specify which transactions belong in the business profile and which in the personal?
4. I'm thinking that for the galleries, I will put the prints I've entrusted to them for sale in a Commissioned Inventory account. What would that look like in Wave? Is the gallery both a customer and a vendor?
5. I'm going to be doing limited editions of certain pieces with a pricing structure that goes up as the edition becomes more scarce. Should I create a separate account for each set of limited editions, or just a "limited edition" account?

Considering this is just the tip if the iceberg, I'm thinking I should invest the $45 in getting you guys to help me get set up. But before I do that, please be honest :
is Wave right for me? And what would the $45 get me if I did ask for support?

Thanks for staying with me.

Alexia

Hi, @lesquamloon!

Congratulations on getting your business off the grounds! Seems like your business is blowing up and I'm more than happy to hear that. If we get to play a small part in your success, better yet! If you want to share a link to your online store, I'd love to take a look and see your work for myself. And as a Québécoise expat in Toronto, I have a soft spot for French teachers

It also warms my heart to hear about all the reading and research you've done. I'm glad you enjoyed Fearless Accounting! We're pretty proud of it, and, well, hearing that Wavers appreciate our work always feels great I'll make sure to share those comments with the team.

Let's jump into your questions. I'll start by saying that while Wave is built with a certain type of business in mind, it can also scale pretty well. We use it for our own accounting at Wave HQ, and, well, Wave is quite a bit different from the businesses of our average user.

1. You can't tell Wave that 1 unit of this product equals a given amount in COGS. It's something that has to be done manually. So following the model in the inventory article on the Help Center, you would have to make a journal transaction for each of those cards sold. Obviously, doing it for each individual sale would be beyond tedious, so I'd recommend tallying your number of units sold either weekly or monthly, multiplying that by $2.30 and using that total as your COGS for those items. With a bit of spreadsheet programming, you could automate all the math involved and only have to plug in the final number. You could put all of those products under the same Asset Account if you'd prefer, or set them up as different accounts, but they absolutely should be considered separate products for purchasing purposes. Your bill should as much as possible like the one handed to you from your supplier.
2. Yes, you can have multiple SKUs under the same account. Plenty of Wavers lump all of their sales into a single Sales account. The income accounts you use here are mostly up to your preference. How much do you need to track those accounts as separate entities in your report? I wouldn't recommend making your Sales and Purchases products the same since there's a transformation process at play. You purchase a few items, combine them into something you can sell and they essentially become a brand new product.
3. There are a few different ways you could handle this. The most detailed way to do it would be the one outlined in this article. That will allow you to reconcile your account on Wave with your credit card. You could also create a credit card in your Chart of Accounts called "Owner's Loan" and use that as your credit card. Just add any transaction you use your credit card for on there and consider any repayment from your business to that credit card as repayment of that loan. It'd be a lot of work to cherry pick transactions this way, and so is moving transactions between your personal page and your business page (we're working on it tho!). As such, I have to recommend separating your business accounts and personal accounts as much as possible. For simplicity's sake, I would go for the second suggestion myself, and upload my bank statements for that account manually, after removing all personal transactions from that CSV file by hand.
4. I'm not an artist myself, so I'm not too sure how art galleries work If I get something wrong, please let me know and I'll adjust my answer. You would have a Commission Inventory asset account with the cost of the prints to you as an amount. When you sell a piece, make an invoice for the amount you get from the gallery (you don't have to send them a copy if they don't want one, it's just the quickest way to do it), approve it and record it as paid. Then, adjust your inventory account to account for COGS. I wouldn't actually take into account the amount kept by the gallery at all. Although if you want to keep track of it, you could add it as a note on the invoice.
5. That's a really cool idea! And honestly, I'm not sure! It's really up to you, making them different accounts will allow you to keep track of those sets separately in your reports with more ease, and combining them in the same account will give you fewer accounts to worry about. In the end, it depends on the kinds of insights you want out of your reports.

Does all of this make sense? Let me know if you need precisions or more information. I love this kind of questions!

lesquamloon

Alexia, I am amazed at the detail with which you respond to queries—vraiment époustouflé . It was, in fact, with you in mind that I wrote my post last night in a bout of insomnia—and you didn't disappoint. Wave is very lucky to have you.

As I've said, I have been reluctant to add any data other than my invoices and connected bank accounts thus far, but I do believe that I may be ready to take the plunge at this juncture, having a fairly good idea of the big picture. (As an example of my stagnation, I'm so afraid of doing something wrong in setup that I've spent way too long looking at sample charts of accounts and numbering schemas. Three digits or four? Do all people in the same industry use the same account numbers? What if I forget an important one and it ends up falling out of pretty sequence?)

I've almost fully grokked number 1, so I'm going to go ahead and give it a try and then come back when I have questions. One sentence in there made for a true "ah ha" moment (I hope): "Your bill should as much as possible like the one handed to you from your supplier." Do you mean to say that I could actually re-create a bill in Wave that contains the very same items for purchase that I purchased, similar to the way I create an invoice with items for sale? If so, that's very cool, and more obvious than I had realized.

The Owner's Loan idea is a graceful solution to my problem, and I am going to adopt it immediately. I know I should know from all the reading I've done, but just to be sure, would that be a liability account? I especially love the idea of cleaning up the csv first. I've been hung up on the idea that deleting transactions from real-world statements would screw up the balance of things. I need to realize that the only balance of things that matters is the business's—the rest of my messy life doesn't need to play a part, and I can filter it all right out.

I'll be back with more questions after I dive in. Merci mille fois—sincèrement.

Oh—and since you asked, my website is here.

lesquamloon

Oh one last thing—when I buy things with the personal credit card, I really consider it to be more owner INVESTMENT than loan. But that's a different thing, right? I guess what I mean to say is, I don't want to pay myself back. I'm putting money into the business. Thus far I've never put one big lump sum in and said THIS IS THE MONEY I'M PUTTING INTO MY BUSINESS. I just put money in as I need to.

Alexia

You are too sweet! I'm lucky to have Wave as well! It's the first time I work for a company that cares about its people this much. It makes it easy to care right back

You seem to be more than on top of things when it comes to accounting knowledge. And if you run into any issues, we're never too far.

That's exactly right for bills. Here's the Help Center article on bill creation. You can use that feature to copy your supplier's invoices line by line.

That Owner's Loan would be created as a credit card in Wave, so yes, a liability account. Specifically, a credit card so you can use it a payments account for bills, receipts and so on.

I'm calling Owner's Loan to differentiate it from Owner's Investment/Drawings, which is an Equity account. To pay off that owner's loan out of your personal pocket (which sounds super strange, but bear with me) would essentially be a transfer from Owner's Investment/Drawings to Owner's Loan. Owner's Loan here needs to act as a credit card so you can use it as a payments account. Now, the idea that you (the person) are paying a loan that your business owes you (again, as a person) might make an accountant raise an eyebrow, but it does work!

Really happy to help! I'd finish with something in French as well, but I swear if I even think about French too much, it takes me a week and a half to get my accent back under control

I'll be sure to show off your work to the rest of the team. Some of those are truly breathtaking.

lesquamloon

Okay, so it's time for an update and check for understanding. Hopefully putting all of my questions in one post again is okay. My aim is to get all of my ducks in a row before applying payments and journal transactions. As soon as I'm sure I've got things set up right, I'll go back and log payment of all of my bills when they happened, then go through invoices and apply COGS transactions to account for inventory sold.

Here's what I've done since the last post:

I created the following inventory accounts (in Assets):

I re-created 40 bills from vendors, via which I've created the following “raw-material” inventory products, which I have categorized in the bills according to their respective inventory type. (I'm purposefully being general on product names so that they can apply to many different instances, as distinguished only in the description field. Individual SKUs can be reserved for my inventory in a spreadsheet elsewhere for now. [I made a spreadsheet to keep track of items of inventory ordered and sold. I may end up uploading it to Stockpile or Skybridge or some other free inventory program if someone recommends one.])

• When there was shipping, I assigned it to "freight in" so that I could add it to the cost of goods sold later.
• When there was a vendor discount coupon, I put in a separate line item called "Discount" assigned the primary inventory category of the order and entered a negative number for the discounted amount.

I created the following sales categories:

And I created an "Owner's 'Loan'" account under credit cards with which to record purchases I make with a personal credit card (that are actually not meant to be paid back).

Questions:
1. Am I good so far?
2. As I said above, I have created raw material products I buy from vendors within the bill creation interface. When I do this, the product ends up with the correct category assignation in the Purchases: Products and Services list.

If I create a product from within that list however, I'm not given the option to give it anything other than an expense category. I can override this when adding that new item to a bill, but it won't permanently retain the inventory category as a default like ones I've created in bills. Is this a) by design b) a bug or c) an indication that I misunderstood a key concept?

3. I saw in the explanation of the new sales categories that I can't apply them to past sales. Shouldn't I be able to delete a paid invoice and recreate it to get around that? I tested the idea and nothing happened, but I don't understand why.

4. I tested out paying a bill with the Owner's Loan and paying off the loan with a transfer from Owner Draw/Contributions, and it worked like a charm. So, would these next steps make sense?

• Enter payments for all the bills.
• Enter a transfer at the end of each month for the amount of the bills paid in that month.

5. I’m pretty sure I understand how the inventory journal transaction is going to work… I’m thinking it’s best to spread out both the added freight in and subtracted discount in calculating item cost from a given shipment, and use that number from my spreadsheet when calculating Cost of Goods Sold. Does that make sense?

This turned out to be much more of a post than I had anticipated. I'm just so afraid of creating a monster I won't be able to tame.

Thanks for any and all guidance anyone has to give, particularly Alexia.

Alexia

I wish everyone was this detailed about everything, @lesquamloon! Let's do this.

1. Yeah, actually. You're doing perfectly!
2. It follows the same logic as for the products you sell (which are always attached to a Sales account). I'll bring this up with the rest of the team, I can see a good argument to allow for asset accounts to show up here, especially since we allow you to manually set them as asset accounts on the bills themselves.
3. Yes, exactly. The only difference would be in your reports. Line items on invoices are assigned to Sales by default. If you recreate your invoices after modifying the category for individual items on your Products and Services list, they'll be categorized accurately on your report once saved.
4. My recommendation would be to make the payment to that card whenever you actually pay off your credit card out of your own pocket, dating the transaction on the day of the payment. It'll make for the most accurate paper trail.
5. That's how I would do it as well.

Honestly, you're asking good questions and showing that you know your stuff. I have all the faith in the world that you'll tame this beast

lesquamloon

@Alexia , thank you. This is honestly all new to me, so it's gratifying to know that I'm getting it. I'll be back with more questions sooner than later I'm sure!

Alexia

Genuinely happy to help, @lesquamloon. You're doing more than your due diligence when it comes to research.

Reach out whenever you need to!