This is a series about starting your own graphic design business. If you missed the first part, finding your first graphic design clients, you can find it here. The second part, dealing with establishing your business properly, is here. None of the portions of this article are meant to be legal or business advice. If you want to get information that applies to your personal situation, contact a CPA and a business attorney for help.
Much ink is spent writing about ‘how much’ you should be getting paid for your graphic design work. I’ve even spent quite a bit of time massaging the subject. Nobody quite breaks down on ‘the process of getting paid’ and what best practices you can follow to avoid pain later on.
If you followed the steps outlined in step 2, about establishing a business in your local city and state, and you’re located in the United States, you should have two things at this point: a business name registered with the state (can be your name, a DBA name or an LLC company name). You should also have submitted with the IRS to obtain an EIN number.
Open a business bank account
Personal money mixed with business money is a terrible way to start your business journey. You should always separate the business money from your personal accounts and not let that money get commingled. Trust me, it will make your life a lot easier to keep clean records when tax time comes around.
Go online and check out different business checking accounts. On this topic, every business owner has their own preferences. Some people prefer to keep all their accounts in the same place. Some people prefer to use a credit union for their business, others prefer to use a larger bank. I personally bank with Chase.
You will need your EIN number, and your business registration paperwork in order to open an account in the name of the business. I recommend you open a checking and a savings account at the same time and that you get a debit card. Now, for checks, I do not have paper checks for my business account. When I need to send a payment, I do it through the bill pay setup that Chase offers on their portal or I pay electronically via debit card.
What’s the deal with business credit cards?
If you have good credit, and will need a bit of a larger credit limit for purchases like travel or computers, a business credit card might be a good decision for you. Business credit cards rack up points and either give you money back or allow you to apply the points to future purchases.
A business credit card will rely on your personal credit for approval. So you do need to have a good personal credit score in order to be able to access this type of product.
Collecting payments in a professional manner
You’re probably wondering how to get paid. Many companies – especially larger ones – will want to issue you a paper check when they pay for your services. That payment will come via regular US Postal Service mail and you can deposit into your account once you receive it. However, it is the 21st century and electronic payments are a thing. Because you’ve probably made payment for services in the past, your head goes to one of two obvious places: Venmo and PayPal.
Venmo and Paypal are both owned by the same company. And they are a proper method to receive payments, as long as you have set up your account as a business account. This means you have provided your business information, and your business EIN so at the end of the year a 1099-K form can be issued to you for the payments and transactions you did on the platform.
Other companies like Quickbooks, Freshbooks, Honeybook, Dubsado, Proposify, Wave, Stripe etc. will offer you a payment platform embedded in their invoicing capabilities, allowing you to send and receive secure electronic payments from ACH transfers, debit cards and all major credit cards. For a fee. And this is the point where many new business owners freak out and say NO WAY! I am not paying a fee!
Payment processing fees are a tax deductible cost of doing business. It is illegal in many states in the US to pass those payment processing fees to your clients. Making your clients jump through hoops to avoid paying a tiny percentage in processing fees means you are avoiding the protection these payment platforms offer businesses and exposing your business, your client and yourself to unnecessary security risks and to the possibility of your payment platform getting cancelled for being used against terms of service.
You need a professional to help manage your money
One of the things you won’t see me skimping on is financial services like CPA and bookkeeping. Why? Because when it has to do with numbers, you’re probably better off relying on someone who deals with taxes and bank accounts every single day. If you’re a creative, you know that there’s a lot more to editing a good picture than just a good camera. Similarly, a qualified expert will know the best way to support you on your new business when it comes to deductions, how to organize your business, which platform to use, how to pay yourself, etc.
When it came time to select a good CPA and a bookkeeper, I selected women-owned businesses (which is something I like to support whenever possible) and professionals who understand how to work with creatives. Our businesses are inherently very different from other service providers, and it feels good to not have to walk someone through what the Adobe Creative Cloud subscription means.
I suggest you take the time to make free appointments with a few providers and have a consultation about how they prefer to support businesses like yours; and select someone that feels like a right fit for where you are in business. This is not a final decision, usually you can change bookkeepers and CPAs as your business grows and changes; but also if you find a good fit you can elect to stay with that person for many years. I’ve been working with my CPA for over 10 years – after I famously had a panic attack while trying to balance a Quickbooks account – and with my bookkeeper since 2019.
What my CPA does for me
First of all, she keeps me sane. Her instagram feed is completely full of super informative content and she is an all-around awesome lady. She was the first professional I ever hired as a contractor at Storey Creative and I count my lucky stars that I have her in my life. I pay her a monthly fee that covers my personal and company tax preparation (I have an S-Corp which requires an entirely different business tax return from mine), tax planning services, quarterly tax calculations and hand holding for when I have questions (like just now I sent her an email asking if PPE is tax-deductible), plus she’s helped a few times when we’ve had to get on the phone with the IRS.
What my bookkeeper does for me
Another amazing lady, seriously recommend surrounding yourself with powerful female identifying entrepreneurs whenever possible. Deb helped setup my Quickbooks, answered all of my sales tax license questions, taught me how to use Quickbooks Online, has amazing suggestions when I need a new bank account, helped me process my PPP loan in 2020 and then helped me get it forgiven. She balances my checkbooks, she helps me plan for big expenses, she gets everything ready so my CPA can get my taxes done quickly and efficiently and disentangles things when I mess them up. Just today she told me small businesses should expect growth of around 20% year over year, and anything over that number should be a nice surprise, which helps me not make my personal goals too unattainable.
How I spend the money I make
Now for the juicy tidbits, I spend part of my gross revenue paying other contractors, paying operational expenses (business insurance, software subscriptions, savings for new equipment, advertising, website and hosting for my company, email service, office supplies, transaction fees, etc.) and then I spend the rest paying myself; which I do as a combination of payroll using Gusto as a salary with employee deductions, owner distributions and retirement savings.
Your individual expenses will be very personal to you and the nature of your business; but in general I say this because you might notice I highlighted transaction fees in the paragraph above. As much as you have bootstrapped and want to extract every dime you make out of your business; the reality is that there are going to be costs associated with running a business that you are better off not trying to save on.
I hope this is an informative post for you. Money is such an odd subject, and we have to stop making it a taboo so that we can all rise together. I’m always happy to chat about this or other business topics.