The holidays are here and the end of the year sales have been keeping artists busy packing, shipping, and hustling. But, before you sign off for a long and well-deserved vacation, you have one more thing on your checklist for the year.
‘Tis the season ... for art inventory!
If you have registered as a small business and you have physical artworks (or products) for sale, you need to complete an inventory for the year-end tax requirements. It’s definitely not the most fun or glamorous part of being an artist, but it is a necessary part of maintaining your career.
Even if you use art inventory management software, an actual count can reveal what you have on hand and make sure it matches what's in your system and what may have gone astray.
Here are just some of the benefits of performing a studio inventory.
Account for missing payments or consigned pieces
Taking an inventory of your artwork allows you to make sure your sales information matches what has come in financially. It also helps you track down any stragglers that have been unaccounted for in various consignment shops or galleries.
A physical inventory of your studio is a great way to make sure the information from your sent works and received sales match up and there are no discrepancies.
Better insights into the business side of things
Conducting a year-end inventory is the perfect time to assess how the business side of your art career is going. You can take stock of what types of artworks sold well and which pieces have been collecting dust in your studio for the last few years. Were there any similarities in these categories?
It’s a great time to note what styles, themes or mediums are worth putting more efforts into and what might be time to cut from the production schedule.
Better relationships with your collectors
Getting an accurate picture of what you have in the studio helps ensure that you’re able to meet all orders and restock on artworks, prints, or products that are running low. It also helps improves your reputation as an artist
By knowing where specific artworks are located (in a gallery, show, retail shop, etc) at any given time, you are able to run an organized and professional studio. With an accurate inventory, you have an immediate response ready when a collector reaches out to inquire about an artwork or a curator reaches out about a potential series to exhibit. Without a seamless way to present this information to collectors in a timely fashion, artists may lose opportunities, exhibitions, clients and their reputation.
Artwork Archive makes it easy for artists to get organized and perform a year-end inventory with easy-to-use tools to manage an art career.
So, how do you go about conducting an end of year inventory so that it isn’t a painful process?
Take note of what you currently have in your studio
Get a quick overview of what you currently believe to have in your studio and the value of those works. An art inventory platform, like Artwork Archive, has reports showing this information in just the click of a button. Print this out to make a checklist as you move through your studio.
Try an art inventory software solution
There’s good news: a studio inventory is only painful the first time if you have an art inventory solution like Artwork Archive. Once the first inventory is over, you’ll be able to keep track of all purchased items and art moving forward with a little organization.
Inventory systems help give you an accurate idea of your net sales, costs of goods sold and total inventory in just a glance.
Since you didn't become an artist to be an accountant, you want to seek out an inventory system that is easy to use, tracks critical details of your artworks and also gives you the added benefits of show tracking, contact management, professional reporting and more.
Quickly calculate the cost of your inventory
Your year-end inventory is the cost to you for the artwork that has not sold that year. You will need this number to get to your total of cost sold. To get your materials deductions on your taxes you will need to have the total costs of materials used in the production of your artwork minus the cost of finished unsold inventory.
This means estimating the cost of the artwork that was unsold at year end—including artwork in galleries, at home and in your studio. To do this, get a list of your works that remain unsold and if you haven't already, the associated costs of producing the work (canvas, paint, framing etc.) When calculating this number, remember that the selling pricing is not taken into consideration.
Estimate the value of the items in your inventory
For insurance purposes, ideally, you’ll have two values for every item in your studio: purchase price and replacement cost.
The purchase price is the amount you paid when you originally bought the items, and the replacement cost is the amount that would be paid if you were to buy that item today.
For high-value items such as kilns, computers and other big equipment, this number is also important to keep track of, if you plan to depreciate the costs over time.
If you’ve never done a studio inventory and you’ve had your studio for a while, chances are you’ll only be able to catalog the replacement cost. You can do a little online research and document the replacement cost for every item you want to get insurance on in the studio.
Create a running list of tools and materials
Could you replace all your tools and equipment out of pocket tomorrow if an unfortunate disaster were to impact your studio? If you are like pretty much every artist out there, the answer is a resounding “no”.
Luckily, there are programs like CERF+ that help artists in the tragic case of studio disasters.
However, in order to get returns on your insurance, you will need to keep a running list of the value of not only your artwork but your materials and tools.
Additionally, having an accurate list of your tools and materials will help on your expense reporting at tax time.
We recommend entering the following information:
- Item type
- Number or quantity of items
- Purchase price
- Purchase date
- Replacement price
- Condition of items
Track your expenses
Okay, bookkeeping probably isn’t the most exciting part of being a creative entrepreneur, but nothing helps more than keeping all of your financial records organized.
By staying on top of your income and expenses, only then can you get an accurate picture of your art business. Know where all of your sources of income are generated, where your money is going, and what you can write off with our Expense Tracking feature. More than that, you can tie your expense records to a client within the database, gain insight into how much you are spending in certain categories, and get one-click expense reports.
With tax season right around the corner, check out all of the main categories that you can keep track of in Artwork Archive.
NOTE: Once they are recorded in Artwork Archive, you can easily export them to Quickbooks or any other accounting software.
Put aside a dedicated time and make it as fun as possible
With so many obligations falling at the end of the year, it can be hard to find the time to set aside the time to do an inventory. Particularly if you have a lot of holiday orders or festivals, it can be the busiest time of year to conduct an inventory.
Turn your inventory day into more than just a mundane numbers game by stocking up on your favorite tunes, snacks and beverages.
Have studio or seconds sale
Use this time to assess what might be collecting dust and taking up rooms on the shelves. Then, take the opportunity to clear out some physical and mental space for new work by having a studio or seconds sale of all the work that hasn’t moved in the last few years.
Set aside the works that you are willing to hold for a special studio sale and start dreaming up all of your new ideas. Just make sure you have documented this work on your inventory program, so you have records going forward. It’s great to move forward, but it’s important to have a digital record of your trajectory as an artist.
How do you get started?
Artwork Archive helps thousands of artists each year with their end of year inventory with it’s intuitive and reliable tool for art management. It’s powerful features allow you to stay organized and conquer your business, so you can focus on making artwork.
Inventory accounting doesn't have to be complicated. By tracking your artwork and materials you can gain insight into your career.
Get started for free for 30 days and get your inventory organized and under control today.