The 5 Questions Creatives Need to Ask Their Accountants

For creative professionals, navigating your financial statements is an afterthought. If you trust your accountant, you may not feel the need to probe them for more information about the economic health of your ventures. But remember: your finances are a collaborative team effort. Engaging and asking the right questions is part of the process. After all, you hired them for a reason. 

A quality financial team - whether it be your accountant, advisor, or a literal team of multiple individuals - can help illuminate your path forward in your creative career if you know what questions to ask and why. These conversations are worth having all year round, but they’re especially relevant as we all near the end of the first quarter. So, let us help you kickstart that conversation with these five questions:

1. What’s my bottom line?

Your bottom line, or revenues minus expenses, will show you if your efforts are profitable. You can gather this information from your income statement. Between focusing on lining up your next project, chasing down invoices, and incurring all the business expenses that naturally arise with a career in the industry, this number might not be at the top of your mind. 

However, having a concrete figure to work from is a powerful tool when envisioning the next steps in your career. It can help you cut extraneous expenses, re-evaluate your creative and professional priorities, and consider other options, like signing with a company versus continuing to freelance.

2. Do I have enough cash?

Have your accountant walk you through your balance sheet to discover your working capital. Your working capital is your current cash account balance, plus any money owed to you and minus any outstanding bills or payments owed to others, including loans and liabilities. How much cash you have to work with at any given time will show you whether or not you can meet your short-term needs.

Can you withstand an emergency expense in your professional life? For example, if inclement weather strands you on location for longer than expected, can you weather the storm - literally? Surprise expenses are inevitable, and having a concrete number to work with will help you feel way more prepared and a lot less stressed. 

3. How are my finances prepared, anyway?

There are two possible answers to this question: cash and accrual, and it’s important to know which is which so you know what you’re looking at. Cash basis financials are straightforward - they report on what’s actually been paid or received as cash. Accrual basis financials incorporate more information into the picture, like what is owed by you and to you.

Cash basis is most common for individuals and small businesses, but if you want a more holistic view of your finances, ask your accountant to switch over. For example, if you have a high volume of cash inflows and outflows with unpredictable timing, an accrual-based accounting method will give you a better idea of how much you’re making, regardless of how much cash you have at the moment.

4. How much equity do I have, and how much can I take from my business account?

This especially applies to individuals working as a loan-out entity or anyone who has to do their own payroll. So, how much can you afford to pay anyone - including yourself - anyway? Can you afford your expenses? This is where your finances become a key player in shaping your goals.

Simply put, the equity section of your balance sheet represents how much value has been left in the company from previous years or how much ground you have to make up from unprofitable years, depending on how your business is currently doing. What is your equity number saying about your business, and how can you pivot or expand accordingly? Next, you’ll want to ensure enough funds are in your account to cover the next three to six months of overhead before considering any large purchases or investments. It’s crucial that you don’t put your operations at risk. 

5. Can I audit my financial statements?

The most common way of thinking about an audit is a tax audit. Auditing your financial statements is not that. It’s more like asking a doctor for a second opinion. In short, it’s a way to check the accuracy of your financial reporting. If you feel like the numbers are not making sense, it can provide assurance that your financial team is reliable and trustworthy. This doesn’t need to be a large confrontation with your team. But, if you could use the extra confidence, an audit is a completely regular and routine thing to ask for. 

Being clued into your financial life is a necessary evil for artists and other industry creatives who often manage their portfolios. Thankfully, there are professionals to help you along, but as an owner, the wisest decision is still to take a deeper look into your financial goings-on and leverage that to make inspired career moves. Your financial reports are often the most valuable place to get concrete data points in an industry that usually leans on subjective tastes, trends, and other elements not within your control. Finding the symbiotic relationship between your creative ambitions and financial understanding will help you carve out a path toward prosperity, transforming facts and figures into an essential industry compass.