Art Show - Financial Arrangements

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Art Show Financial Arrangements

Separate accounting & money

Money taken for art must be paid to the artists, and not diverted for other convention expenses. The convention takes its cut after the artists are paid and money taken on behalf of artists may not be diverted.

Most conventions are run by amateurs – sometimes badly. Giving the art show a separate checking account will prevent the convention from accidentally spending money that should have gone to artists. This is only a problem when the convention is going broke - money is fungible (fungible: one dollar looks like another. Registration and art show dollars are interchangeable until you run out of them). It will not stop the convention from deliberately raiding the artists’ money. Only honesty and common sense can prevent that.

Despite what ASFA's art show guidelines may state, a well-run convention with decent accounting procedures usually has no need for a separate account. On the other hand, it doesn’t cost much and it's better than bad accounting with no separation. One size doesn't fit all. Some cons should definitely have only one account and some should definitely have two, but most could go either way.

Advantages of a separate account:

  • Easier to separate art show expenses from other expenses. If you have good accounting practices you shouldn't need this; if you don't, it may help.
  • It may satisfy legal requirements in some jurisdictions (e.g., VAT problems in England, possible escrow account requirements in some states).
  • Can't accidentally spend artists' money on other expenses (this is only a problem when the convention is in financial trouble).
  • If you have a separate treasurer for the art show (which could be the director, or someone else), it can reduce the load on the main treasurer. This matters more at bigger shows. If this person can write checks without the main treasurer, the show can probably get checks written more easily. But few conventions are comfortable trusting the art show with a blank checkbook; most will insist that the convention treasurer sign them, which negates that advantage. Being able to write the checks out except for the signature reduces the amount of time you need the treasurer, but you could do that on the convention’s general account.
  • It will avoid arguments with those people who think it's necessary.

Disadvantages:

  • It allows cons to hide bad accounting practices, rather than fix them. "We've fixed it so that when the con collapses, the artists still get paid" is a start, but it would be better to fix the accounting so the con won't collapse.
  • It costs more to maintain two accounts, and takes more effort to manage them and merge charts of accounts. It's a significant workload increase for a single treasurer.
  • If your primary treasurer is good, you probably don't need this. If your primary treasurer isn't good, where will you find one that is? If you do, might you not be better off replacing the primary treasurer, rather than fixing just the art show's money problems?
  • Unless you start this account with lots of seed money from the main account, you'll have to wait for checks and credit cards to clear before you can pay artists. If you’re using the general fund of a well-established convention, there should be enough money available that you don’t have to wait for tham to clear. Though too many shows don't pay that fast anyway.
  • It tempts people to say "The art show made $2,000" because there was a gain of $2,000 in the art show account. If the art show's share of function space and other overhead costs were $1,200 - which was paid from the general account - then the art show only made $800. This is also a problem with a combined account when you report on finances by category, but that presupposes a modicum of proper accounting, which you can at least hope might imply awareness of the problem.

Types of payment accepted

  • Cash or traveler’s checks - need change and secure storage.
  • Personal Checks - risk of bouncing varies from high to nearly none, depending on your market.
  • Credit cards - need merchant account, phone/line to approve large charges. Slow if done manually. Transaction fees.

Accepting checks and credit cards will increase both your sales and costs. Checks can bounce. If you accept a check for artwork, and it bounces, you still have to pay the artist. Credit cards pose no risk if handled properly, but your merchant bank will take a percentage (typically around 3-4% once you include per transaction fees), plus setup fee). Credit cards are slow to process manually, but automated systems can be expensive. Not accepting credit cards will cost you more sales than not accepting checks.

The art show most often accepts credit cards using the conventions' account. You need some way of identifying how much of that came from the art show. If the show itself runs the credit cards, it keeps a copy. That's easy. On the other hand, some small cons send art buyers to registration to pay by credit card (because registration has a phone line and card reader). If you do this, have registration make an extra copy for the buyer to bring back to the art show - don't just rely on registration keeping them seprarate.

Sales tax

You probably need to collect sales tax, even if you are tax exempt (depending on your local laws and how you structure your art show). If you do need to collect it, do not have individual artists each pay their own sales tax. It may seem easier for you, but it won't be:

  • Most artists will not have sales tax licenses in your jurisdiction. It's more work for you to get the necessary information to all of them than it is for you to get a license yourself. Your convention should almost certainly have one anyway if they sell any merchandise on site.
  • Paying a $25 fee (rates vary) to collect $14 in taxes is a bad deal for the artist. Multiply by 100 artists, and you're forcing your artists to donate thousands of dollars to your local government.
  • Most artists will either not bother collecting tax, or not bother with your show.
  • If the artists don’t pay the taxes, you may be liable for them. And how will you know if they do?

Reconciliation

Small shows can maintain a list of which artists are owed what by recording the information on the artists' control sheets as sales occur. Larger shows with multiple checkout lines will have to reconstruct this information from bid sheets and tally sheets, in a process usually called "reconciliation".

  • The basic principle of a reconciliation is that any one piece of information can be missing or recorded incorrectly without compromising the ability to correctly pay the artists. In some cases, this means each number must be recorded in three places. In other cases, primary data (like bid sheets) can be taken as always true if present. The amount of money taken in at the cashbox can provide an aggregate third data point for the bid sheets and tally sheets collectively.
  • Start your reconciliation with the most difficult, error-prone part (in most cases, this will be the cashbox). The freshness of your memory of what happened will give you a better chance of getting it right.

Paying artists (and others)

Use checks. They leave an audit trail. If you want to pay artists as they leave the show, write them a check. Then you can offer to cash it for them, if you want. Don't just hand them cash.

Who pays what? Who gets what?

Though it's not common, the art show can be an independent financial entity attached to a convention, and the Print Shop could be run by a third party. Even if the art show is entirely a part of the convention, you still need to decide which departments handle what. You need to decide ahead of time:

  • Who should be the contact for artists? For the hotel? Between the groups involved?
  • Who makes which decisions?
  • Who pays for what expenses (e.g., printing, mailing, function space, reception, supplies, hardware)?
  • Profit sharing – who gets the income from panel fees and commission?
  • Who are checks (from artists and buyers) made out to?
  • Who pays the artists? And what are the logistics?
  • How will accounts be settled and money transferred between groups involved?
  • Who gets to keep any equipment purchased?
  • Who is responsible for collecting bad checks?
  • Who pays for damages or other liability?
  • Who will deal with any problems that arise in the future?

On the question of payment logistics, many conventions are late paying artists. The most common reason given by the art show director is "We sent the information to the treasurer, and we're waiting for him to send payments." Even if half of this is mere blame shifting, it remains a major problem. It's really several separate problems.

  • There is an implied handoff of responsibility. The art show director (AD) is only responsible for calculating amounts, not for seeing that artists get paid on time. If you do want to put this responsibility on the treasurer (I wouldn't), it should be explicit.
  • I often get the impression that the treasurer has been handed a list of names, addresses, and amounts. If you want the treasurer to get the checks out quickly, wouldn't it be better to provide a stack of pre-addressed and stamped envelopes plus the list of names and amounts? Wouldn't it be faster yet for the AD to sit down with the treasurer, dictate names and amounts, then take the checks and mail them?
  • In the weeks after the show, the treasurer is probably busier (at least with con stuff) than the AD. Keeping the responsibility for mailing checks with the AD can help the treasurer get to the art show checks sooner.
  • The AD is more motivated to get checks out quickly than the treasurer is. The AD deals with artists who aren't getting their money, while the treasurer mostly deals with banks which like seeing high balances in checking accounts. It's considered good accounting practice to mail checks as late as you legally can, but it's bad PR for the art show.