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Billing & Payment Collection

Lesson 28 from: The Business of Commercial Photography: The Survival Guide

John Keatley

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Lesson Info

28. Billing & Payment Collection

Lesson Info

Billing & Payment Collection

All right, so we'll move over to billing and payment collection. Hurray. (laughter) The fun stuff. So this is, I'll maybe let Michelle talk a little bit about this, this is I think one of the smaller ad estimates that we showed earlier. This is the estimate and then a final invoice. Yep, so this is that dog food brand that we were talking about earlier. So the left side is what Marron has generated and shared with the client, and before the job happened, and they signed the bottom of that and sent it back to her and that was how John knew that he was able to get moving on it. So once the job is done and he's taken the pictures, there's not a specific like, they get the pictures and then we send the invoice, sometimes that post processing takes a little longer because the images are going off to the retoucher. I usually check in with John, like, is it okay if I go ahead and send this invoice now, and he's usually able to say, "No, you should probably wait till," or "Yeah, it's not a p...

roblem." So, once I get the go ahead that it's okay to send the invoice I sit down and I pretty much just move everything over that Marron has approved, the client has approved on the estimate. So, I make sure that whatever licensing information that just gets copied and pasted and put over, and then. There are two different ways that you can bill, so you can bill flat, and if the client agrees to building flat then we would literally just send an invoice over for the total that they sign off on on the estimate. So in this case it would be 6,875. If they request that there be backup, what that means is you have to bill and submit all the receipts that go with it, and so then you need to adjust the rates for the totals that you actually received. Sometimes, like an assistant on the estimate would be $300, but when they submit their receipts that they've actually do, like $310 because they're adding their parking fee, so you just make those adjustments as you go, and then the final invoice will be actually have cents that you're, you know, it's not just a nice flat number, it's $6,391.37, so, you just have to know before hand which way you're gonna bill, whether it's flat or if it's with backup. And often in the estimating process we will be like, (gasps) oh, I mean what, you know, we're not sure, what if he comes in and lunch is a lot cheaper than that and, you know, if we're not billing flat then I'll say, don't worry, this is just an estimate. This is saying that we can spend up to this amount, but if you guys decide that you want half as much talent, we're not gonna bill you for what we don't use, and during the estimation process that actually puts people's fears aside when I can say that. If they're really flat, they're really flat and they've just decided that that's easier for them, and less paperwork and we're happy to do that as well. Also, if you have a producer, often John's giving them a production budget, and so maybe along the same lines of what Marron was just saying, they will have, like, we'll give the producer and say, you know, in this particular job that maybe they have like $4,000 that they could work with. And there might be some areas where the fee is less, but maybe they ordered lunch, and the lunch was actually a little more than was budgeted for so that money can be moved through the budget where it needs to, but you don't want to spend more than what you've been approved for. I do not let any of my artists hand in anything a cent over, because it really, you lose the trust of the client if you start doing that. If there's an unexpected cost, I try to get it cleared before the time of invoicing and say, hey, this happened, is it okay if we bill for this? And I try to get that in writing, and if you don't have an agent then it might be as simple as just an email confirmation, but just something that gives you approval for any overages, because it's really upsetting to people. I mean, think about when you take your car in and then they tell you it's gonna be $1,500 and then they just send you a bill for $5,000, that would make you crazy. So we really try to avoid that whenever we can. Which is another reason why it's so important to pre-visualize, we talked yesterday, in terms of production why you need to pre-visualize and think through everything that's gonna happen so you can be prepared and account for that. And the same thing, it's beneficial in treatment to pre-visualize and think through all this stuff that you're gonna have to implement. And it's the same thing here, you can't just rush this through and give some numbers out, like Marron said, and then be like, oh my gosh, I forgot to put in lighting, that's why it's so important to think about this stuff and be aware of it, because you don't want to do a shoot and be like, oh my goodness, I totally forgot to put in lighting, it actually cost me $1000 dollars. Whether it was just a simple mistake or not, it's not appropriate to ask a client after they've signed off, or especially even after the shoot's happened, like, totally forgot about lighting, is that cool? That's, you kinda have to eat that at that point, and that sucks, but hopefully you never make that same mistake again. The good news is that once you do a detailed estimate, the job's kind of done production-wise, I mean, really, you just have to fill in the slots and sow up and say, oh, okay, I have two assistants, I can hire two assistants, I can do this and this, and that. And a lot of the, well not to underestimate what happens on shoot day, but in terms of the production, a lot is really already worked out before the job even starts. So in this same instance here, this is the same invoice that we've been talking about. So we did bill with backup, so all the receipts had to be submitted, and ideally you have a receipts for everything, but there are definitely gonna be instances where there's not a receipt for digital capture, you know? That's something that just happens internally, so you can generate your own receipt, and so I just wanted to show you an example of what we use. Again, this was design, we had a designer working with us, so this was just one other thing that he kinda built a structure for, and then it's pretty easy for me to go in and just be able to update whatever specific items needed to be on there. There are gonna be times where your assistant doesn't send you a receipt. That's okay, you can just add this into your own receipt. So this a example of licensing language that was used for-- Same job. Actually, this is relicensing for the same job. So basically Marron's talked about the importance of including in your estimate or your contracts what the the usage is, what can they use this image for, and the same reason, like if you're saying, hey, we're not providing a groomer, or the agency's gonna do that, you leave that line in there and you make it very clear, well, I dunno, maybe John's taking care of it, we're saying no, the agency's taking care of that, and with licensing we're saying you can use this image or these images for this period of time for this specific use, and then the benefit of doing that is then eventually they may want to use that image or those images again. Do you wanna give that example of the wedding package story? Just kind of to kinda discuss how we present the licensing? In terms of presentation? Yeah. So, yeah, I mean. I'll get back to kind of this idea, but in terms of, there's a couple things happening here, there's licensing and pricing and all that kinda stuff, but there also is, as with all things, presentation and confidence. And we've talked about confidence in relation to other areas so far and presentation in terms of your treatment and your visuals, but presentation and confidence is a really, really important thing for you to practice if you're not good at it, and to wrap your minds around. Again, remembering the used car salesmen, where he's like not really confident or not sure, and then where he's like yeah, it's great. So years and years ago when I was a wedding photographer, and I thought I wanted to, I was thinking about, well, actually, I was just miserable. (laughter) I was a wedding photographer, and I didn't want to be doing it anymore. I don't even know if I knew about editorial photography yet at this point, but I wasn't happy and I had been doing it for a few years, and so one of my solutions is that I thought, well maybe if I can make more money doing this, I'll be happy, more money might, you know, cover all sins, so to speak, and so I knew a really successful wedding photographer who had hired a consultant. And so in speaking with him I thought, well if it worked for him maybe that's something that I should do, and I think it' important to always be looking for ways to grow. So we hired a consultant who works specifically with wedding photographers, and he came to our home and spent the day with us, and we went through all of our business and things, and he had all kinds of suggestions, mostly I would say the day was reinforcement of how much I do not wanna be doing this anymore. Some of his ideas were crazy, it was like putting up neon signs in our window so that people driving down the street might, you know, be more aware of us and stuff, it was like turning our backyard into a petting zoo or something, it was just crazy. (laughter) But, there was one thing that we did that I will never forget and it was an incredible business lesson, is he said, I want you to present to me your, gimmie your presentation, what'd you say to a bride or groom or a couple when they come in? And so I walked through our presentation and the packages that we have, and we had a list, and at the top of the list was package A, and the middle of the list was package B, and at the bottom was package C. So package A was the cheapest, it was like, I dunno, $2000 or something like that, it was just basically I show up for five hours and take pictures and I give you the pictures on a disc. And then package B was seven hours, so it's a little bit more time, and then comes with an album, and maybe a couple other things, and it was like, I dunno, 45, 48 hundred dollars or something like that. And then package C was like $7,500, I wanna say, and that was on there basically because why not, if someone wanted to pay it, I'd gladly take the money kinda thing. It was a little more time, maybe the album was bigger, I think I had a second shooter, that sorta thing. So everyone I met with, I would say 95% of the people bought package B, and I really only just talked about package B. And I think also, for me, I kind of thought, package A I wouldn't buy, and I definitely wouldn't buy package C, I can't afford that, so my confidence was really mostly in B. So I gave him this whole presentation, and then when I was done he said, what's your best wedding package? And I thought about it for a minute, and I said, well, I guess probably package C. And he said, "Why is it the best?" And I said, because you get more, I guess, it comes with more. And he said, well if it's your best package, how come you never talked about it once? And I didn't really know at the time, but looking back, cause I didn't have confidence in myself and that package, I just didn't believe in it. And so, again, it was a clear example of how people only bought into what I bought into, that's why 95% of the clients that we had bought this one that I talked about. So, at the end of the consultation though, I was like, this is not the answer, this is not gonna work, I don't want to be doing this anymore. And so, I think I had discovered editorial photography, and I had been doing a little bit at the time but our business was kind of in this place where still 90% of our income was coming from weddings, but I was getting some work editorially. You can understand now why it was probably only 10% of our business, but I got to this point where I was just like, I don't wanna do this, I need to just cut it off, I need to do editorial or I'm just gonna be making, nobody's gonna be happy and I'm gonna be pulling myself in too many directions. So I decided I was just gonna make a cut, I'm gonna just cut it off rather than, you know, stay on and never fully leave because it's comfortable. I just need to make a cut and go for it, you know, sink or swim kinda thing. But we did have three more wedding clients, potential clients, booked for meetings, and so I think maybe because I was still a little scared, if I'm being honest, and, you know, it was a scary decision to make the cut, I just thought, I'll just meet with these next three people. But, if they don't hire me, I'm really not gonna be bummed, because I kinda don't want to be doing this anymore. And so I felt like I had nothing to lose, and so what I did was we switch up the packages, it was the same packages but now package A, instead of being the cheapest, it's the most expensive, package B is still there, and then package C is now the cheapest. And we had a bigger wedding album, I think it was actually our wedding album, it wasn't even, obviously, one that I had shot, but it was just our wedding album to show the size of the album that someone would get. I had the same pictures that I've always had, I didn't shoot anything new, it was the same stuff. Even the form was the same, all that had changed was just the best, the most expensive was at the top, and I decided I'm only gonna talk about the most expensive package. And also, I have some confidence now because it's like, I've got nothing to lose, I'm willing to lose, these kinda things. And because I really kinda didn't wanna do these weddings, I decided to double our rates. So now the top package was $15,000, and the middle one was like $9,000, and so on. And again, I had never booked a wedding package for probably more than 45, maybe $5,000. So the next three clients that I met with, they all booked me and they all booked me at $15,000. And that was a shock, because, again, nothing changed. My work didn't change, the only thing that changed was my confidence and my presentation. Now I'm not gonna say that it's gonna, just go crazy and put yourself out there, I don't know why or how that happened and I got all three of them, but it did, and it's a lesson that I firmly believe in, and that's a long way of saying, again, when you're presenting anything, but especially licensing, you wanna give people options, options are good, but you wanna give them what would be the best option first, and make that, incentivize it, give them good reason to go that direction, and then you can provide some other options if for some reason another one works better. And I think one other thing that I hear John and probably Marron talking about is that the pictures that you take, you have to know who's using them, and how long the value of those pictures are gonna last. So if you take pictures for a dog food company, how long is this dog food bag gonna look like this? Or, you know, there's a lifespan, sometimes, to these images, and so Marron could probably talk more eloquently about the conversation that goes around offering licensing options but one thing that we've realized is that at some point, either they're gonna wanna re-shoot and have a different campaign that they're gonna go with altogether, or they wanna continue to get a little more value out of the images that they have, but that's gonna end at some point. And so, when John and I were having these conversations with clients on our own, this was kind of how we approached it. We would give them several options, and the rate is gonna change based on if it's one year, two years, and at some point, like if you have a client that comes and is willing to relicense the image, you might get a relicense the next year, potentially you might get them to relicense it one more time, but after two relicensing options, there's a very good chance they might just wanna re-shoot, and so you're giving yourself either the option of getting a little bit more money or losing the client, and so we then at that point might give them the option for an unlimited time, a buy out, or also just giving them another one year option. But, how do you go about those licensing conversations? Well, I usually have them up front, so I usually say, how long are you gonna need these images for? I try to steer people away from buy outs because they're paying for what they don't need. If they really want them, and they're willing to pay for it, then we're more than happy to give it to them, but they're generally not willing to pay for the value, so it is a way to get budgets down. You've asked for five-year use, if you really need us to count on $10,000 in the budget, why don't we just do one year use and then next year when you have a new budget you can re-up. Or we can, we had a job for you that was a library shoot for two days, but they also had, or it was a billboard shoot for two days, but then they just did supporting library assets for another day, and we separated it so that since the usage was combined in the day rate, it was higher on the print advertising campaign days, and then on the other days it was a lower fee, and that was a way that we could get around charging higher fees for the entirety of the shoot. But we didn't give something for nothing, we changed the parameters of the usage. Nowadays people will ask us to, wisely, will ask us to put in usage options in our estimates. We only have enough to do a $5,000 day rate on this, but the client wants to know what it will cost to do advertising for a year, so then I would add another $5,000 because in my head it would've been $10,000 for an advertising shoot. So it basically bumps up the day rate to what it would have been. Or I incentivize people to buy more usage at the beginning. Well, we'll give you a buy out for $15,000 now, but if you choose it later, it's actually gonna be twice that, so then they can say well, okay, we actually just wanna not have to deal with this ever, and, you know, we try to empathize with clients' needs, there's often somebody that's not there that's able to police usage packages, and maybe they're going to leave the company before the usage is up so, if they know this about their company and communicate that to me, I try to work with them to get the artists paid fairly, but also to address their actually needs in the way they're gonna use the images. This letter, while it serves the purpose of providing an opportunity to relicense, it also provides them a notification that, if they don't relicense they should stop using the images, so that is just another piece that goes along with monitoring infringement and copyright use and all of that. Michelle is particularly good at this. Do you have any systems that you can tell people? Cause it's actually amazing (laughter) how good she is at tracking the terms and the lifespans of the images, she's really on top of it. Google Docs is my best friend. (laughter) We have so many documents, but it is nice because John and I can share them pretty easily but anytime John signs a job that has licensing included, I just have a form that I keep track of that I put in what the job is, the day that it start, like the license starts, and when it finishes, and then who we should be following up with as a contact once the license is expired. I used to just kind of keep track, keep it in the back of my head that I need to check it every now and then, which is not always the best system. Marron and I had a conversation, like, how could we do this better? And so, now I annoy Marron (laughs). We share a calendar and so I just put in reminders in the calendar. So usually it's about 30 days before the end of the license. It gives Marron the opportunity to start having a conversation with a client, cause often those conversations aren't quick and decided the day of, they probably need to go check their budget and make sure, you know, is this gonna work for us to do this, or are we considering re-shooting? They have to figure that out inside their company. So, Marron usually gets a nice, friendly reminder about 30 days in-- Then I get another one. Followed by an email from me and then probably two weeks later, another, you know, thing pops up on her screen. But it just does require you to stay on top of it, and be in contact with your clients so that you can have those discussions. I mean, what can be nice, what I've found, which is there's the obvious possible revenue stream, which is great, but I found it's had another added bonus which is, "Oh, I'm so glad you called, "we actually need to do another shoot," which is, for most photographers, is what they'd rather be doing, I mean, they wanna be making new work. So it sort of gives you an excuse to be in their world again as well, and talk about what they might do the next time. So this is something that's come up recently and I think, again, we can't really give legal advice, and a lot of it depends on your state and where you're at, but we would highly recommend that you look into your particular state and what the laws are and how they treat freelancers, if they're considered contractors or freelance. That dictates sometimes how they can be paid, if they need to to be paid day of, or if you have to have certain paperwork for them, or if you can pay them on a 10 net 30, whatever that is, but it's really important. I think there's a few things that have happened recently that have kind of brought this to people's attention. So that's definitely something, again, on the contract side that you should be thinking about and doing research if you think that you're gonna start hiring crew members or working with people in any sort of freelance capacity. And as far as paying contractors go, you need to make sure you get a W-9 from them, and you only have to, technically, you only have to get a W, am I saying this right? I believe so, you only have to get W-9 from them if you're paying them up to $600 a year. But my take on that is I don't wanna have to be monitoring, with the number of people that John's working with, I don't wanna have to be monitoring, okay, we've paid you $200 dollars this time, and next time we may be able to pay you $200, so I don't need a W-9 from you until the third time I work with you. I don't want to have to be worrying about that, and so my recommendation is that you just, you don't pay your contractor until they've given you a W-9. So anybody that we work with, I just say, please submit a W-9 and I'll pay you, and I don't pay them until I get the W-9. There's been a number of times where before I started doing it in that way, I would just pay them and then at the end of the year or tax guy is like hey, we need a W-9 from this person, and then try tracking that person down and making him give you a W-9, it's annoying at it doesn't happen, so my new system is that nobody gets paid until they've given me a W-9. I mean, you do have to think about, and the same idea is that if you have something that somebody wants, then that is the best way to get what you need from them. So in your case, if you're trying to get a W-9, not paying them until you get it is one option. In my case, if I'm trying to get an advance, say there's a $75,000 job and we have a $30,000 advance to cover production expenses, I've had to have the conversation that my artist cannot show up on the day of the shoot until we get that cheque. And lo and behold, they find a way to make that happen. But if we, and we've done this a couple of times too, and learned, if we say, oh, okay, we'll just, we don't wanna stop things from happening, we'll just show up, it'll be fine, we'll figure it out, guess what money never comes? So, you know, I don't recommend threatening a production, I recommend being as accommodating as you can, but I would say while you have something that they need, if you have the final files that are retouched, don't hand them in until you have that advance. Be like hey, I don't want to hand in these files, or even with licensing, I'll say, can I get that signed agreement back from you? "Uh, no, I don't really have it, "maybe I can get it next week but can you just "send us the high res?" And I will say, very nicely, I'm so sorry, it's actually our policy, we cannot send high res images back until we have the signed paperwork. And they figure it out, and they get it to you. So, it's important to know what you have. So, this is maybe part of Michelle, again, the whole thing that we started this class with is if you're depending on taking pictures and making money your business, right. We get into photography for various reasons, it's fun, it's exciting, we like telling stories, we just love it, but you're a business. So we have to treat it that way, and so that's kind of what we're talking about, there's forms and things that have to get signed and filled out and filed. And we've worked, we work with a lot of contractors, that's just part of the business but what I've come to realize this that I think a lot of people are trying to save a little bit of money here and there, and that's fine, but the problem is when the area that you're trying to save a little bit of money makes you a liability to the people that are hiring you. And so we've worked with different contractors who are like, "Mmm, you know I don't have this "form from the Washington State, "I don't pay that tax." And it's like, well. The problem is, in Washington State, John works a lot and so he works enough that he gets flagged by Washington State Department of Revenue, and so if we meet a certain level of revenue, they could come and audit us, and if they start auditing us and realize well, you've worked with this person but they're actually not registered as a business, so now technically they're your employee, and so you need to pay us employee taxes on this individual. Well, that's, I don't want to say a bad word, that's not cool (laughter). And so we do have a list in place that I ask for people's W-9, and now I ask for people's business license number. And if you don't give me a business license number then we're not gonna work with you again, because that's not a liability that we are willing to take. And so, my recommendation is that you register. If you're making money as a business, the IRS is gonna want money from you and the state that you're working in, they also want a piece of the pie, so be on the up and up, register your business. Part what goes into that is selecting your business name and registering that, that saves you a lot of hassle is someone else comes along who's trying to work under the same business name as you. Figure out what your business structure is gonna be, and there are definitely benefits that come from doing that registering. I mean, you can have access to additional loans that you wouldn't be able to have to have if you were just registering, it protects you if you were to get sued for some reason, depending on the type of structure that your business is made at then it protects you personally from if your business is getting sued. It opens up additional retirement funding options for you, so there are benefits that come from it. And then just make sure that you register with a state and then with the IRS and pay the appropriate taxes that come along with that. Additionally, we really recommend that you work with an accountant, somebody that is local, that is reputable, that is gonna help you make the right decisions for the type of business that you are, and we have some horror stories of accountants that John has worked with over the years who were stealing money from him, or we weren't paying them enough to be on their list of priorities and so then we started falling down lower and lower, and that's when we started getting these notifications from the IRS. So just make sure you work with somebody who understands your business, who you're paying appropriately so that they keep on top of the things that need to be done. And ultimately, it's gonna help you as an artist be able to keep working as an artist. If you have this nagging feeling in the back of your mind all the time that you're gonna get audited, or the IRS is coming after you for something, that splits your attention, and it's gonna make it so that you're not being as fully creative as you can be. So that is a high recommendation. And then, if you do work with an accountant, they often will have recommendation of what kind of accounting software to use. So, those are kinda the recommendations that we would have for that. Yes. A question. [Female Audience Member] I just wanted to ask this question in case someone out there was thinking about it, is there a certain amount of money that you should make before you register with the state? Meaning like if you're taking just $200 gigs here and $300 gigs here, are you still considered a business, or do you wait till you're making those $5,000 gigs? I don't know that we know the answer to that, I think you probably need to talk to an accountant. But I would say that if I just gave any general advice, I think if you're making money at something, it's a good idea to register appropriately.

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Ratings and Reviews

Bonnie Aunchman

John & Creative Live - Thank you - Best. Class. Ever.! This is a GREAT class! If you are a photographer, this is definitely a MUST GET class, but even if you work with photographers as part of a creative team - you have to take this class. (I'm a Photo Stylist) John covers it ALL in this class - it really, truly is a Survival (Success) Guide. John is so detailed, honest, and generous in his knowledge/experience/wisdom in the commercial photography industry in helping you understand the business and really succeed (& stand out). When I see that John is teaching a class on Creative Live - I'm in! (I have his other valuable courses as well)

a Creativelive Student

I was lucky to be part of the studio audience for this course. John is an awesome teacher and did an outstanding job of making sense of a very difficult side of photography for a creative to understand. He shared his 18+ years of experience, including the good and bad he has gone through. The "special guests" alone are worth the cost of this class. John has an amazing team working beside him behind the scenes. Their perspective on his business was priceless!

Joseph Brewster

John gave an enormous amount of insight and practical advice in this comprehensive course. I really enjoyed a course focused more on commercial and editorial rather than wedding and family, which is more common. Great info and great work all around!

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