Fashion Designers: 5 Tips for Managing Finances

Published on 31 July 2023 6 min read

Set up a budget
Regularly review your finances
Keep business and personal finances separate
Plan for taxes
Consider hiring a professional

Whether you're a seasoned fashion designer or just starting out, managing finances can be a tough nut to crack. But don't worry, it's not as complicated as it seems. With the right approach and a little discipline, you can get a handle on your finances and keep your fashion empire running smoothly. Here are five tips on how to manage finances as a fashion designer, each one simple yet effective for maintaining financial health in the world of fashion designing.

Set up a budget

Our first step on the journey of financial management is to set up a budget. It's a simple yet powerful tool that can give you full control over your finances.

Why a budget is important for fashion designers

As a fashion designer, you have a lot of expenses to keep track of—from fabric costs to marketing expenses. A budget helps you understand where your money is going, so you can make sure it's being spent in the right places. Think of it this way: you wouldn't design a dress without a sketch, so why run a business without a budget?

How to create a budget

Creating a budget doesn't have to be a headache. Here's a simple method to get started:

Identify your income: Start by listing all your sources of income. This could be sales from your designs, income from fashion shows, or even money earned from teaching fashion design workshops.
Track your expenses: Next, note down all your expenses. Don't forget to include both big costs like rental space for your studio, and small ones like your daily coffee run.
Set financial goals: Now, think about what you want to achieve financially. Do you want to expand your business, hire more staff, or perhaps save for a rainy day? Setting financial goals will guide your spending habits.
Adjust as necessary: Finally, remember that your budget isn't set in stone. As your fashion business grows and changes, your budget should too.

Creating a budget is a crucial first step in learning how to manage finances as a fashion designer. It puts you in the driver's seat of your financial journey, ensuring you know where your money is going and how it's helping you grow your fashion design business.

Regularly review your finances

Once you've set up a budget, it's important not to just set it and forget it. The key to effective financial management is regular review. It's like checking your outfit in the mirror before you leave the house—it's always a good idea to give everything a once-over.

How often should you review your finances?

How often you should review your finances depends on your personal needs and the nature of your fashion design business. If your income and expenses change frequently, you might want to review your finances weekly. If they're more stable, a monthly review might suffice. The most important thing is to make it a regular part of your routine.

What to look for when reviewing your finances

When you sit down to review your finances, here are a few things to pay attention to:

Income: Is it consistent? Are there any unexpected changes?
Expenses: Are you sticking to your budget? Are there any areas where you could cut back?
Financial goals: Are you on track to meet them? If not, what adjustments can you make?

By regularly reviewing your finances, you can stay on top of your financial health and make necessary adjustments before small issues turn into big problems. It's a simple and effective way to manage finances as a fashion designer, keeping your business on the runway towards success.

Keep business and personal finances separate

When you're a fashion designer, it can be tempting to mix business and personal finances. After all, you might think, "Isn't it all just money?" Well, yes and no. While it's true that both types of finances involve money, mixing them can create a tangled web that's difficult to untangle. It's like mixing up your fabrics — you wouldn't want to sew silk with denim, would you?

Why should you separate your finances?

There are several good reasons to keep your business and personal finances separate:

Simplicity: It's much easier to track income and expenses when they're not all jumbled together.
Professionalism: Separate finances give your fashion design business a more professional appearance.
Tax purposes: It's much easier to calculate your taxes when you don't have to sift through personal expenses.

How to separate your finances

Here are some practical steps you can take to separate your business and personal finances:

Open separate bank accounts: One for your business and one for personal use.
Use different credit cards: Use one for business expenses and another for personal expenses.
Pay yourself a salary: Transfer a set amount from your business account to your personal account each month.

Keeping your business and personal finances separate is a smart move for any fashion designer. It might seem like a hassle at first, but it can save you a lot of time, stress, and potentially money in the long run.

Plan for Taxes

Just like a well-fitted dress, a well-planned tax strategy can make your fashion design business look good and feel even better. Without it, you might find yourself in a tight squeeze when tax season comes around. So, how do you manage finances as a fashion designer when it comes to taxes? Let's take a look.

Understanding your tax obligations

Here are some important points about taxes that every fashion designer should know:

Income Tax: This is the tax you pay on your earnings. It's based on your net profit, which is your total income minus your business expenses.
Sales Tax: If you sell clothing directly to customers, you'll likely have to collect and pay sales tax. The rules vary by state, so be sure to check your local regulations.
Self-Employment Tax: If you're self-employed, you need to pay this tax, which covers Social Security and Medicare.

Tax planning strategies

So, how can you plan for these taxes? Here are a few strategies:

Keep good records: Save all your receipts and document your expenses. This will make it easier to calculate your taxes and could help you save money.
Estimate your taxes: Don't wait until the last minute. Estimate your taxes throughout the year so you know what to expect and can save accordingly.
Consider tax deductions: As a fashion designer, there are likely many business expenses you can deduct from your taxes. These could include the costs of materials, travel, marketing, and even your home office.

Remember, taxes might not be as exciting as creating a new fashion line, but they're a crucial part of running a successful business. By planning for taxes, you'll avoid unpleasant surprises and can focus on what you love most—designing beautiful clothes.

Consider Hiring a Professional

Designing a fashion line requires a keen eye, creativity, and a whole lot of passion. But when it comes to managing finances, sometimes even the most talented designers can benefit from a little help. So, should you hire a professional to manage your finances as a fashion designer? Let's discuss.

Why hire a professional?

Hiring a professional, like a bookkeeper or a certified public accountant (CPA), can bring several benefits:

Expertise: They know the ins and outs of financial management, taxes, and laws related to business finance.
Time saving: They can handle financial tasks, freeing up your time to focus on designing and running your fashion business.
Peace of mind: Knowing a professional is handling your finances can reduce stress and give you confidence that your finances are in good hands.

Finding the right professional

So, how do you find a professional who understands how to manage finances as a fashion designer? Here are some tips:

Look for experience: Find a professional with experience in the fashion industry. They'll understand your specific needs and challenges.
Check qualifications: Make sure they have the right qualifications. A CPA, for example, has passed rigorous exams and meets strict licensing requirements.
Ask for references: Don't be shy to ask for references. A good professional will be happy to provide them.

Remember, hiring a professional isn't an admission of defeat—it's a smart business move. It allows you to focus on your passion, knowing your finances are being well managed. So, consider it. It might be the best investment you make in your fashion business.

If you're looking to improve your financial management skills as a fashion designer, don't miss Kelsee Thomas' workshop, 'A Freelance Artist's Guide At Making Finances Make Sense.' This workshop will provide you with practical tips and strategies on how to effectively manage your finances as a creative professional in the fashion industry.