Most artists look at us sideways when we ask them if they’ve ever used an invoice. “Of course,” they respond, but this is a new trend. In the past, artists relied on their galleries or they would just correspond via email with a final price. It works, right? For straightforward deals, this is a perfectly fine way to conduct business. There are a few other details though that should be considered: tracking, cash flow, accurate calculations, discounts and production costs.
As your studio grows in size, it’s important to keep track of what’s been sold, for how much, when it was sold, when payment is expected and to whom it was sold. The ArtSmart Archive holds this data but the way in which you partially procure this information is via an invoice.
Consignment Agreement → Invoice
The process begins with the ArtSmart Consignment Agreement where by you establish the price, maximum discount and any production to be recouped. We’ve already discussed the details of a Consignment Agreement. That’s the first step of setting the tone and establishing that you’re a professional who cares about their art practice and their studio business. Once you hear about an actual sale, then you send an invoice to the gallery. To clarify, there are two types of documents. The Invoice goes from the artist’s studio to the gallery and the Artist Statement goes from the gallery to the artist’s studio. Most galleries send an Artist Statement upon payment so you know what you’ve been paid for. But an artist shouldn’t wait for this.
As soon as you find out that your work has been sold, inquiry if they offered a discount and the ultimate sales price invoiced to the collector so that you can send your invoice to the gallery. In the past artists would just wait to get a check or a wire without the due diligence of finding out what it was for, how big of discount was given or if they were reimbursed their production costs. But the new normal is for the studio to invoice the gallery. This ensures that you know ahead of time what you are going to get paid, and it allows you to make sure you get your production reimbursed. You get to make the calculation yourself to ensure no mistakes are made.
The components of an Invoice and an Artist Statement should contain essentially the same information, date of the invoice or statement, an invoice number for tracking, artwork details, image, retail price, discount, sales price, production costs, total due to the artist, the name of the collector, and the city and state or country. At the bottom of the invoice is key: Title does not pass until Artist is paid in full.
All of this information should be stored in an archive so you cannot only track where the work is located but also if you’ve been paid for the work or not. This is KEY. Otherwise you will have a very hard time staying on top of what you are still owed.
You generate an invoice based on the information received. This provides you with a perfect opportunity to calculate exactly what’s owed to you and for which work. It also sets a clock ticking of when you can expect payment so this helps anticipate cash flow.
The ArtSmart Calculator
With the ArtSmart Calculator, you can plug in the retail amount, the discount that was offered to the collector as well as any production that you are to pay the gallery for and/or any production that the gallery or consignee owes you. This is incredibly important to get right. and it’s not easy to get your head around this calculation every time. The other hindrance is that the gallery’s or consignee’s language around splitting costs sounds differently than the actual math that is calculated.
We built this calculator so you can see the math worked out in two different ways: the way the gallery thinks about it and the way the artist thinks about it. The thing to remember is that most of the time, everything between the artist and the consignee is split 50/50. That means that the retail price, the discount and production are all split equally. For example, if a consignee sold a work for $10,000 with a 10% discount, each party would receive $4,500 each ($10,000 – $1,000 (10% discount) = $9,000 / 2 = $4,500). So the artist would invoice the consignee for $4,500.
The invoice lists the details of the work (title, date, medium, dimensions and/or edition number), an image of the work is especially helpful both for the artist and the consignee, date of the invoice (this helps with the tracking and timing when the invoice should be paid, typically this would be within 30 days of a collector paying the consignee or if it’s an invoice directly to the collector than typically 30-60 days within receipt of the invoice) and finally what’s due to the artist.
Things become more complex, when you’ve incurred production expenses and require reimbursement. Artists typically think that they are going to get 100% of their production reimbursed because the language the gallery uses sounds like this: “We will take production off the top of the sale”. When you hear this you think, “all of the production will be recouped to me.” This is not true as the math shows. This misinformation and confusion was the sole reason why I created the ArtSmart Calculator.