Items you buy
When you buy supplies on account instead of paying cash there and then, your suppliers are your creditors until you pay them. Enter here the payments that you will make to your creditors (including VAT) in the months in which you will pay them.
Some galleries buy directly from the artists themselves, while some buy stock from specialist wholesalers or 'publishers' of art works. Until you have paid the artist or wholesaler, they are creditors and when you pay what is owed you are making a payment to creditors.
Of course, it may be that you are the main or only artist who supplies your gallery, in which case your trade suppliers are likely to include artists' supplies shops and framing specialists.
You're also likely to sell some items other than paintings and pieces of art, so you may want to set up accounts with:
- suppliers of postcards, greetings cards and other gift items
- printers. You may arrange to have full-sized prints made of originals or you may decide, possibly in collaboration with artists whose work you display in your gallery, to have your own design of cards printed, based on the art that you sell
- suppliers of picture framing materials
- specialist art equipment suppliers
Setting up an account
For convenience it is best to set up accounts with your main suppliers. To do this you may be asked to provide bank and trade references. Until the account facility has been granted you will have to pay for your order at the time you place it. This is known as paying on a pro forma basis.
Once your account has been set up you will be invoiced at regular intervals and expected to pay within a certain number of days of receiving the invoice.
In some cases suppliers may impose minimum order conditions and charge for delivery. Some suppliers may offer items such as free display stands for greetings cards or help with advertising promotions. These are likely to be related to the amount of business you put their way.
Sales on commission
It's quite likely that you won't buy many of the paintings and other pieces that you have on display in your gallery. Instead, you'll probably sell them on behalf of the artist and retain a commission (generally between 20% and 50%, possibly up to 60%) and pass on the rest of the money from the sale to the artist.
The artist is a creditor for their share of the sale proceeds until you pay them the amount due to them. When you do, you are making a payment to creditors.