7 Reasons Musicians Need Accurate Bookkeeping

7 Reasons Musicians Need Accurate Bookkeeping

These blogs are designed to help musicians, artists, managers, agents, and producers manage their finances a little better.

I have been a fan of musicians since I first remembered listening to vinyl from my parents' collection. Fortunately for the world, I can’t sing or play in time, but I have a gift for numbers, profits, and net worth. For now and forever, I will play my guitar and sing in my basement, where I belong as a musician, and stay with my gift as a financial geek to make a living.

Why is bookkeeping essential for you? Money in your pocket is what matters.

Here are 7 reasons you should have someone keep track of your financial position on a timely basis.

Expense Tracking

Let’s start with expense tracking. Money earned is memorable. Expenses can get lost in a memory, particularly when there are so many little expenses such as guitar strings, picks, mic cords, gas, and parking fees, as well as bigger items like plane tickets, promotion material, and clothing. A great way to track these expenses should be to use a debit check card for all your purchases. At any time, your expenses can be accessed on your bank statement.

Budgeting

Budgeting your expenses can ensure a long and successful career. Budgeting is simple. When you go on tour, you have a good idea of how much money you will earn. Budgeting is allocating your expenses wisely so they don’t exceed your income from the tour. Having a manager or accountant pre-budget your upcoming tour is a wise practice to ensure positive cash flow for future projects in your career.

Contract Negotiations

There are numerous contract negotiations in this crazy industry. One of the most significant advantages of having timely and accurate books is in contract negotiations. Knowledge about your books will give an impression of professionalism and confidence to negotiate. You will know the value you bring to the table. You have the concrete data to back it up if called out on it. Also, knowing your financial position gives you the leverage to bargain harder, accept the terms presented, or walk away from the deal.

Financial Planning

Financial planning involves knowing what is available for future investments, tours, and creative projects. The music industry has uneven income streams. Knowing your current financial position allows you to plan your future career. Financial planning also provides the opportunity to have ample cash flow during unforeseen circumstances like a pandemic. Of course, having a plan for someday when your career has ended is advisable.

Performance Metrics

Income and expense tracking through accurate bookkeeping allows you to see how everything and everyone performs, from your recorded music to your live show performances. You will be able to see which venues are more successful for you and regions that accept your type of music, just to name a couple of examples. Performance metrics allow you to run your business (yes, you are a business) more efficiently by identifying what to cut or add to your business in the future.

Reduce Stress

Knowing your business is in order allows you to be more creative and on your game instead of worrying about your money. Also, having your finances accounted for gives you peace of mind if you have an insurance claim. Accurate accounting gives the insurance company proof of the value of your claim, if any of your equipment is damaged or stolen. Finally, if there is a legal dispute and you have financial evidence to support your claim you can rest easier knowing you will have what is due to you.

Tax Preparation

The saying that only two things are certain in life, "death and taxes," is true. Having your accounting work up to date ensures that your tax preparer can easily file your tax return on time. Along the same lines, the less work your CPA has to do, the more you can save money and keep a good ally on your team. Clean, timely books simplify a tax preparer's life as they have many clients to care for during tax season, and a clean set of books allows them to accurately file their taxes with no hassle from the IRS in the future.

Conclusion

Knowing your financial position allows you a chance for a long and successful career. Hire a good team to do the accounting work for you so you can keep creating, and I can keep being a fan of your music.