Last week we talked about the importance of being organized [check out that post here] and we slid in a mention about a massively dreaded topic: FINANCES. Ok - I’m gonna cut to the chase. Talking about money sucks and is boring, but obviously we need it to survive, so you might as well do the best you can with what you’ve got. If you’re out there DIY-ing like us, every single cent counts and you need to be able to keep track of it. With more than a few years of experience under my belt, I’m going to share some tips that I hope will get you on the right track:
Set up a business banking account. This is so business income & expenses stays separate from personal income & expenses. This will make tax time one billion times easier (ahem, if you haven’t learned yet -- you have to file taxes like everyone else). When April 15 rolls around, you definitely don’t want that $15 birthday check from Aunt Mildred counting as business revenue, right? And on the other end of things, you bought a guitar, so you need to write that shit off and take the deduction. That is a professional expense.
Get a credit card for business expenses. This comes with a caveat - if you are terrible with credit cards, DO NOT DO THIS. A lot of business cards come with very flexible or high limits, so if you are not responsible, stay away from these. However, if you can keep it under control, it is another great way to keep track of expenses. Most cards these days give great points on purchases AND can even categorize your expenses. Plus at the end of the month, you only have one bill to pay.
Have a filing system for receipts. When we first started out, we kept EVERY SINGLE PAPER receipt. Now, we mostly store things digitally since most expenses can be tracked via email receipts. Meals and other paper receipts get filed into monthly envelopes. If you pay for something with cash, you DEFINITELY need to hold on to the receipt so that you can track that expense since it won’t show up on a card or bank statement.
Keep track of income received and income due. Last week, I mentioned getting set up with an invoicing system. This is a great way to keep track of who owes you money for gigs, studio time, or other various tasks.
Know your payout schedule for various revenue streams. For a DIY-er, this can be a massive headache. We get income from so many different sources, that it’s tough to keep up. However, here’s my rough outline of when I expect money:
Digital distributor: every Friday (each platform has a different payout date, but most are 45 days after a month ends. Spotify ends up kind of paying whenever they want though).
Merch: Weekly from Stripe (website sales); Square deposits every few days when we’re on the road.
Everything else: there is never a schedule for any other random things - I just have to keep watch and try to track down as best as I can.
Look into software that can keep track for you. Here’s a list to get you started:
Quickbooks - hands down the most comprehensive, but it’s a bit tricky to figure out. It’s also not the cheapest
Expensify - only handles expenses, but it’s incredibly easy and has a low monthly fee. Best for people that might only have a few revenue sources to keep track of, but need help with daily business expenses.
Freshbooks - what started as just an invoicing system can now do so much more!
Here’s a fun little list if you want to dive into it more (payroll systems, fun!)
Full disclosure, our business has now gotten to the point of where I can’t handle our books on my own (thank God for our amazing bookkeeper! She keeps our accounts and my brain in order). However, I did this 100% on my own for YEARS. If you’re just handling your own finances, it’s honestly worth putting a little effort into learning it and going over your books about once a month to sort everything out. Otherwise, you’ll end up hating life in February before tax time (been therrrre). Once you expand your business, bringing on professional help is not only a time saver, but totally encouraged to make sure you’re following all of the right rules. It can get very confusing very quickly.
I mentioned taxes a few times… I’ll take a break from the boring posts, but I’m planning a tax post in the near future! I know you’re on the edge of your seat.
Best of luck out there!
Reason to ignore this advice: If you have a friend, parent, sibling, ANYONE WHO LOVES YOU, that knows what they are doing with small business accounting, by all means, let them help. As long as you trust them, you are good to go.