So you want to be financially stable and make some money with your music. I get it – so do I! The first and most important step to finances and money is to actually track it! What you track will grow (a little money manifesting tip). It’s important to know where your money is going and how much is coming in. By having all of the systems properly set up it will make your life way easier for years to come!!
Moving along now! Opening a bank account specifically for your band is important. To open an account under the band name/business name you will most likely need to be registered as a legitimate business (I say most likely because I’m not sure of the rules in other countries – do your research!). If you’re not into doing that quite yet one of the members can just open an account online under their own name – this should probably be the person everyone trusts the most and not the one who likes to gamble!!
All of the money you make and spend NEEDS to go through this account. All money made goes in, and the expenses go out. If you get paid in cash don’t just split the money five ways and be on your merry way. That can get messy when you’re trying to update your accounting down the line. Here are five REALLY GOOD reasons to open a band bank account.
- You can easily see what you can and can’t afford (gear, recording, marketing)
- You can easily track how much you actually make
- You can easily track how much you actually spend
- You can pay for things like meals, hotels, and fuel with the account debit card – no one has to front the money and be paid back later
- You can link your bank account to accounting software and have all your ducks in a row when tax times comes around
NOW THE BORING STUFF – SORRY ACCOUNTANTS!
When it comes to tracking your money there are basically three main ways you can do it.
- Run an spreadsheet that you dedicate one member to consistently update
- Hire an accountant to do your bookkeeping
- Connect your bank account to some accounting software
- This is BY FAR the best option as long as all income and expenses are going through your account
- There are tons of free options available – I would recommend Wave or Zipbooks
However you decide to do it make sure that you are keeping on top of categorizing your income and expenses. Setting up your chart of accounts properly at the beginning and keeping things up to date will save you some headaches come tax time. Trust me – when your playing over 50 shows a year trying to track expenses back 6 months can get a bit interesting!
When it comes to taxes -first and foremost – You have to do it right! But don’t worry, if you have been on top of tracking everything all year, keeping your receipts, and consistently updating your books it will be a breeze! So I had mentioned previously that being set up as a business has some tax perks. Well here they are!
- You can write off gear purchases! BUY THAT GUITAR!!!
- You can write off vehicles and fuel
- Make sure you are keeping a mileage log
- Make sure you are keeping fuel receipts
- You can write off hotels – We’re staying at the Ritz tonight!
- You can write off operating expenses
- Distribution costs, accounting fees, merchandise expenses, graphic designers, etc.
- You can write off studio expenses – L.A. Here we come!!
- You can write off haircuts and clothing purchases
- Really?? Yes. You as an artist are a brand. Your brand has an image. You must keep that image and consistently portray it for marketing purposes. So you NEED to look a certain way for your business branding. Clothing and haircuts keep your branding on point.
- You can write off a portion of your mortgage or rent, and utilities
- What?! Yep. If you have a portion of your house or apartment that is specifically and strictly set up for your business (a home studio, jam space, etc.) you get to use a portion of your mortgage or rent as a business expense
- How Does this work?
- Let’s say for example your house is 1000 square feet and your home studio/jam space is 250 square feet. You are using 25% of your space strictly for business use – therefore you can write off 25% of your home expenses!
So how do you do all this?? Hire an accountant. Unless you are 110% confident you know what you’re doing when it comes to taxes, hire an accountant. Doing taxes the wrong way can make for a messy situation down the road. Make sure you do your research about how things work in your country/province/state, because everywhere is slightly different. An accountant will likely know a few more ins and outs of the tax system then you do, and this could result in you having to pay less taxes – or even better – a tax return!!
So that’s about it! Not much to it – right?? I hope this has been valuable to you and you are inspired to start running your career as a business owner. I was once told it’s 80% business and 20% music. I’d be more inclined to say it’s 90% business and 10% music. If you’re planning on having a successful career as a band or artist, you NEED to start thinking like an entrepreneur. You are selling yourself and your music as a brand, and need to treat it as such!
If you have any great financial tips – let us know in the comments!