Also in this issue:

• Web Radio:
  Will It Pay To Play?
• Greening Of The Music Industry
• The IMA Buzz
• Making $$$$s and Sense
• April Happenings

Making Dollars & Sense

It’s tax time. Another year of good intentions and wasted opportunities has passed and it’s time to face the music. Anxiously, many of us will drag shoeboxes of receipts to an accountant and hope for a reprieve.

But accounting is more than just a way to figure out what you owe Uncle Sam. Used right, accounting is probably the best tool you have to assess and manage your career.

You don’t have to understand double-entry accounting to keep track of things – that’s what computers are for. The important thing is to have a system of keeping track of expenditures and revenue and being able to interpret the information to make management decisions.

Understanding the accounting and finances of your band and business will ultimately help you make better decisions. Everything you do has a real and measurable financial impact on the profitability of your business. Regular and accurate accounting will help you see what it is.

Violinist Jean Cook does all the accounting for the non-profit punk chamber music collective Anti-Social Music. Since non-profits run the risk of losing their tax-free existence, Jean knows the importance of careful accounting and is an ideal tutor for the rest of us.

Jean told me that most people get "a hazy picture of their accounts around tax time" but a sharper and more focused picture can help you immeasurably in making better decisions every day.

She offers the simple example of the daily cup of coffee. A cup of coffee and a cookie from the corner shop is $3.33. Not a lot of money to spend. But if I have an afternoon cup of coffee every work day, (a pretty good assumption), I’m actually spending $66.60 a month or about $800 a year.

That’s 2.7% of my annual income (based on $30,000 a year). Throw in the occasional latte and it’s no wonder I can’t pay the phone bill.

According to Jean and other savvy experts, the best thing you can do to protect your finances is write down every single expenditure for a couple months and really track where your money is going on a daily basis. Without that knowledge you can’t make informed decisions and do things better.

Dale Saari, a professor of finance for Columbia College’s Arts Management program notes that most small businesses (like independent artists and other music biz mavericks) assume that their finances are simple. But, actually end up paying more in taxes each year simply because of sloppy bookkeeping.

You will quantifiably increase the likelihood of an accountant saving you money with (hopefully) legal tax breaks if you present them with an organized ledger of accounts, and not a box of crumpled receipts.

Kristin Brown from the Future of Music Collective suggests treating everything as a serious business venture from the get-go, especially in today’s digital world. According to Kirsten, you need a professional legal & accounting team or plan in place or risk unpleasant consequences.

Kirsten explains: if you and 3 bandmates write a song and only have a verbal agreement to split the profit four ways, chances are you and your mates are headed for trouble.

Without a practical framework for how to collect money, who’s the main contact point for royalties, how the profits get distributed, who collects the royalties if the band splits up, etc... there will likely be bad feelings, lost money and opportunity.

While the essence of a business is to make money, what businesses really do is create cash flow. Smart bands & music biznesses today can profit from many revenue streams including CD sales, touring, licensing, terrestrial & Internet broadcast, downloads etc.

Kirsten suggests evaluating all your revenue streams. Now, imagine you’re wading into a river and accounting is like your prospecting pan to identify the nuggets of gold in the flow.

Tracking revenue from each stream and knowing how much you spend on creating each stream allows you determine where to focus your energies.

Whether you use, as Kristin recommends Quicken to keep track of everything, or Quickbooks which is what Jean at Anti-Social Music uses, or plain ol’ Excel, regularly logging transactions - perhaps every week if there’s not much going on or even every night on transaction heavy times, like tours – basic accounting can fuel your success.

Obviously things can get incredibly complicated depending on how many different accounts you want to keep track of, how you classify those accounts and how often those accounts have transactions, not to mention how do you know whether something counts as a debit or credit in the first place, which is akin to learning a different language.

That’s why they invented accountants. Accountants do more than fill out forms that you don’t want to fill out. They are privy to a very detailed picture of many different businesses. Develop a relationship with them and you’ll find that they’re a font of knowledge.

The author - David Wechsler would love to do some accounting for his new album, Vacations available for pre-release download at his Myspace page. (http://myspace.com/davidawechsler).