Music industry accounting has the same goals as general-purpose one. The essence of financial services is to help talented people with tax preparation, filing reports, liquidating debts, checking agreements, and forecasting the budget. However, creative persons often face non-standard economic challenges, e.g., monitoring royalties and controlling financial transactions on tour. Let’s talk about some features of music industry accounting.
Key responsibilities of an accountant
Bookkeepers in the music industry successfully handle various tasks, depending on the employer’s requirements and experience level. Specialists serve musicians, singers, producers, record corporations, and other creative individuals. Consider some of the most common tasks that professionals successfully cope with:
- Dealing with tax returns: creative persons often have multiple sources of income and irregular payments, making filing tax returns a daunting task. Specialists use all their experience to ensure the correct and accurate payment of mandatory fees.
- Exploring contracts: songwriters sign contracts with labels, distributors, studios, advertising agencies, and other partners. Financial experts can review these papers to ensure they meet the client’s financial needs.
- Managing assets: since creatives are often busy recording melodies and world tours, they don’t have much time to keep track of their finances. An accountant advises customers on the most profitable ways to invest.
- Cost management: recording music and organizing tours are expensive, but a musician needs to ensure he doesn’t waste money. Bookkeepers regularly review business transactions to ensure their hirers don’t overpay or run into debt.
- Budgeting: some professionals are responsible for computing tour budgets. They use their knowledge to manage customer resources wisely and avoid unexpected costs.
Experienced accountants help you avoid violating IRS standards and guarantee you maximize profits. With expert advice, it is possible to create a system that streamlines the various economic aspects of your music business.
Principles of working with royalties
Royalty is the money the business pays to the owner of the creative asset. Royalties are collected by organizations such as ASCAP, BMI, and SESAC, which then distribute the money to the songwriters and artists who created the music. Since various royalties are available, let’s look at the basic interaction principles with every kind of awarding.
- Performance royalties: whenever a song is performed publicly the authors receive payment. Such a reward may be received if your music is used at public events, broadcast on the radio, in cafes, and in shopping centers. The funding is collected by firms holding performance rights. There are a few categories of performance remuneration: songwriter and publishing capital.
- Mechanical royalties: if you have a master recording of a track, whenever it plays on a streaming service, e.g., Spotify, there is a mechanical payment. Mechanical licensing specialists collect these funds.
- Print music royalties: if you are a composer who composes classical melodies or film soundtracks and your work is recorded as sheet music, you receive funds from the publisher for each sample sold.
- Sync royalty: every time your track is featured in movies, TV shows, commercials, and various kinds of visual content, a sync fee incurs.
- Producers’ royalty: some professionals are paid based on the percentage of profits the record label is contractually entitled to, called producer scores. One point is one percent of the earnings generated from the song.
Accounting experts in the music sector can quickly and accurately calculate the royalties due to artists. On the other hand, they are ready to help brands produce, distribute, and promote audio and define the royalty volume that goes to the authors.
Tax deductions in the music industry
There are strict rules about how much money entrepreneurs must transfer to budgets of different levels, but many creative persons need to learn there are several variants of how to reduce their tax burden. We’ve put together a few tax deductions to take advantage of as soon as possible:
- Tools, gear, and equipment: your collection of guitars, amps, cables, stands, and cases are all tax-deductible capital expenditures.
- Travel to rehearsals and music events: from gas stations and parking fees to taxi and public transport spendings, travel costs are often overlooked when determining ways to reduce mandatory fees.
- Workspace: your music career will likely require recurring costs associated with setting up a workspace at home or renting an office. To take advantage of the home space deduction, you must compute how much of the house is for business use only.
- Food: if you spend money on the meal while on tour, recording a new album, or negotiating terms with agents and producers, you may expect a 50% deduction on such expenses.
Experienced accountants in the entertainment field can help you determine the best place to stay to minimize mandatory payments. They will also choose the optimal system to organize your music business, ensuring your investments are regularly tested.
Top music area bookkeeping software
Using advanced music industry accounting platforms, you can quickly generate invoices, generate reports, manage project times, and more. Reliable software frees up time, so you are free to focus on what you do best – make music and perform great songs. Consider the most popular digital solutions:
- FreshBooks: time management, invoice sending, and cost optimization are nothing new, but FreshBooks offers the full benefit of a seamless, cloud-based accounting solution for musicians. The program provides to control finances, check expenses and monitor timely settlements with counterparties.
- Zoho Invoice is the ultimate cloud-based software for creatives. You can manage your time, set up invoices, and get paid quickly. In addition, you may keep track of receivables and interact with clients and colleagues through such a tool.
- Xero is an easy-to-use cloud management system suitable for musicians, bands, artists, and freelancers. You may easily access Xero functionality on your smartphone, tablet, or computer. Advanced payment options, including bank transfers, have made it easier to bill and manage financial transactions through the app.
Music industry accounting consists mainly of repetitive tasks. The simple tactics of planning and executing such routine objectives assist musicians who successfully manage their businesses while focusing on the creative aspects. Select software that will help you make all the necessary project documents.
Conclusion
Musicians and companies working in the creative field need specialists who may track their expenses, monitor fees and develop a budget. BooksTime’s staff are ready to become your financial advisors. We will carefully control your capital while you create.
The company employs only experienced professionals who know the industry’s features and will do everything possible to ensure you receive the optimal reward.
Professionals comprehend all the intricacies of copyrights and licensing agreements, can spot discrepancies, and are willing to check royalty records to find missing funds responsibly. We may contact your lawyer to force counterparties to recover forgotten debts and ensure all tax standards are strictly observed.
