Where in the world am I today?: North Vancouver in the Morning, Juneau, Alaska in the evening

Got the following inquiry in a recent email and thought I’d use it as a blog post…

Exactly how do you do your book keeping…. is there anything as a Canadian small business entertainer that may be helpful to others like me. (It’s funny I have a bachelor of commerce, but HATE accounting. Almost failed it many times at university). Do you hire a book keeper? Do it yourself on a program? Do you have a credit card that is only for business or do you put both personal and business on one credit card? Do you have a business checking account, (big fees) or use a dedicated personal account? Hopefully not too personal. You know I still wish I had taken a course on how to set up and run a small business way back when.

Now most of the principals I use aren’t Canada specific, and would work for any entertainer I should think… To try and craft some sort of structure to the flow of money, I’ll start from the point of income and move towards the accounting of expenses…

Incoming Money –

First off, I have a dedicated bank account for all of my business transactions. I choose to make it a personal checking account because I’m thrifty (some would say cheap) and didn’t see the need to pay additional fees just to say I had a ‘business account.’ My personal account does everything I need it to so why would I need anything more? Having a dedicated account that all income is deposited into helps if you ever get audited (which I have). It keeps the flow of incoming and out going money so much easier to follow for an auditor which means you spend less time getting probed by the government and can get back to the fun of making money by performing… So – one account for all business transactions.

Outgoing money –

Credit Card: Along with having a dedicated bank account for business transactions, I also have a dedicated credit card that I only use for business transactions. In much the same way it helps to keep the paper trail looking clean if you’ve got a single card for all of the business transactions you make. If you have to go through with a fine tooth comb and determine which purchase were for the business and which were personal it becomes rather messy very quickly. Keeping it very distinct is a really good idea.

Cash Purchases: There are two choices here… You can either set up a ‘Petty Cash’ account and use it for all business related cash purchases or the choice I made was to treat myself as a purchaser for the company and when I enter cash purchases into my books have myself set up as a registered purchaser and once a month or so the company pays me back for all of the purchases I made with money from my personal bank account. Either way works, but I found that setting myself up as a purchaser for the company was easier than trying to keep a petty cash account in balance.

Book Keeping/Recording Receipts –
I use a program called Accounting Edge which is a product made by MYOB (Mind Your Own Business). The copy of the program I use is quite dated, but it still does everything I need it to do, so I see now immediate need to change it. The actual piece of software that you have doesn’t really matter all that much. The purpose of any accounting program (be it Quicken or Quickbooks or  Simply Accounting etc.) is to help you electronically record and organize receipts and other business transaction. One of the first things you do when working with any accounting program is to set up a ‘chart of accounts’ and this is where it makes some sense to talk to a professional accountant about how you as a small business owner/entertainer should choose to categorize your assets and liabilities including a hopefully clear method for entering the receipts from expensese. Finding out what you can and can’t write off is a very useful exercise because it allows you to make smart choices about how you spend your money and minimize your tax bill at the end of the year.

In the picture above I’ve got a picture of a filing system that I use to organize my receipts. Consider the file folders like the various accounts you’d set up in a chart of accounts. I’ve got folders for postage receipts, office supplies, props, costumes, workshops etc. etc. Once I’ve entered the information into my accounting program I file the hard copy receipt in the corresponding file folder. By staying reasonably on top of things and this only really means spending fifteen minutes or so once a week you’ll be able to stay on top of data entry and have nice clean looking books. Now whether you choose to do your tax return yourself or (like me) choose to take the information into an accountant who will take the information that you prepared and plug it into the tax return on your behalf having spent the time to create a clear method for organizing your information will save your hours and hours of frustration!

So there you go…a brief explanation of how I handle the accounting for the business that we call show. My system has evolved over the years especially after things like being audited… I try to keep my records squeaky clean these days so that if I ever get audited again I’ll hand over my records and the government can go over them all they want… As far as I know I’m doing it all right and as far as they showed me when they poured over things during the audit I was already doing it mostly right… Just to make sure though I get my records checked by a professional accountant just to make sure and have him prepare my tax return… If my guy sees anything that he thinks might raise flags he lets me know, but so far since that last rather invasive proceedure things have gone fairly smoothly… I don’t recommend getting audited to anyone, but it inevitably happens to someone and if that someone is you then having your poop in a group makes the experience a whole lot less painful.

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This entry was posted on Tuesday, June 2nd, 2009 at 12:01 am and is filed under Technical Tuesdays. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.