24 MusicWeek 24.01.14 VIEWPOINT NICK LAWRENCE
NEVER MIND THE TALENT - FEEL THE BIZ
ACCOUNTANCY n BY NICK LAWRENCE, CEO, BLUE SQUARED
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ou only have to open a copy of Music Week, read the latest Tweets from artists or talk to managers and producers, to realise that
talent only goes so far. Sure, the cream will generally rise to the top but, more than ever, anyone seeking success in the music industry has to get a business ‘head’ on very early in the game. Perhaps it has always been thus, but the fact that
the other week MW ran a very rare focus on accountancy reinforces the point. Now, I don’t intend to get all nerdy in these columns – it’s what you have an accountant for (and if you don’t you should have) - but I hope to be able to offer a bit of insight into a side of the industry that is often considered a ‘dark art’ and is usually way outside the comfort zone of many parts of the industry from self-employed musicians to major labels. So, where to start? In reality, it needs to be with
basics and this applies not only to those creating music, but those producing, promoting and publishing it. Earlier this year HMRC (the tax man/woman to you and I) started random record checks. Just to be to clear, these have nothing whatsoever to do with how well you store your vinyl! They are about inspecting financial and business records and can cover anything from
so business tends to get ignored. Don’t get me wrong, creativity shouldn’t be
stifled by business imperatives. If that was the case, we’d all be bankers, right? But some of the questions that HMRC is asking are the kind of basics that even start-up garage band wannabes should be able to answer if they are making any kind of living from the music industry (see Nick’s Notes below). Yet, it constantly amazes me that even
A-listers, major festival organisers and big-name production houses often struggle to know the answers and find it even harder to lay their hands on the relevant information. So what’s the answer? Getting to grips with
ABOVE Nick Lawrence: UK music accountancy expert warns that HMRC may carry out a ‘random check’ on any artist - at any time
expenses to royalty payments and ticket or merch sales. A number of specialist accountants picked up on this early because it appeared that HMRC were going after the creative sector first. [To the tune of Delilah] Why? Because they are
an easy target. Why? Because business record keeping in the creative sector generally, and the music industry in particular, is – to use technical language – pretty crap.
NICK’S NOTES: A TAXING ISSUE - A ‘HOW TO’ GUIDE TO DEALING WITH HRMC
What are HMRC record checks all about? It’s certainly not checking out your taste in music and they won’t take kindly to touring musicians who stuff post-gig bar bills in their back pockets or producers reclaiming VAT on EU-based costs because they don’t know where the supplier is located.
So what will they ask? They’ve got a clipboard full of questions, but these are some of the critical ones: * How long have you been trading? * How often do you update your sales records? * How many expense invoices do you have each month? * How often do you update your expense records? * How many of these are paid by cash? These seem really straightforward.. only if you can you lay your hands on all the relevant records if HMRC decides to run a check. Even the biggest companies often find it hard to keep track unless their records can be easy updated and the information is added regularly. It’s not rocket science, it’s just good organisation and can also improve cashflow projections. Just don’t be tempted to leave updates to the last minute.
So what makes for good record keeping? Pretty much anything relating to your finances, but in particular: * Earnings must be supported by sales invoices * All expenditure (and that means all) must have either invoices or receipts, no matter how small, or it can’t be claimed back.
* Reconciled bank statements – banks have been known to make mistakes. No, really. So it is important to check them regularly and reconcile them against your receipts. * Regularly reviewing people who owe you money (debtors) and those you owe money to (creditors) and always chase your debtors.
That’s great, but where do I keep all this stuff? A used A4 envelope for petty cash receipts is fine – nothing hi-tech, but certainly effective. Keeping a note of what each expense relates to is important: which studio, which band, that kind of thing. There is also some great technology around that not only
helps you keep everything in order, but also monitors invoicing dates and when bills are due – predicting the cash reserves you’ll need to cover them. You can now store this information remotely (in the cloud) which cuts paperwork and allows you collaborate in real-time with your accountant wherever you are in the world. Some software, like Xero, even has mobile apps which allow you to take a photo of a receipt as soon as you’re handed it and save it to the cloud. Just don’t confuse it with the after-party images you’re about to share on Fac….OK, never mind. For an Unexpectedly Simple Guide to Record Keeping go to
www.nwnbluesquared.com/music
Nick’s Notes are brought to you with a bit of help from Xero - accountancy software with its head in the clouds
DIFFERENT CORRIDORS
basic record-keeping is good start, even if that just means putting all your receipts in one shoe-box instead of the pockets of 25 pairs of jeans, or using some simple cloud-based software to store vital business information. If nothing else, at least you can dump something
a bit more organised on your accountant’s desk, say “sort it!” and still expect to have a decent relationship with them when it comes to preparing your accounts… but that’s a whole other story.
nNick Lawrence is CEO of NWN Blue Squared, specialist accountants for the music industry.
nick.lawrence@
nwnbluesquared.com
How the entrepreneurial music business should deal with its tax responsibilities
Why? Because creatives don’t ‘do’ numbers and
www.musicweek.com
Singer/songwriter Carrie Tree and her manager Ken Kutsch share some thoughts on the music business and its relationship with accountants. According to Carrie: “It feels like there’s about
10 different corridors and doorways in your head as a musician. You’ve got the creative side and writing music at one end and then you’ve got to get to the other end for book-keeping, accounts and booking venues so it can be quite a challenge to keep going backwards and forwards.” For Ken, the issues are different: but equally
challenging: “Creatives don’t do numbers, but why should they? I feel I have to have a little bit of all of it – creative and business – and I love working with artists where we can interact. “I will ask business questions but we’ll also go
back and forth on artistic decisions because the two things are interlinked.”
To see the full video interview visit
www.nwnbluesquared.com/music
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