Advice from a music industry accountant – do you need one?
I know it’s only rock and roll but I like it …. Just not all the financial stuff that goes with it. Apologies to the Stones. Dealing with financial stuff is not what draws most people into the music industry. The conundrum is that you need to deal with the financial stuff in order to survive.
You don’t have to look far to find financial disaster stories in the music industry. Bankruptcy tales run the gamut of unpaid tax bills, incompetent and dishonest management, dreadful music deals, to plain ordinary running out of cash from rock and roll lifestyle excess. Did you really need to buy the private jet?
For most it is hard enough to earn a modest living in the first place. Your task is to hang on to as much of your earnings as possible. At least then it’s your choice if you do blow the lot.
If your income is just from performing, your affairs ought to be straight forward enough. Your job is to keep performing to generate the cash. The next biggest task is paying the taxman. You earn the money first and pay the tax later. The tripping up point comes when it is time to pay the tax because you have spent the cash. The taxman then gets upset and makes you bankrupt.
You will have to accept that if you earn money the taxman wants a cut. You want to pay him as little as possible but without getting prosecuted for fiddling the system. The solution is to get a good accountant as soon as possible. There’s a lot of things you can do to limit your tax bill but they need to be thought through in advance. Don’t leave it until the taxman is knocking on your door because then it’s too late.
Life starts to become complex when you start getting into writing, publishing, recording as well as performing. Each income stream has its own labyrinth of contracts which all need negotiating. Once you have done that you have money coming in from a recording contract, touring, royalties, merchandise, Spotify etc. etc. You will have multiple sources of income and maybe record company advances to repay. How do you make sure you get paid what you are due?
The solution is to hire the right people. Maybe not all at once but you are going to need a manager, lawyer and accountant. You will be getting on with doing the creative work and there won’t be enough hours in the day to deal with everything else, even if you wanted to. You need people who are competent, who will get on with the job without ripping you off and who you can get on with. You need people you can trust and be confident they are doing a job for you. The trap is not to bother and assume someone else is dealing with it all for you.
There is a theme here. Don’t ignore the financial stuff just because you don’t like dealing with it or don’t understand it. The message is you don’t have to be the expert but you do have to seek out those that are. It will be worth it in the end. Maybe you will be able to afford that private jet after all.
Photo by Kelly Sikkema on Unsplash