Have You Made Sure You Can Get Paid?
File Under: Making Money With Music
No matter what industry they’re in, every business needs to collect and handle money to survive. Musicians who strive to make money with music are no different. Once you get your music business underway and start generating transactions -- such as sales of album and merch at shows, sales of downloadable songs and content via credit card, payments for licensing purposes -- you might find that you have to handle a few key details about taking payments and invoicing.
Consider the items below to make sure that you can get paid in any business situation:
1. Taking Cash
When you take cash sales, consider the following:
- Do you have change on hand?
- Do you have a way to make out receipts if they ask for them?
- If all of the money from each type of sale goes into the same drawer or envelope, do you have a tracking system for your income for bookkeeping purposes?
- Do you have a way to deposit the cash immediately afterwards? At your bank, or via some other method? Keeping too much cash is unsafe.
- Which bank account are you going to use to deposit your cash? If you’re not doing business as a sole proprietor, it should be a business account.
Cash can be tricky, because it often goes into someone's pocket, either intentionally, or otherwise. Also, if you make the mistake of paying your expenses out of your cash income, you’ll need a way to track it. Otherwise, you’ll miss out on putting in a tax write-off.
2. Taking Checks
Some people still use checks. Unfortunately, they’re tricky because it's up to you to make sure that the person paying is legitimate. A bounced check not only costs you money, but it often comes with a significant bank charge -- sometimes even costing even more than the income from the check itself! These are all factors about checks that you should consider:
- Does your bank have an app that lets you deposit checks? Many banks today have mobile apps for smartphones that allow you to take photos of checks and deposit them remotely which makes depositing checks more convenient.
- Which bank account are you going to use to deposit your checks? If you’re not doing business as a sole proprietor, it should be a business account.
- What's the Non-Sufficient Fund (NSF) fees that your bank charges? If you need to handle a lot of checks, talk to your bank about options or consider choosing a bank that has lower NSF fees.
3. Taking Credit Cards
Today, handling credit card transactions is within the reach of everyone. If you have a smartphone, you can take payments using solutions like Square, Paypal Here, or Intuit's Go Payment and many others that let you pair a credit card swiper with an app. You should never have to say "no" if someone asks if you take credit cards.
Consider the following factors for taking credit card payments in a music setting:
- Are you comfortable with the credit card payment processor? These services usually charge a combination of flat fees plus percentages of each transaction. You'll want to compare services and make sure you’re getting the best deal you can.
- Which bank account do the fees get deposited into? Again, if you’re not doing business as a sole proprietor, it should be a business account.
- Can you use the credit card processor for sales online? Many of these services allow you to take credit cards from customers via the internet which makes it more convenient for customers.
Most established businesses won't pay you unless you have a way to send them an invoice. They are not usually done by paper, and are instead done via PDF in an email. But the invoice still does have to be sent as it gives the purchaser a tax record for a payment that they made. Remember that businesses have to account for all of the money they spend every year.
Here's what you should consider about invoicing:
- Do you have a way to issue invoices? (If not, there are free invoice templates available online if you do a search .)
- Do you have bookkeeping software that allow you to track accounts receivable, which will let you see which have been paid, and which haven't? (You can do this manually for free using a spreadsheet on Google Docs or something similar.)
- Do you have a way to track each type of income that you get so that you know where it came from at the end of the year by customer, and category of income? This lets you plan your business in the future much more accurately.
These are all, of course, business startup questions, but it's worth it to think this through, especially if you're about to go on a tour, and won't be close to your home bank. The important thing in this case is to be able to carefully track your revenue and keep it separate from other sources of income you might have so that when tax time comes the next year, you can keep it all straight.
#makingmoneywithmusic #musicbusinessPhoto Credit: Keith Cooper