Accounting For Your Creative Business

Today we're talking about setting up accounting for your creative business. Yeah, it’s a little daunting, but it’s SO IMPORTANT because accounting for your business is super frickin’ important. And if you don't want to end up like me with a $10,000 tax bill, literally every time it's tax season, you should probably listen to or watch this episode.

Here’s what we’re covering:

1. Separate bank accounts - get a master business license for $60 in Ontario, this will allow you to get a bank account
2. Set up an accounting system like Wave or Quickbooks or Freshbooks
3. A way to track sales, either with your acting system or POS like shopify
4. Track every transaction coming in and out of your biz with categories
5. Keep a running tally of your profit, this is what you will be taxed on
6. Hire an accountant that is awesome and not stupid and KNOW what you’re supposed to be looking for

Check out Melissa Houston’s podcast The Business Society for more on your business finances https://thebusinesssociety.co/podcast/ 

My amazing accountant can be found here if you’re in need of one! https://www.mlhc.info/ 

That’s all for now! If you liked this episode and want to hear more, make sure you follow me on Apple Podcasts or wherever you listen to your podcasts! You can also find me on TikTok and YouTube. 

If you’re interested in starting your own creative business, in the new year I’m launching an exclusive program to help you get started! It’s limited to 5 people and I’m developing this program RIGHT NOW! FOR YOU! So if you’re interested, click here to sign up for more info! 

Instagram: @the_ultimatecreative and @emily.milling

Transcript

[00:00:00] You're listening to the ultimate creative. I'm your host, Emily milling. I am a multi passionate multihyphenate entrepreneur, comedian podcaster, musician, filmmaker. You name it. If it's creative and it has something to do with business, I'm probably in. If you're looking for a way to earn money through your creative passions, or if you need help finding your creative side, you are in the right place.

[00:00:34] Well, hello there. Welcome to another episode of the ultimate creative with me. Your host, Emily milling. Yes. I'm still batch recording. Yes. There's still a Christmas tree here, but you know, That's recording my podcast and my videos makes it easier for me to enjoy my time off from Mike rate of business.

[00:00:51] And so today we're talking about setting up a counting free creative business. That was a really dumpster. But we're going with it. All right. Cause accounting for your business is super frickin important. And if you don't want to end up like me with a $10,000 tax bill, literally every time it's tax season, you should probably listen or watch or whatever this.

[00:01:15] It was very noisy in here today. All right. First up, if you are starting a creative business and you have not yet gotten yourself a business license, that's the very first thing you want to do. And Ontario, you got a master business license. It's like 60 bucks is super duper cheap and you register your business name and you're good to go.

[00:01:32] You can, you get to unlock a whole world of other things, specifically opening up a bank account. That is just for your. The reason you want to have a separate bank account for all of your business transactions is because if you've got like a computer you purchase coming out of your personal account and not out of your business account, well, you're probably going to get taxed a shitload more.

[00:01:54] First of all, you can game the system to friends. You absolutely can. Maybe, maybe you have unruly. Office workers that you're working with in your business. And in the afternoon, they're like so grouchy and you're like, well, maybe I can buy them, uh, an espresso machine to calm them down in the middle of the day.

[00:02:17] That should go through your business bank account and be a business expense. So that you don't get taxed of a Gillian, extra dollars on it. Plus you got the HST off. If you have an HST number and you need that. If you're making more than $30,000 a year in Ontario or in Canada, whatever, figure it out for wherever you live.

[00:02:35] That's just what it is for where I live. You need to have a separate because it's going to make it a lot easier for your accountant at the end of the day. To go through your books and be like, okay, great. This is 100% super duper easy. It's going to be cheaper for you. I'm just trying to save you money.

[00:02:48] Okay. The other thing that you should do is listen to Melissa Houston's podcast, the business society. It's a podcast that my team at the ultimate creative produces. It's so good. It's so it's like essential for any business owner, no matter what to listen, to listen to all she has to say about business finance.

[00:03:05] The next thing you need to do is set up some sort of accounting system. It could be wave. I use wave. There is a free version of wave as well. It just has like ads. Still a super awesome platform to use. You could use QuickBooks, you could use fresh books, you could use HoneyBook. I don't like there's a bajillion, different books.

[00:03:25] You can use whatever. Choose one, stick with it, go with, if you don't like it, then go to something else. It doesn't have to be like the one I use or the one somebody else is using. It just has to be somewhere where you can track all of your transactions and the money flowing in and out of your account.

[00:03:40] That's literally the exact same thing. I just said the. So the transactions will be the money flowing in and out of your business account. Remember, you need a separate business account. Do not put this through your personal account, please. For the love of God, it's not going to be a good situation in your accounting software.

[00:03:55] You need to set up your chart of accounts. What does that mean is very simple. It's just categories. It's like my budget for meals and entertainment. I will be using that budget to treat one of my clients to dinner tonight. There are some really good benefits to putting everything through your business.

[00:04:11] I'm telling. When you're an entrepreneur, you get crafty like with your creative crafty business. Okay. I'll stop that now. I'm not sorry. So you've got your categories in your accounting system. You assign transactions to each of these categories. Every single time a transaction comes through, it's actually super easy.

[00:04:32] You could do this, like for five minutes, once a week or 10 minutes, every two weeks or 15 minutes, every three weeks or 20 minutes, every four weeks, whatever you want to do. I don't know. It's your life. You figure it out. But I like to do it like once a week, five minutes, it takes me zero time. And I also put in.

[00:04:47] If there is HST. So harmonized sales tax here in Ontario, that's 13% of all of the, the, the transactions. The transactions is 13% on top of the price that I charge my clients for their podcast production. And then anything that I buy that has HST on it, like a. Perhaps out at a restaurant, I take that HST and I deduct that from what I've collected.

[00:05:12] And when I file a report later, anyway, you put that all into your accounting system so that you have a very clear picture of how much money you've got, how much you need to put into a separate account for your HST, remittance or your tax remittance. You keep track of your profit. You keep track of how much you're paying your contractors, how much you paying yourself, all of these different.

[00:05:32] Do that in your accounting system, this is super essential, super important for you to do. Oh man, you need a way to track your sales. You need a way to track your sales. Cause like, if you've got like random cash coming in at ya from all over the place, specifically, like my fiance whose business accounts were a little bit of a disaster before I got my meaty little hands on them.

[00:05:56] Anyway, if you've got money coming in from all over the place, like you have to have. A clear understanding of what all of these different places are. So for example, you can have a Shopify and that's selling a product, right? Or you could have a woo commerce, like a WordPress website that you sell a subscription on, or you could just do invoicing through your accounting software.

[00:06:19] So through QuickBooks, through way through FreshBooks, whatever that is, you need to have a way to track that because you also need to have a way to follow up with the people who are delinquent and do not pay you on time. But you need policies to make sure that they pay you on time. And also you can charge interest when they don't pay you on time, because like nobody needs to be here for that.

[00:06:37] That's that's just foolishness. So find a way to track all of your sales. This is essential for reporting, understanding how much money you've made through the whole year, what you need to save for your taxes, all of these different things. Put it in one place if you possibly can and make sure that you know how to use it properly.

[00:06:57] I also want to talk about. You should have a running tally of your profit at all times in your business, so that you know exactly how much to put away for your taxes. When it comes to tax season, you might have a fiscal year end, like my stupid fiscal year end, which is on June 30th by June 30th. I need to have a certain number of dollars in my account or already paid to the CRM.

[00:07:24] So that I don't have to have a giant, massive $10,000 tax bill, which has happened to me on multiple occasions. I don't want that to happen to you, which is why I'm telling you this keep a running tally of the profit in your business. So all of your sales minus how much you spent on things to make those sales happen, that could be subcontractors.

[00:07:43] That could be. Office supplies that could be the apps that you use. Maybe use like a Santa, like a scheduling tool for your team. It could be like, literally anything you spend money on for your business meals and entertainment, perhaps entertain yourself. Why not get some takeout? You're working hard, do it.

[00:08:02] It's for you. Make sure that you're tracking all of this stuff and subtract that from the amount of sales you've made, what's left over is your profit. That's what you're gonna get taxed on. Okay. And figure out what the tax rates are for your particular situation. They're all different. Mine is currently because my business makes under $500,000 a year at this moment in time.

[00:08:22] Mine, my tax rate for my corporation is 12.9%. So 12.9% on the profit that I have earned so far equals whatever the number is because, um, I don't know. I think my current profit is, well, I'll tell you, my, my current profit is around $3,000 for the last six months. And that sounds really tiny, but this is strategic.

[00:08:47] Okay. I'm going to let you in on a secret here. My revenue is over $60,000. And my profit because I pay myself on a payroll. I pay my subcontractors and I pay for a bunch of other things through my business that are business expenses. The profit is a very, very small amount. So I currently only owe in corporate taxes for the end of the year, like 300 bucks.

[00:09:12] Like it's really not a lot of money. This is why it's important to keep a tally of the profit. Because like what if instead you just took divots. And dividends being like, you just send yourself, eat transfers. I used to do this all the time. What, if you did that, and you didn't know how much you were actually taking out.

[00:09:29] So like the, the $20,000 that you sent yourself after you got a big contract or something, you didn't put away, extra tax money for that. And by the way, you're going to be taxed personally, very differently than for corporate. So this is going to be different for everyone. You got to talk to an accountant about what's the best plan for you, but just as a heads up, you are going to be taxed on the profit of your business.

[00:09:51] So keep a running tally of that at all. What I want to talk about now is understanding what you need to look for in an accountant or a bookkeeper. If you choose to hire. First of all, I think it's absolutely essential that you understand your business. Finances. If you don't understand them, if you need a crash course, go check out my amazing client, Melissa Houston, she's got a course on this.

[00:10:15] She teaches people, business finance stuff all the time, and to make your life easier so that you know what you're doing. I went from having like $10,000 tax bills every year and not knowing how the fuck to pay them to having $300 tax bills. Right. Like I was just talking about. Can actually happen if you know what you're doing, but anyway, once you understand sort of the backend of your bookkeeping and your corporate structure, your business structure, the, the accounting side of it is going to be much easier to find an accountant that won't fuck you over.

[00:10:47] Like a couple of the ones that I had before I understood what my books meant. Cause like, they're not going to tell you, unless it's my current accountant, I will drop a name, her name in the show notes because she is amazing. But she is an exception. Let me tell you, I went through bookkeepers and accountants that just said, okay, now you owe this much.

[00:11:08] And I was like, but how? And they never gave me the strategy. To understand how to pay myself for example, so that I wouldn't have an excess amount of taxes to pay later. They never gave me the strategy to understand like how to, uh, like what things could be written off as business expenses versus like paying them out of pocket instead.

[00:11:31] And I ended up paying so much more money. And I paid them a lot of money just to tell me this stuff. So there are not good accountants out there and there are not good bookkeepers out there. And frankly, there are bookkeepers out there who like, if they're charging you like 50 bucks, you got to take a hike, man.

[00:11:51] You do not want. You don't have it. You do not want to pay less than $2,000 for somebody to do your taxes at the end of the year. Otherwise you're just totally screwing yourself over, build it into your entire budget. Don't cheap out on this stuff. I'm telling you. From the bottom of my heart. I don't want you to have a $10,000 tax bill.

[00:12:11] And I'll say that till the day I die. So that's it for this episode. If you enjoyed this, if you want more of this, you can find me on Tik TOK on YouTube. I guess I'm on the Instagram too. Here I am on Instagram and on the podcast, the ultimate creative podcast, it is for people who want to. At creative business and need to know what the fuck they're doing.

[00:12:30] I've also got programs that I'm running that help people just like you to figure out how to do their business. It's like a crash course for creative business. It's new, it's fun. It's fresh. If you're interested in that, send me an email, emily@theultimatecreative.com and I will get you on the list for the information it's an exclusive.

[00:12:48] Very tight little group, five people maximum. At a times, you get mega super focused on your business and your needs specifically. And I will help you to get your business started so you can have all that time. Freedom you want all the money you want, all the things that you want. Cause I know it's possible because I do it all the time.

[00:13:03] It's my life right now. It's really freaking cool. Anyway, that's all like you. I love you buddy.

[00:13:13] Thanks for listening to the ultimate creative. If you heard something today that helped you get one step closer to building your super awesome dreams, I would love it. If you shared a rating and written review on apple podcasts, that helps more people just like you, that want to break into their passions and build a life they love with creativity and entrepreneurial.

[00:13:32] And if you know, someone that needs a boost of inspiration and this episode will help please share it and spread the love. I truly believe that the more we encourage each other to take steps towards building our dreams, the better our lives will be and the happier we will become. Pretty awesome to learn more about how I can help you build your dreams through podcasting, more coaching, head over to the ultimate creative.com or follow me on Instagram at V underscore ultimate creative.