015 - Bookkeeping for Your Drag Business is a MUST - Here's How to Make it Easy
On today's episode of the podcast I'm wrapping up my intro series of the Unf*ck Your Biz framework to put your finances back together with legal and tax strategies. Today we'll be covering systems to take care of your bookkeeping.
If you're new to the series, take a pause to check out my intro episode and then Lesson 1 of the series. Missed the most recent lesson? Check out Part 7.
Prefer to watch your podcasts? Check out the Business of Drag podcast on YouTube.
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π€ Get a free copy of my bookkeeping template
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As I've shared in previous episodes, LLCs are like a magic bubble of legal protection for your business. They protect your personal assets from business liability. That is one layer of protection. Other layers include insurance and contracts.
In my other business, where I work with service providers like planners, coaches, designers, etc., they are typically the ones providing the contracts and insurance. For drag professionals, things are a bit different because you are usually on the receiving end and have a contract provided to you unless you are organizing a drag show/hiring talent. To learn more about contracts, grab a copy of my book or check out my bank of contracts for just $30.
When it comes to systems, in addition to setting up your cash flow systems (for example, paying yourself regularly) you also need to customize your tax systems including bookkeeping and setting aside money for quarterly estimated tax payments. During today's episode I'm walking you through my bookkeeping template so grab that free download here. Once you get that free template you'll also get access to buy my Business of Drag course for just $30.
The IRS says "You may choose any record keeping system suited to your business that clearly shows your income and expenses. The business you are in effects the records you need to keep for federal tax purposes. Your record keeping system should include a summary of your business transactions. This summary is ordinarily made in your business books. For example, accounting journals and ledgers. Your books must show your gross income as well as your deductions and credits for most small businesses"
The most common way small businesses do this is with Quickbooks, but you don't have to. You can use a simple spreadsheet or even a pen and paper (though I do not recommend that). If you're relatively new in business you typically don't need fancy bookkeeping software, unless you find you're selling a lot of low-ticket items like merch, that way those transactions can be automatically pulled from your bank account into your Quickbooks. Once you hit about $150,000 - $200,000 a year in revenue, that's typically when I recommend you hire a bookkeeper, which I offer as part of my Drag Tax business. You can book a call here to learn more about that.
Now to dive into our bookkeeping spreadsheet and show you how to use it. Be sure to download the spreadsheet to follow along. For a visual walk through, check out this episode on the Business of Drag podcast on YouTube where I share my screen as I discuss the spreadsheet template.
First we start with Income categories. Let's assume as a drag professional one of your income categories is gigs, paid posts for sponsored Instagram content, and wig styling/salon services. We want our spreadsheet to break down our revenue sources by category and month to give us important financial insights further down the line.
Then, we'll go through our expenses and the Business of Drag tax deduction guide to decide all of our categories like makeup, storage, clothing, etc. (called Chart of Accounts). We'll log this at the end of each month when we open our monthly bank statement and log our expenses. This is why it really helps you to have a business bank account so you don't have to comb through every personal transaction to see what was for your business and it will be harder to argue what was a business deduction if you get audited. This gets especially tricky on Amazon or Target or other places where you do personal and business shopping. Separate your business purchases and pay for them with your business bank account.
Looking to set up a business bank account? I recommend Novo (not sponsored, though I do receive a referral bonus). Novo has no monthly fees and offers a Reserve system so you can organize your money and even automate certain percentages of each deposit to go toward taxes, savings, etc. Click here to join Novo.
Analyzing your expenses compared to your income can help you calculate profit and find what revenue stream(s) are most profitable. For example, is wig styling making you much more money than sponsored posts and you should therefore spend more time on wigs?
In addition to tracking income and expenses, the bookkeeping template also has pages to track your travel, your mixed use expenses (rent, gas, electric, things like that which can partially go toward a home office) and your cash flow.
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