PromoTix University Class

William Royall (00:01)
All right, in this video, we're covering one of the most important aspects of running any business, let alone an event business, and that's the process of setting up your accounting for success. We're going to go over the basics of setting up a chart of accounts, managing your expenses, choosing the right accounting software, and best practices for bookkeeping.

The foundation of your accounting system is called your chart of accounts. This is a list of all the financial accounts your business uses, organized by category to help you track and manage your finances. Think of it as a roadmap to understanding your income, your expenses, and where your money is going.

Start with income

These are where you'll track the revenue streams coming into your business. For an event company, you might have accounts like ticket sales, sponsorship revenue, merchandise sales, an exhibitor or vendor fees. Naming these accounts clearly will make it easier to see where your income is coming from and adjust your strategy accordingly.

Next, you have your expense accounts. These cover everything you spend to run your business. Common expense categories include venue costs, equipment rentals, marketing, staff wages, supplier fees, and talent. Breaking these down into specific categories can help you manage your spending and spot trends over time.

William Royall (01:27)
let's talk about cost of goods sold or COGS, which is a type of expense. This expense category is especially important for event businesses because it includes any direct costs related to delivering the experience

For most event companies, this can include things like event supplies, merchandise, production costs, and food and beverages that are sold on site. This is also what indicates your gross profit margin.

Essentially when you take in gross revenue, you'll subtract out your cost of goods sold and what you're left with is called gross profit. Gross profit is then used to pay all of your operating costs that aren't directly associated with delivering the experience itself. These non-COGS expenses may include things like salaries and payroll, office space, travel expenses, and more for the overall company.

Now let's take a look at some specific examples of what may be classified as cogs at the event level.

Examples of cogs for an event business might include decor and supplies like tables, chairs, lighting, or staging materials that are directly related to the event itself. If you're producing custom merchandise like t-shirts or branded items, the cost of these goods fall under cogs too. Another common cogs category is food and beverage costs. If you're providing food at the event, either through catering or your own team,

the cost of these items along with any additional service fees paid to caterers would be a part of your COGS. And if you're using temporary event staff like sound engineers or technical crews, their labor costs can also be considered as COGS since their work is directly related to producing the event itself. This is different from a director of your company which may work all year and be paid a salary.

COGS accurately helps you understand your gross profit, which is the revenue from the event minus these direct costs. By tracking your gross profit, you'll get a clearer picture of each event's profitability, specifically within your overall business when you host multiple events.

Now, besides income and expenses, you'll also want to set up assets, liabilities, and equity accounts. Assets might include your equipment or any upfront costs, while liabilities cover things like loans or credit card debt. Equity represents the owner's investment in the business, and tracking these helps you understand your business's financial health over time.

William Royall (04:03)
Now, you're going to have to choose between two main accounting methods, cash and accrual. Cash accounting records income and expenses when the money changes hands, while accrual accounting records transactions when they're earned or incurred, regardless of the timing of the payment itself. So for most small businesses, cash accounting is simpler, but accrual gives a more accurate picture of your actual finances. Talk to your accountant about which set up

might be best for your business.

Now, let's talk about choosing the right accounting software. For many small businesses, tools like QuickBooks, Xero, and Wave offer affordable ways to handle accounting tasks, track your expenses, and generate the reports you need. If your events have a lot of moving parts, though, look for software that offers project or event-based tracking so you can monitor each event's profitability in detail. Most of these tools also connect with your bank and credit card accounts, making it

easier to reconcile the transactions and avoid missing any expenses.

William Royall (05:10)
Now, once you have your software in place, it's essential to follow some bookkeeping best practices to keep everything organized. First, set a regular schedule, whether it's daily or weekly to enter your expenses, update revenue, and review your cash flow. Having a routine reduces the risk of small mistakes turning into larger financial issues. Also, keep digital copies of receipts and invoices by uploading them into your accounting software or using apps like Expensify.

This makes it easy to find records and saves time during tax season. Finally, consider setting aside time each month to reconcile your accounts. This ensures that what's in your books matches what's on your bank statements.

One essential tip here, always separate your business and personal finances. Open a dedicated bank account and credit card for your business to keep everything organized. This will make bookkeeping smoother and prevent any tax headaches down the road.

Finally, let's talk about budgeting and forecasting. We're going to discuss budgeting for each event specifically in the next class, but you also need to budget and forecast your monthly and yearly expenses for the business

This helps you avoid cash flow problems and prepares you for upcoming expenses. Plus, a well-maintained budget allows you to analyze your spending and make informed decisions.

To recap, setting up accounting for your event business involves creating a chart of accounts, choosing an accounting method, selecting the right software, following bookkeeping best practices, and maintaining overall company budgets.

William Royall (06:51)
By putting a solid accounting system in place, you're setting up your event business for smart growth and profitability. In the next video, we'll go deeper into financial planning and cash flow management. See you there.