We think you’d be hard-pressed to find two completely different professions as accounting and the creative industries.
If you believe popular characterisations then you wouldn’t believe that we accountants could possibly enjoy working with creatives but you couldn’t be more wrong!
So why are creatives different? And why does this mean that they need a different approach to accounting?
Read on and we’ll let you know why we like working with creatives.
It’s not just the work they do
The obvious answer to why creatives are different is that they do different work.
Now, this isn’t actually as straightforward as it may seem, because there are quite a lot of nuances here.
The work that creatives do is almost exclusively intangible, that is you can’t touch it so it’s not like manufacturing or construction.
And usually, creatives are producing entirely new assets, whether that be a video about a client or a hard-copy brochure so they aren’t a ‘me too’ type industry.
But bracketing creatives is hard because the sector is so diverse that it ranges across a wide spectrum.
Indeed, a creative agency can focus on one particular aspect such as producing original artwork or they can be a multi or full-service agency that does pretty much everything that a client may need.
Creatives have a process but it isn’t like a production line as such and they tend to work on projects. Plus of course, they are almost exclusively working B2B rather than with an end customer although their work will ultimately make a big difference in the B2C relationship that their clients have with their own customers.
There’s a much higher incidence of freelance and subcontract working in the sector too. Creatives often like to be free to work with many clients at the same time which keeps things fresh and interesting. If you work in the creative industries you may be surprised to learn that there are sectors that very rarely use freelancers, if ever!
So although the work that creatives do is different in itself, the way that they do it and the way that creative industries organise themselves are also disparate.
Now, this may be a massive generalisation but we’ve found in our experience that on the whole, people who freelance, subcontract or run their own studio or agency tend to be ‘big picture’ people. They are often less interested in the minutiae of their finances but more in the direction of travel.
They also value clear communication and being able to talk about a problem, rather than receive a series of stock emails.
How to account for creative businesses
With all this in mind, how do we need to change our approach to accounting for creative businesses?
The first thing is to get a good quality accounting system in place. There are two reasons for this.
The first reason is that we need something that can cope with the different needs that creatives have in terms of bookkeeping. Whilst some systems may seem good on the surface because they do invoicing and bank feeds, they often don’t have the capability to handle project accounting for example.
The second reason is that often, creatives are on the move, going from client to client or meeting to meeting.
So we look for a system that has things to help like receipt scanning software and a fully featured mobile app, so wherever our client is they can get access to their numbers.
We often recommend Xero in this respect because it has all the features we need, a great mobile app and is well priced.
Once we have a good system in place we’ll amend the central accounts list (or Chart of Accounts) so that it matches what our client needs. A good illustration of this is that the basic set of accounts out of the box might be more focused towards manufacturing or consulting so we will change these so they have more relevant account names.
Then we’ll look at our client’s business and the way they work.
For example, if they tend to do big projects for just a few large customers then we’ll set up project accounting so that we can accurately track profitability. Or if they work with many small clients then we might set up template invoices so that it makes charging people quick and easy.
We can also provide training for people who aren’t confident with accounting software to whatever level they like. We find that in some cases people don’t want anything to do with the bookkeeping side so we may just run through how to get reports out of Xero. Others like to do their own invoicing and we’ll show them how this aspect works.
We will also work with our clients on methods of charging where they use things like per cent complete or stage payments so that we know that the accounts will match exactly what they are looking for and the way they like to work.
Reporting for the creative industries
The bedrock of accounting for creative industries is having a system that is properly organised and that then allows us to provide awesome reporting.
Reporting is the thing that can add real value to a business and can make the difference between a profitable project and a disaster!
Firstly we will sort out the standard reporting like Profit and Loss and Balance Sheet but then we’ll go further.
We’ll look at project reporting, which will show exactly how profitable each project is and where our client can make changes. This is also very helpful when clients require them to submit either waypoint reports or project closure accounts.
We’ll speak with them and understand the Key Performance Indicators (KPIs) that are important in their business and we can then set up bespoke report templates that can then be run at the click of a button.
And of course, if it is helpful, we can schedule regular review calls to talk over the results and give them guidance as to what things they can do to make things even better.
In short, we’ll mould the accounting system and reporting so that it provides a service that is specific to the creative sector and not just a generic business.
In summary, creatives are different
In 2019, DCMS estimated that the creative industries contributed £115.9 billion to the UK economy and so we feel that it is a sector that should be cherished and nurtured.
People that work in the creative industries are different, their businesses are different and they deserve and demand a different accounting service.
They need a capable accounting system that is correctly configured to cope with their distinct needs and they need methods of working with their clients that will be suitable for the business relationship.
Whether they are working as a lone freelancer with many clients or they run a full-service agency with many employed staff, they will need an efficient and accurate method of keeping their books.
Importantly, they will need an accountant who understands the type of KPIs that are appropriate and that is able to report them in a suitable and useful manner.
In short, a different industry needs a different accountant.
If you’d like a different accountant for your creative business then why not call and let’s talk about how we can help.