Tuesday, May 27, 2008

Nonprofit Accounting for Music Groups

Hello. This week I wanted to write about accounting. I'm by no means an expert, but I've picked up a few things along the way running our nonprofit organization. Most important lesson I've learned, make sure you have more coming in than going out. Here is a run down of how we do it plus a list of things I've come to realize in the last decade.

In the beginning, we operated as a sole proprietorship. Essentially I had a separate bank account that I used to have money come in and out, but everything we did showed up on my tax return. This is certainly the easiest way to manage finances for a music group. Everyone is a subcontractor. Clients pay you, you pay the artists, and whatever is left (if anything) goes towards operating the business. Back then, we often didn't make enough money to pay everyone a decent wage, so I went without any pay for a while. That is when I began to understand that important lesson above, make sure more comes in than goes out.

After a couple years, we decided as an ensemble to become a more established entity so we reorganized as a nonprofit corporation. Words to the wise on this decision - it is not for everyone. I discuss the advantages and disadvantages of starting a nonprofit in my blog entry dated 12/19/06. Click here to see it. For us, it was the right decision. It allowed us to apply for grants and make donations to our organization tax-deductible. Also, given the amount of work we did in the schools back then, it made a lot of sense.

However, once we were a nonprofit corporation, our accounting become much more complicated. We had to start filing three tax returns a year, provide a detailed narrative of our activities each year, and start doing payroll, deductions, social security, medicare, etc. And that was just for the government. Needless to say, an activity that once was pretty straightforward become much more complex.

The load of managing our accounts falls mostly on one fabulous volunteer (aka Mom) who used to manage the accounts at a local bookstore. Imagine that, a bookkeeper at a bookstore?! For my part, I handle the payroll, pension, and budgets. We have learned through the years and now use the following system which is relatively easy to maintain.

1. We use accounting software. Right now we use MYOB. It is a great product with fabulous support. It updates our tax tables and allows us to operate under the fiscal calendar (July-June) very easily. With artists in four states, it is really helpful to have the computer calculate everyone's deductions for you. It is simple to print checks/reports and everything is customizable. It still takes a lot of time to enter everything - all sources of income and expenses need their own ecard. However, given everything we do, it makes life much easier.

2. We have an accounting firm handle the three tax returns. As a nonprofit, there is a lot of paperwork. All meetings have to have minutes. And every year we need to file returns to federal, state, and state charity registries. This doesn't come cheap, however it does offer us peace of mind.

3. We make sure to do the following monthly: a) pay bills [see expenses below]; b) deposit checks [see income below]; c) send thank you letters to donations made that month; d) file state and federal taxes with a quarterly reconciliation; e) pay pensions and associated union work dues; f) do payroll; and g) reconcile statements (credit card, bank, etc.).

4. We make sure to do the following yearly: a) send W-2s and 1099 forms (January); b) close out our payroll year (January); c) close out our fiscal year (July); d) send residuals/statements to artists and composers (July); e) send our tax return information to the accountant (October).

5. We have a savings account that we use for restricted funds. Anything we receive that is earmarked for a particular activity is placed there until we do that activity. For example, a grant designated for our education program, Toot your own Horn goes there until the funds are needed.

6. We review our profit/loss statement and our balance sheet every time we have a board or musician meeting. This insures that we are aware of our current situation and aren't met with any big surprises.

7. We have a chart of accounts. This is a list of all our assets, liabilities, and income & expense sources. Our bank accounts, petty cash, and property falls under our assets. Liabilities include our credit cards and payroll deductions & expenses. I've broken down our income and expense below.

Performance Income: Recitals, Outreach and Self-Produced Concerts
Donations: Government, Corporate, Private Donors, and Foundations
Other: Merchandise, CD Sales, Interest

Salary & Related: Wages, Payroll Taxes, Penions
Travel & Related: Lodging, Meals, and Travel
Office Related: Dues, Photocopying, Postage, Supplies, Telephone, Internet
Professional Services: Independent Contractors, Insurance, Legal & Accounting, Photography, Professional Development, Rent
Advertising & Promotion: Ads, Conferences, Literature Printing, Recording Projects

1. Make sure more money comes in than out. At the very least, break even.
2. Seek funding from a variety of sources (eg: ticket sales, CDs, grants, private donations)
3. Be realistic about your financial goals.
4. Always get multiple quotes for large purchases.
5. Always create an annual budget along with individual tour budgets. (See number 1)
6. Keep a detailed history.
7. Be economical without sacrificing your artistic product.
8. Spend money to get your name out there.
9. Set targets for your annual appeal with more people donating small gifts and less people donating big gifts.
10. Always have a back up plan for the inevitable. (eg cash reserve for low cash flow, secondary budgets based on less income, etc.)

Tuesday, May 13, 2008

The Inner Workings of QUADRE

Patrick Rappleye got in touch with me in April. He is a masters student in horn performance at the University of Iowa. He was asked to put together a presentation on a brass ensemble and he chose us! What follows are the interview questions he sent me along with my answers. You can also see this interview along with other interesting tidbits that involve brass ensembles from around the world by going to Patirck's blog here.

PATRICK: How do you book concerts? Do you have a management service or do it on your own and what are the main difficulties?

DANIEL: QUADRE is a self-managed ensemble. Our strategy for booking concerts is two fold.

First, we have a series of home concerts we produce in the San Francisco Bay Area where we are based. We usually present 3 to 4 home concert series a year. Venues for these series include one or more of the following: performing art centers, community music schools, churches, and private homes. These events give us a chance to regularly connect with our local supporters. They also give us the opportunity to try new things out programmatically.

Second, we set up tours around the country. They usually last from 7-10 days although we were once on the road for a whole month. We find presenters – those that book us for concerts – through booking conferences and associations (Western Arts Alliance, Chamber Music America), our online research of venues in different geographic areas, and our own personal contacts.

Both of these strategies take a great deal of work. We are a nonprofit organization with 4 artists, one paid staff-person (myself), 4 volunteers, and a board of directors made up of 7 citizens from the community. In regards to booking concerts, the volunteers and I construct the tours (contracts, travel), manage the books, and handle the fundraising/development. The board helps ensure the long-term health of the organization and maintain its financial stability. Administratively, the artists organize and decide the programming, contribute potential leads and contacts, and help out as needed (grants, artistic partnerships.)

Of the two strategies above, the first one is contingent on being open to potential partnerships and collaborations. Most of this work is made possible due to revenue from contributed (grants and personal appeals) and earned sources (ticket sales and performance fees.) For the second strategy of tours, most of our revenue comes from performance fees with a little supplemental income coming from merchandise sales (sheet music and CDs).

The main difficulty with both of these core activities is finding the partners and clients to make them possible. After ten years in the business, it is easier although it is still a constant challenge.

P: What different players have you had in the quartet?

D: Here is the list of the primary horn players involved in the group since 1998. There have also been substitutes, associate members, and extra horn artists (aka 5th and 6th horn players.) For the purposes of not making this list too ridiculous, I have left them out. However, I do feel strongly that everyone who has been involved in QUADRE has made it what it is today.

1998-Now, Daniel Wood
1998-1999, Harold Aschmann
1998-2000, Eric Thomas
1998-2001, Melissa Hendrickson
1999-2002, Armando Castellano
2000-2005, Carrie Campbell
2001-2006, Meredith Brown
2003-2005, Mathew Reynolds
2005-2006, Alex Camphouse
2005-Now, Nathan Pawelek (Subbed from 2003-2005)
2006-2008, Jessica Valeri
2007-Now, Lydia Van Dreel
2008-Now, Amy Jo Rhine

P: Do you have a member who is the leader/decision maker?

D: Being the only member that has been with the group since the beginning, I act as the leader and decision maker for most of the artistic and management decisions. However, no artistic decision is made without all the artists in the group being informed and providing input.

P: How do you solve artistic differences during rehearsals?

D: Everyone in the group respects the talent and insight that we each bring to the ensemble. We handle all issues professionally giving each idea a chance to be heard. When we have a disagreement about which idea to do, we usually go with the consensus or the idea felt most passionately. We have also tried out multiple ideas in several performances. Audience reaction can be a great way to measure the success of an idea.

P: How many concerts do you perform a year?

D: This has varied considerable over the years. We have performed full-time during two seasons (1999-2000; 2001-2002). Each of those seasons had over 250 performances. Other years have had as few as 15 concerts. In the 2007-2008 season, we performed over 30 concerts with approximately 100 services total (concerts, rehearsals, outreach, and lectures.)

P: What made you want to create a horn quartet and what do you like about chamber music?

D: The inspiration for starting QUADRE comes from the male vocal quartets of the 50s and 60s. I am a huge fan of the Four Freshman, The Four Aces, The Four Lads, and in particular, the Hi-Los. The sound that those groups got in their recordings was fascinating to me. I wondered whether it would be possible to do something similar with a group of like instruments.

With chamber music being my favorite class in college, I helped put together a variety of ensembles: brass quintets, woodwind quintets, and horn quartets. I really liked the sonic potential of the horn quartet. After leaving college, I started a horn club so we could play new music for the genre. After a few months, it became clear that four of us wanted to make a go of it as a quartet. The rest is history.

As for why I like chamber music, I think the ability to make music in a small group is exhilarating. The four of us get to make all of the artistic decisions. And you know that each of you account for 25% of what is happening on stage. It is also a medium where there is nowhere to hide when you perform. I also really enjoy how we can connect so personally with our audience. They get to know our personalities and we, to a degree, get to know them as well through after concert discussions, home-stays, and communications (email and letters).

P: What rehearsal techniques do you find most useful when learning new music?

D: Individually, we study the scores, work a great deal with the metronome and, if available, listen to live recordings / computer renditions. In the group setting, we find singing our parts very useful and being sensitive to all the markings the composer has written (tempi, articulations, dynamics, etc.)

P: What are the future goals of Quadre?

D: In the short term, we intend on recording two more albums in August. We have two recordings currently: The Voice of Four Horns (2000) and Citrus (2005). We will build on the success of our domestic touring and home concerts by continuing to collaborate with different musicians and artists. We also plan on touring internationally more in the future.

P: What has been the most rewarding aspect of being part of Quadre?

D: For me, it is getting my music performed at such a high level by my fabulous colleagues. It is also very rewarding to see the group continue to thrive after ten years.

P: I noticed you have a blog and myspace page. How important do you think using the latest communication outlets is to being a viable quartet?

D: Connecting with our audience is a critical part of our organization. Our blog and myspace page is a part of our overall marketing and communication strategy which includes: conferences, advertisements, merchandise (CDs, Sheet Music, Posters, Apparel), newsletters (email & mailed), our website, online networking (myspace, blog, afm.org, etc.) and so on. Having a strong online presence is another way to get your message out about who you are and what you do.

P: Anything else you would want me to know/present about Quadre that is not on your website?

D: I consider and think of the other members in the quartet as family. I care deeply for each of them and their well-being. We are all very interested in what each of our families are up to (especially the kids) and talk to each other regularly about all sorts of things above and beyond the artistic and management concerns of the quartet. Because we have a strong bond with each other, I think our music is always very present and in the moment. We feel passionately about each other and bring that same passion to our music.