In the new edition of Music Week, we take an in-depth look at the world of music accountancy, as a host of leading firms explain why theirs is one of the most important roles in the business.
For the feature, we hear from top names at Thomas St John, CC Young, Gelfand Rennert & Feldman (formerly known as Skeet Kaye Hopkins prior to a 2019 merger) and Harris & Trotter as they reflect on common misconceptions about their sector, and reveal the challenges raised by the coronavirus pandemic.
One of the interviewees is Tim Smyth, director at Thomas St John Accountancy, a firm shortlisted for Accountancy Firm Of The Year at the 2020 Music Week Awards, and which offers a host of tax services, provides fully outsourced finance director functions for record labels, publishers and management companies, as well as royalty sales negotiations and acquisitions, HR and business coaching.
“Accountants are knowledge workers,” Smyth told Music Week. “They thrive on complexity and solving intricate and detailed problems. The good news? As technology continues to automate the more mundane aspects of the profession, there should be more time to spend on interpreting results rather than merely recording them.”
Here, in an unread extract of our interview, Smyth sheds more light on an often overlooked sector of the music industry…
What is the biggest misconception about accountants and the work they do?
“That’s an easy one: ‘accountants pay bills and fill in tax returns’, right? Unfortunately, this often turns out to be the case, as a lot of accountants allow the client to define the process. They don’t spend time thinking about the delivery system required to provide a consistent value-add service. They are reactive. There are certainly a few who provide a great service to their clients but, this is usually at the cost of technical proficiency… I think most accountants in the profession today are faced with a choice of either reinventing themselves as agile specialists or just trying to ‘ride it out’. One thing is for certain, customers are smarter today and don’t afford the same untested respect they did in the past. If you’re not providing value and communicating that value clearly, your practice is in decline.”
Why are accountancy firms so important to the music business?
“The music business deals with a number of very complex tax and accounting issues, from foreign withholding taxes to royalty accounting. Accountants are therefore hugely important in successfully navigating these waters, and specifically specialists in the entertainment field. It really doesn’t matter whether you’re a global business or an individual starting out, a good accountant is key.
"For individuals, earnings can also be inconsistent and lumpy, with some expenses, like commissions and taxes, not being due until months after the money has been earned. This makes budgeting essential, especially when artists are starting out. The accountant’s role in assisting with this process, educating the talent and putting the correct processes and structure in place can often be the difference between having and not having a sustainable career.
"Artists will also have a number of advisers providing creative input and direction into their decision making, the accountants role of providing the financial insight is a key part of enabling them to make a truly informed decision.”
So, at what level does an artist need to be before they should recruit an accountant?
“The earlier the better! Certainly at the point an artist is required to file a tax return it’s worth engaging an accountant, even if the services are initially very light touch to keep costs to a minimum. Just having that expert point of contact to run through any financial queries can be hugely important for artists. Whether it’s understanding at what point they should VAT register, how they actually get paid from Spotify plays, comparing publishing deals or benchmarking contracts, having an impartial professional to run through these points can remove all of the anxiety, and probably save you money as well.”
What are the biggest challenges involved in the job, particularly with regards to music clients?
“One of the biggest challenges in the job, and especially for music clients, is just managing the flow of information in and out of the organisation to ensure all stakeholders are receiving the most valuable information when they need it most. In order to do this; it’s important we understand exactly what information is required and when, from everyone, whether it’s the tour manger, lawyer, artist, booking agent, manager, wealth manager etc. It’s also important that we have robust processes for receiving and requesting information, the right systems to process the information quickly and people with the right skill set, knowledge and experience to then deliver it back. People often complain about getting information from clients within this sector but it’s really just a case of being creative and putting the right systems in place. Developments in technology are making this easier, but having great people and the right culture within the organisation is still the most important factor.”
There are lots of accountancy firms out there. What distinguishes Thomas St John from the competition in your eyes?
“The biggest distinguishing factor is that the company was designed to service talent at an international level. When Thomas [St John] started the business, he did so with the vision of providing an integrated tax and accounting service globally. We currently have offices in London, Amsterdam and Los Angeles, with further offices planned for Canada, Australia and Sweden this year. How accountancy firms are run in these various countries is actually quite different so it’s been valuable to pick some of the best habits and processes from each.
"That aside, the company’s whole ethos is also very different to any other professional services firm I’ve worked in, or come across, even down to how the business is structured. TSJ always set out to be the best entertainment practice on the planet and through hiring or partnering with talent and expertise from other industries, it’s enabled us to see how these industries approach similar opportunities and problems. By learning from this, I believe we’ve been able to better equip our staff to deliver that promise. It’s probably not been very efficient, we’ve made mistakes, and it certainly hasn’t been easy, but I would never change our approach or willingness to tear up the rule book.
"Thomas St John is a special place to work. It’s rarely easy and always challenging. We have incredible, talented people who work tirelessly for our customers. We have a deep belief in doing things better than they have been done before. Music, sport, TV and film are central to our culture and I am very proud of the role we play in providing, at least some measure, of financial security in a business that is fragile and constantly in flux.”
* To read the full accountancy special report, see the new issue of Music Week, available now, or click here. To make sure you can access Music Week wherever you are, subscribe to our digital issue by clicking here.