All About Bookkeeping

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What is bookkeeping and why should I care? Let’s keep it real. Bookkeeping sounds boring, but it’s one of the most powerful tools you have.

Bookkeeping just means tracking your money, what came in, what went out, when and why. Whether you’re running an organization or just producing one show. Bookkeeping matters because it tells the story of your finances. It helps you see what you actually spent, make sure you get paid on time, answer questions from funders or collaborators, and avoid meltdowns during tax season.

You don’t need to be an expert to start. You can use a simple spreadsheet, date, description, amount, vendor, budget category. Try low cost tools like QuickBooks or Wave or hire a Bookkeeper.

Even just a few hours a month makes a difference. The important part is starting. Don’t wait till April or your audit.

Now let’s talk about reconciliation. That’s just comparing your records to your bank statements to make sure everything matches. It’s like checking your bar tab before you pay. Did you get double charged? Did you forget to record a deposit? Is everything where it should be? Reconciliations catch mistakes. Do it monthly if you can, and quarterly at the very least.

Knowing your financial picture creates less stress for you, your funders, and your collaborators. You’re not left with the fear, assumptions, or false hopes. Staying on track with tracking and staying consistent is key.

What is bookkeeping?

Bookkeeping is keeping track of your finances in an organized way. People used to keep their financial records in bound ledger books, and though we mostly do things digitally now, the word “books” has stuck. The more complex your financial situation, the more complicated the bookkeeping rules get. But for most artists and small arts organizations, the basics will take you a long way.

Keeping accurate records of your income and expenses is the foundation that you build the rest of your accounting on. From this foundation, you can ask and answer more complex questions, like:

What did I spend last year on venue rentals?
Who do I owe a 1099 to for this year?
Are my expenses evenly distributed, or are there heavier and lighter periods?
How diverse are my income sources? Am I leaning too heavily on one source?
How much does it really cost to run my organization?

Where do I get a bookkeeping ledger?

You can set one up without much trouble in a spreadsheet, or use low-cost software like Wave, Xero, or QuickBooks Online. There’s a downloadable Microsoft Excel template and a Google Sheets template that you can use farther down on this page.

What goes into bookkeeping?

To do your bookkeeping, you need to list out each transaction separately, line by line, in a way that answers the questions: when, how much, who, what, and why?

The simplest way to do this is in a spreadsheet, with one transaction per row. Or, you might use bookkeeping software like QuickBooks Online, Wave, or Xero. At minimum, you should have a space for the date (when), a space for the amount (how much), a space for who the money went to or came from (who), a space for the category that the transaction goes into (what), and a column for a description where you remind your future self (or someone else who might be looking) what the transaction was all about (why).

Pro tip: doing your bookkeeping in a spreadsheet works best if you’re small and just starting out, when you only have a few transactions, don’t have loans or debt to pay off, and don’t have a lot of grants to track. As your money gets more complicated, using a formal accounting system will make your life a lot easier. They’re built to manage complexity!

Expense example: if you paid Jane Dozzle $500 for working the sound board at your December 15 holiday show, your transaction line might read something like:

Date	Amount	Name	Category	Description
12/15/20xx	$500.00	Jane Dozzle	Independent Contractors	Holiday show sound tech

Income example: if you deposited a check for $1,000 from the Arts Foundation of America for a general operating support grant awarded on March 28, your transaction line might read something like:

Date	Amount	Name	Category	Description
3/28/20xx	$1,000.00	Arts Foundation of America	Foundation Grants	General Operating support grant for 1 year

Pro tip: If you’re using a spreadsheet to do your bookkeeping, it’s super important to be consistent with your category names, so that they show up right at the end. For example, if you have an expense category in your chart of accounts for venue costs, you should decide whether it’s going to be called “event space”, “venue rental”, “space rental”, “venue rentals”, “program space rentals”, etc.

Where does bookkeeping come from?

Bookkeeping is one of the oldest forms of recordkeeping on Earth, going back 7,000 years to ancient Mesopotamia (the region that includes parts of modern-day Iraq, Iran, Kuwait, and Syria). The history of “double-entry bookkeeping”, which is the kind used worldwide today, dates back to 1494 when Leonardo da Vinci’s math teacher and probable lover, Luca Pacioli, wrote down the complex system of checks and balances that merchants in Venice had started using. That system has remained almost unchanged for more than 500 years!

What should I look for in my bookkeeping records?

As you fill out your spreadsheet or make entries in your bookkeeping software, you want to make sure that your entries are accurate and consistent.

Accurate in this context means that each individual row, whether it’s for income or expense, has the correct information in each spot (answering the questions when, how much, who, what, and why).

Consistent means that you’re using the same categories from your Chart of Accounts for similar income and expenses.

If your records are accurate and consistent, then you can feel confident that any reports or analysis you do based on the transaction records are giving you the right information.