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"P&L" for Individual Program Events

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  • "P&L" for Individual Program Events

    I am treasurer of a community band, and want to set up an accounting system. We play several concerts per year. So, our financial activity is quite "lumpy". That is, we don't provide a continuous service such as distributing food, or providing counseling. In other words, we are event-based.

    So, each concert has expenses (sheet music purchase, hall rental, etc.) and revenues (ticket sales [some concerts are "pay as you wish", with a hat by the door] and player participation fees).

    The organization also has other revenues that are not concert-specific (donations from public, etc.) and expenses (e.g., annual blanket copyright clearance licensing and memberships in a few musical organizations).

    We do some fundraising events (auction and bake sale).

    No employees.

    So, I can clearly identify program, admin, and fundraising expenses (and revenues), and I'd like to further breakout the Program Services (both revenues and expenses).

    Here's the nub of what I am trying to figure out, and would ask for advice or comments: I'd like to be able to prepare a high level Statement of Financial Activities (no break out of individual concerts), as well as a more detailed view in which we show a "mini-P&L" for each concert. The "bottom line" of each concert would be like a gross profit (loss) for each of our "products" (concerts). I want to show each concert's contribution margin, if you will, and then that provides a context for the unearned revenue (all the donations).

    We typically have sort of regular concerts: Fall, (sometimes) Christmas, Spring, sometimes a couple of additional chamber concerts, a summer Pops concert, and a Fourth of July concert. Some years, we also have some big, special Festival that might occur over several days, and feature some well-known composer or performer that we engage.

    So, my first thought (before I decided to try Quickbooks) was to set up a separate set of revenue and expense accounts for each of the annual concerts. That is, revenue accounts (ticket sales, player participation fees) and expense accounts (hall rental, advertising, music purchases, etc.) for each concert. Some might not actually be used in any given year, but, I figured to set up about 8 sets of these accounts (each of the 8 sets of revenues and expenses are quite similar, although not necessarily identical.)

    Then, I learned about the class feature of Quickbooks, and thought why not create a single, comprehensive set of revenue and expense accounts that could cover our most complicated concert (and thus all of them), and then use classes (8 of them: one for each of the concerts we could have in a year) to allocate the revenues and expenses to the various concerts.

    Seemed like a neat and clean idea.

    But wait, there's more...

    I went back over the last several years of financial records. (I plan to enter 3 - 5 years' worth of historical transactions.) I discovered that, although most concerts' financial activities occurred over 10 - 12 weeks, that wasn't always true. For big events, planning and financial activity occurred over 3 - 6 months!

    No matter what month I chose to begin a fiscal year, there was no choice that would permit, say, the Fall concert, to be unambiguous (that is "Fall Concert" could refer to two years).

    Let me explain. Whether I used my initial idea of creating one set of Fall accounts, one set of Christmas accounts, one set of Spring accounts, etc., and then reporting based in Program Services broken out by those "prototype" concerts (Fall, Christmas, Spring, etc.); or whether I made one big set of concert revenue and expense accounts and then used Quickbooks classes to breakout Fall, Christmas, Spring, etc., there still is/was only one Fall concert, one Christmas concert, one Spring concert, etc., in a year. Shocking, I know.

    Let's say the fiscal year starts Sept 1. (Most of the musical organizations in town seem to start a new season in Sept.) So, our Fall concert might be in Oct or Nov. We start in Sept with rehearsals and financial transactions start occurring for the Fall concert. Great. No problem.

    Same thing as Christmas, Spring, and other concerts roll around.

    Now, we get to August. The next concert season Fall Concert is a biggie. We start buying music in July or August. But, if I debit "Fall Concert" expenses before Sept.1, those transactions will be for THE Fall concert for the fiscal year, which will mean they are charged to the Fall concert that already occurred 9 months ago.

    The problem could be solved by creating separate accounts for each concert for each year. That seems clunky, and a lot more work-- whether implementing as accounts (in another softweare package) or (Quickbooks) classes. I mean, I could be adding 50 - 100 individual accounts (eight concerts: 2019 Fall Concert, 2019 Christmas Concert; and each concert with at least 10 expenses), or 8 new classes every single year. Not too long before I would have a monster chart of accounts; or a class list with no end in sight!


    BOTTOM LINE:

    The problem is that I want to account for about 8 annual concerts (projects). I want to report on them in the year in which they occur. But, each concert could have financial activity which is spread over two fiscal years. (I've worked though the data, and there is no "safe harbor" month for start of fiscal year, that avoids the possibility of concert preparation activity for one of the concerts overlapping two fiscal years. So, instead of one class for each of the annual concert types, I would need one class for each specific concert, and these would therefore increase steadily and indefinitely.


    QUESTIONS:

    Is this what might be called "project accounting"?

    How might I handle this with Quickbooks?

    I tend to think of classes as being used for continuing activites or cost or profit centers. Somehow it doesn't quite seem "right" to try to use classes for each year-specific concert. And actual accounts seem even worse.

    The concerts are events, although I do want to track the net income or expense (I guess they seem sort of like a product to me, each one having sales revenue and a cost of goods sold, if that makes any sense.)

    Could Customer:Jobs be an appropriate tool to record revenues and expenses for each concert (event/project)? I don't fully understand, yet, how Customer:Jobs work, but I have this nagging idea that it might be more appropriate to set up each concert as a job, rather than as separaate accounts or classes.

    Or is there another, better approach.

    Arrgh... Guess I got carried away writing the great American novel.

    Any thoughts are appreciated.

    Regards,

    DG
    Last edited by dgpretzel; 04-04-2019, 12:28 AM.

  • #2
    Wow. I should have read through recent threads before spilling all that ink.

    It seems that Lorin already answered the question in this thread:
    Community Theater

    So, it seems the answer is to use classes, after all. I guess there really isn't any problem with the (sub)class list growing indefinitely.

    DG

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    • #3
      After thinking about this some more, overnight, I think my discourse distills to two main issues:

      1) The ever-increasing number of (either) accounts or classes necessary when the same generic accounts/classes (e.g. "Fall Concert") can't be used, and event-specific ones (e.g. "11-16-2019 Concert") must be used.

      2) The desire to recognize all revenues and expenses for each concert in the year in which the concert was performed, and not "spread out" over multiple years which would report some of the revenues & expenses (during preparation) in one year, and the remaining revenues & expenses in the year of performance.

      Somehow, I think there must be some well established way to handle #2. To me, it seems similar to a business that spends a lot of time and money making some custom product (say a house, or a special automobile). Then finally sell it in the next fiscal year. Spending money certainly affects liquidity, but seems like it doesn't affect the bottom line (i.e., shouldn't be recognized as expenses) until sold. Then it becomes a matter of sales revenue netted against cost of goods sold, no? Maybe, before the sale, it's inventory of some kind.

      I dunno.

      How do theatrical organizations handle this. Might they not run into the same situation. They may have revenues or expenses-- OK, mostly expenses-- while in rehearsal. This period could weeks, or maybe months. Then the performances happen later (meaning ticket sales). Perhaps, in the next fiscal year. Yet, (I would think) the theater management would want to treat the whole production process together-- all expenses and revenues associated with that particular play, regardless of whether various "pieces" of it occurred over multiple fiscal years.

      Still sort of "thinking out loud" and trying to figure out how actual accountants would think about this, and record it.

      DG

      Comment


      • #4
        I really want to help with this but not until after April 15th.

        My wife is a SCORE volunteer for those needing QuickBooks help. One of her new clients is an art gallery, which has approximately 20 different income accounts just for in-gallery sales. That is approximately 18 unnecessary accounts. And the same can be said about other income/expense accounts.

        What the gallery needs and so do you, is to greatly simplify your chart of accounts.

        If you will export your current chart of accounts to Excel, go through and eliminate as many of the accounts as you can.

        When that is done, I'll show you how to use the QuickBooks class tool and how to use the QuickBooks tool for generating custom reports. When that is combined with the QuickBooks report filtering tool for choosing date ranges , for choosing selected classes and subclasses and for choosing selective accounts, what you want can easily be done.

        Also you need to see that not all of your questions deal with income sheet accounts. Some deal with balance sheet accounts.

        QuickBooks has some not-for-profit reports inadequacies but those deficiencies relate mostly to the equity section of the chart of accounts.

        Consider Ockham's Razor: William of Ockham, a Franciscan friar who studied logic in the 14th century, supposedly wrote in Latin it is sometimes called lex parsimoniae, or "the law of briefness".In the original Latin, Occam's Razor was stated as Entia non sunt multiplicanda praeter necessitatem. This translates roughly: More things should not be used than are necessary. It is unknown how much Pacolli was influenced by Ockham.
        Last edited by Lorin Browning; 04-04-2019, 11:40 PM.
        Lorin Browning, Ph. D.
        Fellow -- National Tax Practice Institute

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