Financial Accounting for Voice Actors

I can't believe that I actually have to talk about it, but after reading a very interesting post on one of the better-known voice acting boards, it's obvious that some folks aren't too well versed in the topic. On the one hand, that's not too surprising... if we were really into that kind of stuff, we'd probably not be voice actors. On the flip side, if you're trying to run a Voice Over business, then I think some basic accounting needs to be understood.

Let me make one thing perfectly clear: just because someone paid you for a product or service does not mean that you generated a profit!

I'll repeat myself: sales of a product/service do not equal profit. You've generated revenue from a sale. These are your sales, and can only be considered revenue after it has been earned and realized (meaning that you delivered the product/service and got paid).

Sales revenue usually implies multiple sales over a period of time. However, even in a single instance we can apply some accounting to show you just where your profit is. You take your sales and you find the difference between that and whatever returns from sales and allowances you had to apply. This gives you your Net Sales In other words:

Net Sales = Sales - Sales returns and allowances

Seems simple, right? We don't count revenue for something that was returned or allowances made to consumers. BTW: this is considered to be your Sales Revenue.

Next step. Let's figure out our Gross Profit. Hey, we're finally using the term "profit" so that's how much we've earned, right? Not quite, but we're getting there. Your Gross Profit is defined as:

Gross Profit = Net Sales - Cost of Goods Sold (which include whatever it costs the business to make the sale and other direct costs attributed to this act)

So now we know how much profit we have, right? Yeah, but that doesn't really tell us how much we actually get to keep. You see, there are other things which we have to consider, such as our operating expenses. Deduct that and you get your Net Income, which is your bottom line for the business (i.e., tells you whether or not your business is generating money or losing it... from a high level of perspective). Put another way:

Net Income = Gross Profit - Total Operating Expenses

Now it's possible to fib on the numbers with some creative accounting to make your Net Income look better than it is (just ask the folks at Arthur Andersen and Enron), but for our purposes this model will suffice.

So the next time someone trys to use sales as a means of profit, you'll know how to stop them dead in their tracks before it affects your understanding of the situation, or worse yet, the financial health and viability of your voice over business from a financial standpoint.