3 Tips for Accounting in Kickstarter Campaigns

by Alex Feldman

November 23, 2017

In today’s world of business investments, business loans are old news. Crowdfunding is rapidly emerging as a favorite way for businesses, particularly new enterprises, to raise funds for new projects. There are numerous advantages for both businesses and investors in using crowdfunding as an investment platform.

For individuals looking to invest, a Kickstarter allows them to begin investing with only a relatively small amount of funds required to begin. For businesses who are looking to raise money, it is easier to entice individuals to invest in a Kickstarter campaign than it is to sell them shares or stocks.

Before setting up a Kickstarter campaign, it is worth considering how you will manage the accounting for such a project. In this article, we take a look at some of the best accounting practices which will help you to easily and efficiently manage the funds for a Kickstarter campaign.

Separate Personal Funds from Business Funds

It is very important before embarking upon any significant business venture that you clearly separate the money for the project from your own personal funds. In the case of a Kickstarter campaign, you will want to set up separate bank accounts for any funds to be deposited into.

This applies even if you are the sole owner and employee of the business and the venture is entirely personal. It is partly an issue of discipline, and of maintaining the boundaries between the personal and professional. If you fail to enforce this destination, you are heading for disaster.

If you are working as part of a larger group, or perhaps even if you are working solo, you should consider studying an online masters in accounting. A masters in accounting will teach you everything you need to manage this kind of project, and by studying online you can save money and study while working.

Decide Your Goals and Reward Levels

It is important that you make sure you understand all the necessary tax codes and regulations which will apply in your state. You will need to factor in the tax on any funds you receive when calculating your total fundraising goal. The money that is generated through a Kickstarter campaign is considered to be taxable income by the federal government, in most cases you will also need to pay a sales tax on any funds that you receive.

Once you have an understanding of your tax obligations at both a state and federal level, then you will be able to work out what percentage of your overall funds will be lost to tax. You will need to make sure that your overall target reflects this extra cost.

Keep Track of Your Funds

This isn’t just good organization, for the purposes of tax you will need to record any contributions you receive through Kickstarter appropriately. You should work with a qualified accountant to establish exactly how the funds you receive are classified in your state.

Kickstarters offer an exciting new way for ordinary people to invest in new and innovative ideas, without requiring a large amount of start-up capital. Managing the accounting for such a project appropriately is an essential component of its success.