3 Tips to Better Manage Accounting for your Ticket Sales

Arts & Cultural organizations tend to have more unique revenue streams than any other type of nonprofit.

For instance, an Arts & Cultural org will (or could) generate revenue through their admissions, special exhibitions or events, membership dues, retail sales, grants, fundraising campaigns, facility rentals, and investments.

Accounting for all of these different revenue streams is no simple task.

Here are a few tips to help you better manage accounting for your ticket sales:

Be Mindful of Revenue versus Deferred Revenue

When someone walks up to your ticket desk and hands you some greenbacks in exchange for a general admission ticket, life is simple: Credit to Revenue, Debit to Cash, end of story. However, if you’re selling tickets for a seated or special event or exhibit, your organization has a decision to make:

Will you go ahead and credit revenue immediately, or do you need to count those dollars as deferred revenue until the event actually occurs?

Even though GAAP doesn’t necessarily demand that you defer the revenue until the purchaser attends the event, most nonprofits choose to follow that procedure with their ticket sales. Depending on your refund/exchange policy, if the performance is canceled or the date of the exhibit is changed and the patron cannot attend, for example, you may owe that money back to your patron.

As a general best practice, most organizations choose not to journal into and out of revenue as purchases and refunds are made prior to the show.Rather, they will credit Deferred Revenue when the sale is made (while crediting Cash or Receivables, as appropriate). Then, once the event actually occurs, Deferred Revenue is debited, and Revenue is (finally!) credited. This allows the organization to avoid fluctuations in revenue reports as tickets are sold and refunded in advance of the event; “butts in the seats” is the trigger that allows you to accurately recognize the revenue  truly earned from purchased-and-utilized tickets.

Don’t Ignore Your Over/Shorts

Too often, we see orgs “gloss over” their cash drawer over/shorts by debiting or crediting Cash (which is fine), and sending the offsetting entry directly to the same revenue account they use for ticket sales.The thinking here is that, generally, the net over/short isn’t truly material, and was caused by the physical act of selling tickets, so there’s no real harm in over- or under-stating the revenue by a few dollars here and there.

While it’s (hopefully!) true that your over/shorts aren’t material, counting them towards or against your true revenue really isn’t the best way to manage your business.

An improvement is seen in organizations that have one account (generally a revenue or an expense) set aside to reflect the over/short offset to Cash. Now, the Ticket Sales Revenue is correct, and the Over/Short account probably carries a balance of a couple dollars at any given time, so you’re squared away!

However, this practice still leaves a big question unanswered…

Let’s say the Over/Short account has a balance of $2. From a financial accounting standpoint, it makes no real difference how we got to that $2. From a managerial accounting standpoint, however, it makes a huge difference; are you dealing with a $6 over and a $4 short, or does this represent a $1200 over and a $1198 short? The answer to that question will determine whether you need to investigate for fraud, or devote more time and expense to training your staff members, or install a camera at each register station…or just let it go, because after all it’s just a $6 over and a $4 short.

We recommend booking overs in a revenue account and shorts in an expense account, rather than netting your over/shorts in one account, so that you can gain that insight into what’s truly going on behind the scenes.

Don’t overload your books

Many organizations make the mistake of treating their general ledger as the only reliable system of record for their entire business. By that I mean not only do they track all relevant financial information in their GL (as they should), but they also use the GL to track information related to ticket sales that has no bearing on financial management. Check number? Member ticket versus non-member ticket? Number of people in the party? Important information, to be sure…but these are examples of information that belong in your ticketing software, not in your books!

I’ve worked with several organizations that say: “Yeah, that’s a great theory to have that information only in our ticketing system, but their data entry is not reliable, so it falls to us in the Business Office to track all of that information.”  

I understand the sentiment, but it misses the larger point: your ticketing software is as important to your overall business as your financial software.

If data entry into your ticketing system isn’t reliable, that’s the problem that needs fixing – trying to leverage your financial system to track non-financial information is not a workable long-term solution. Let your ticketing system and ticketing personnel do their jobs (or, force them to do their jobs, as the case may be), and let your financial system do its job. I realize there may be some pain if that business practice forces a change in your organization, but the long-term gain will be worth it!