(Wealth Professional) - Earlier this year, the Canadian Revenue Agency (CRA) published official guidance that should be of concern to anyone who earns a living as a social media influencer.
In an April 13, 2021 post on the official Canada government website, the CRA said people who received subscriptions, gifts, donations, or other income through their content on social media platforms, they are considered to be undertaking a business activity and must declare the income from that activity – whether it’s monetary or non-monetary – for tax purposes.
For many game streamers, TikTok dancers, Instagram models, and other talents who earn income via a significant social media presence, keeping track of the earnings and expenses generated as they produce and publish their content may not be so easy.
“I think part of this is because this is such a new and nascent field,” said Faye Pang, Canada Country Manager at Xero, the global business platform. “We’re increasingly hearing of kids saying, 'Hey, when I grow up, I want to be a social media influencer.' That just wasn't a sentence you heard in years past.”
Beyond that, Pang said, social media influencers may find it challenging to manage their workload. Inspiration for content might suddenly strike, a topic relevant to their brand might suddenly trend, or their fanbase might suddenly explode as they go viral. Because of those and other realities, Pang said, it can be hard for influencers to anticipate and stay consistently on top of their day-to-day financial affairs.
According to research, Pang said the influencer market doubled in value between 2019 and 2021, going from US$6.5 billion to nearly US$14 billion in the last three years alone. And as social media accounts for more consumer eyeballs and impressions, the industry is poised for a massive explosion – and content creators must be prepared to see their enterprise grow.
“Influencers are entrepreneurs and small business owners in their own right,” Pang said. “Like other small business owners and entrepreneurs that we work with at Xero, they're probably less excited about doing administrative work and tax compliance and all of their bookkeeping, and want to focus all their time on what they love doing.”
To free up their time for what matters while staying on the taxman’s good side, influencers can automate a large majority of their bookkeeping by leveraging technological tools. On the Xero platform, Pang said there are features that let users match receipts to their transactions, which are driven by AI and machine learning engines. They can take pictures of receipts for expenses they incur and upload them to the system, which will then pull the data from each receipt and document the details of the transaction automatically.
Another useful feature on the Xero platform, Pang said, is the ability to create meaning from financial data. While influencers might be well-acquainted with social media dashboards and analytics, they might not be as equipped to interpret their cash flow position. With intelligent technology like what Xero offers, they can more easily determine when they might need to take on an extra project, or find a way to throttle back on their expenses.
“Some might want to do the bookkeeping or accounting on their own, though we always recommend that they work with a professional advisor or accountant,” Pang said. “In either case, a platform like ours can help influencers save time on repetitive tasks and surface actionable insights.”
For influencers, having apps and data on the cloud is another ideal feature. Because many content creators go to different locations – travel and lifestyle bloggers are a prime example – they need to be able to do certain critical tasks on the go. Having the ability to check their cash flow positions and make necessary updates within their account, therefore, can be absolutely vital.
A bookkeeping platform that has numerous APIs, Pang added, can provide massive value. An influencer, for example, might want to feed information from multiple bank accounts they own into their bookkeeping platform so they get a real-time sense of what their cash position is. They may also want the ability to pay professionals who prepare their online assets – video editors, graphic designers, and sound mixers, and so on – straight from the bookkeeping app on their phone.
“The beauty of Xero is that we have an entire ecosystem of app integrations,” Pang said. “We actually seamlessly connect with over 1000 third-party apps around the world, which helps satisfy accounts payable, accounts receivable, and practically all the accounting needs that the typical small business owner could imagine.”
For a social media creator whose day-to-day is totally devoted to engaging with fans and content ideation, bookkeeping and business building might be the furthest thing from their mind. But as tax authorities like the CRA increasingly focus their attention on the sharing industry, Pang encourages influencers to consult with financial experts and think about whether a tool like Xero would be useful for them.
“Don't wait until everything is broken and you're in a mess that you need to clean up,” Pang said. “What we’ve seen from the many small business owners we’ve helped is that the sooner entrepreneurs adopt tools like ours, the better set up they are for success in the future.”
