Now that we've closed out 2013, it's time to ask ourselves, "Did I make any money this year selling my books?" Sure, of course, I think so. But how do we really know the impact of our income and expenses? We track it.
Why track expenses you ask? Because it lets you see exactly where you're leaking money. For example, I thought I was overspending on shipping expenses because I seemed to always find myself at the post office mailing out books to customers, writing contests, media, etc. But when I looked at my end-of-year report, I could see that postage didn't add up to that much at all--it was more of a perceived expense. What actually ate up my funds was business travel. So now I have more solid information to make future decisions about where to spend my time and money as an indie author and publisher.
Thanks to the advice of my sister who's been running her own social media company Cyber PR Army for years now, I've been using Quickbooks software to track my business activity. Until I pull the plug and hire a bookkeeper or accountant, it's up to me to keep track of my business finances. Thankfully, I'm a pretty organized person so it's not too much of a stretch to handle my own receipts, plus the payoff of organizing all business activity lets you create some really cool end-of-year reports (oh la la, colourful bar charts).
So today I thought I'd share with y'all my lessons learned from handling my own financial management this past year for Mirror Image Publishing. I was lucky enough to attend some accounting workshops offered by Invest Ottawa and the Ottawa Public Library, whose presenters gave me invaluable tips on how to prepare for tax time.
Here are some tricks I learned this year that should help you out with your own money management.
1. Reserve some time every week to update your books. I chose Wednesday mornings as my day for entering receipts, paying bills, and checking accounts because it just seems to work best for me (Friday was a total disaster). You could also choose to update your books monthly, but I guarantee that the work will increase exponentially the longer you wait to do it, and you'll soon find yourself spending an entire day or two just trying to catch up when you could have just spent a couple of hours a week.
2. Spend time setting up your chart of accounts. If you carefully think beforehand about all the possible categories of business income and expense (e.g. office supplies, travel), then you'll be good to go for the rest of the year, making only small tweaks to the categories as needed. Again, I mention Quickbooks because in my experience it's been amazing to work with. They've now moved to cloud-based accounting and I just saw on their website a 50%-off sale. Make sure you get the "Plus" version so you can track your book inventory.
3. Receipts fade so scan them. Your records are subject to audit for about seven years, and your flimsy store receipts just won't hold up. So in the meantime, scan your receipts so you can safely store them electronically on you computer, then put the original paper version in a folder and stick it in a drawer and hope for the best.
4. Tracking last year's activity lets you plan better for next year. When I click on the "reports" tab on Quickbooks, it offers all kinds of different ways to analyse my year's worth of expenses. I can see my ratio of spending for marketing versus equipment purchased versus editorial and publishing costs. Then I can print off the report, take a seat in my worry chair, and ponder the ways to do better for next year.
5. Get a good book to tell you what you can and can't claim. I received a free tax planning guide from a local accountant, and I reference this guide all the time (as well at the Canada Revenue Agency website and their 1-800 line for small business and GST). You definitely don't want to make a mistake on your tax return if you can help it (i.e., gym memberships are not tax deductible, even if you do go there to network) because it will just come back to haunt you with compounded daily interest if you are ever subject to an audit.
6. Keep track of your car travel log monthly. Seriously, it just makes life easier to track activity when you still remember what the heck you actually did, instead of trying to recall details from 12 months ago.
These are my personal lessons learned. Obviously, I am not a trained accountant or tax planner, but I think there are some useful tips here that will help you out in the coming year.
Numbers can be fuuuuuuuunnnnnnnnnn!
Stacey D. Atkinson is the author of the newly released novel Stuck, which she published via her independent company Mirror Image Publishing.