How often do you come across an accountant who is also a writer? Apparently we are not quite as rare as I thought, but also not as prolific as say, lawyers wearing the writer’s hat.
So you may have guessed by now that I am an accountant. Yes, a bespectacled and boring CPA CGA with an MBA. And let me just say it before you do, “I am a bean counter.” But now I’m also a writer, a novelist, to be more precise.
How Can I Help?
Here’s the thing, many writers, like most artists, can’t find a single left-sided brain cell to perform tasks that are remotely accounting or business related. I know that many writers would find my knowledge useful, so I’ve decided to share some of that in this post and in future ones.
This is my first post on accounting and writing. I’d like to start by sharing some tips on getting organized as an author and entrepreneur.
Some Common Q&A
Here are some of the most common questions I get from self-employed individuals and small business owners.
QUESTION: Do I have to set up a separate bank account for my business activities?
ANSWER: When you’re just starting out as a writer, you don’t need to incorporate (that’s a separate topic that I will delve into another time) or even register your writing as a business. Consider yourself as a self-employed professional, and therefore you don’t need to set up a separate bank. You do, however, need to track your author income and expenses.
QUESTION: How then do I keep my author income and expenses separate from my employment income and personal expenses?
ANSWER: Keep a record of your author income and expenses. If you know how to use Excel, set up a spreadsheet. It can be a simple three-column worksheet consisting of these three titles: DESCRIPTION, REVENUES, and EXPENSES. List in the respective columns, your revenues as you receive them and your expenses as you incur them. Obviously you can do the same thing with a notepad if Excel is not your forte. Tally up the REVENUES and EXPENSES columns at the end of each year and include them in your tax returns. You may need to hire a tax accountant.
QUESTION: How do I know which expenditure is a qualified expense for tax purposes?
ANSWER: Generally, any expense you incur to learn your writing craft (e.g. courses, conferences), to write (e.g. software), and then to promote it (e.g. book launch costs), may be considered a qualified expense. If in doubt, add the item into your record anyway, and then when you have to file your tax return, check with your accountant or verify with your taxation agency. This guideline is applicable for Canadians and likely for residents in other countries too, but always consults with a professional tax expert when in doubt.
QUESTION: How do I organize my receipts?
ANSWER: Here’s something that I do that takes a minute to keep organized. At the end of every year, I start a folder for the following year for all my receipts. You can subdivide the folder if you wish or set up two or even three folders instead of one—one for your regular employment related documents, one for writing revenues, and one for writing expenses. How many you set up is a matter of preference and also depends on how many receipts you expect to accumulate. As you receive a receipt, drop it into your folder. Then at tax filing season, take your folder(s) and the aforementioned log of your revenues and expenses to your accountant. You will save a lot of money in book-keeping fees!
Next time I’ll discuss how to create a budget and why you need one. In the meantime, check out how I’ve used my accounting background to create this really useful Excel workbook for tracking your novel’s characters and events. I use it all the time while I’m writing my novel. You won’t believe how it’s kept me sane whenever I’ve tried to remember an event I wrote about several months ago, or how old my characters are supposed to be in the context of a scene. I’ve built in automated formulas to calculate time lapses between events and each character’s age. Try it…it’s free.
So what pressing question do you have about your writing business?
DISCLAIMER: This post is meant to provide general tips to assist individuals in understanding and organizing their business records and is not to be considered as paid professional advice.
Picture credit: pixabayby