If you have been able to quit working for another employer and work solely for yourself as an e-book writer, you need to make sure that you have your finances together. As an e-book writer, you are essentially running your own business with yourself as the sole proprietor, and you need to to treat your writing and productivity as a business. Here are four tips that will help you keep your finances together as a professional e-book writer.
Get A Tax ID
The first thing you need to do is get a tax I.D. for your business. That way, when you set up accounts with book sellers, such as Amazon or Barns & Noble, instead of providing them with your social security number and making that information more readily available for someone to gain unauthorized access to, you can provide them with the tax I.D. for your business. This will also help establish that you are running a business and will help you separate your business and personal expenses.
Open A Business Account
Second, you need to open a business banking account. This will be the account where all of your earnings from your e-book sales will be deposited into. This will also be the account you use to pay any expenses related to your e-book writing career. Having all of your earnings and expenses come out of one account will help you keep better track of how you are doing financially with your e-book writing business.
Set Up A Pay Date
Third, you need to make sure that you pay yourself. Set up a specific pay schedule for yourself, such as once a week or once a month. You'll want to coordinate your pay date to line up with when you get paid from the various companies that distribute and sell your e-book.
When you pay yourself, you'll want to make sure that you are also setting aside a set percentage of your income for state income taxes, federal income taxes, and self-employment taxes every payday. You should make quarterly payments for your state and income taxes.
Track Your Expenses
It can be easy to feel like you don't have that many expenses as an e-book writer, depending on the topic that you write on. However, all those little expenses add up, and they can be subtracted from your overall earnings, which will lower your income for the year. Set up a spreadsheet to keep track of your earnings. This spreadsheet should keep track of the following information:
- Date Of Expense
- Amount Of Expense
- Payment Method
- Reason For The Expense
- Payee
Additionally, you should scan all your receipts and create both a digital and physical file so that you have a detailed recored for tax purposes of all of your expenses.
Your business expenses include anything related to creating e-books, such as payment fees for editing programs, subscriptions to industry magazines, software programs, and research expenses.
Set Aside Time To Keep Your Finances In Order
It can be tempting to not keep track of your expenses and income, and just wait till the end of the year to do so. However, it is smart to sit down once a week and dedicate ten to fifteen minutes towards looking at your finances. This gives you a dedicated time each week to enter your expenses into your spreadsheet. It also gives you a dedicated time each week to look at your e-book sales and track how your sales are going. Looking at your sales on a weekly basis will allow you to make smart business decisions about if you should cut prices, increase your promotion of your books, or change distributors. This will help you increase your sales and make smart business decisions about where to invest your time and resources in creating and promoting your e-books.
Finally, if the financial side of running a small business is new to you, you may want to find a professional accountant to work so you can properly track your expenses and income and make smart decisions that will grow your e-book sales and business.
For small business accounting, contact a company such as Don Lamb CPA Inc P.S.
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