How to Record Author Expenses and Income

Keeping records is an important part of your business. There are two reasons why: one that’s important for the business and another that’s important for you.

It’s important for you to do this because it’s another tangible way to reinforce that you are operating a business. That there is an entity outside yourself that you are building and bringing to life, much like Dr. Frankenstein did with his patient.

Think about it this way: What is a business? Is there a physical, tangible thing that you can point to and say, “this is the business”?

You have objects associated with your business, such as your books and your marketing materials. You might even have an office dedicated to running your business. But the business is a fiction. It is a story that you are telling your readers, your suppliers, your booksellers, and even yourself. If everyone buys into the story, then you have a business.

Take the Hogarth Press. That was the business started by Virginia and Leonard Woolf in 1917 to hand print books by themselves and their Bloomsbury friends. In the first year, they published a book containing a story by each of them, and earned £14 in profit. They published two books the next year, and five the year after that. It grew from a hobby that gave Virginia a way to relieve stress to a for-profit venture. Virginia relinquished her interest in to business, and Leonard continued running it with a partner until 1946, when it was acquired by Chatoo & Windus.

So what is the Hogarth Press? It was controlled by the Woolfs, but it was not integral to the Woolfs. They were able to pass it along to other interests, until now it’s an imprint owned by Random House.

Will your business last as long as Hogarth Press? That’s up to you. What’s more important is that you treat it as a living thing, and living things need sustenance and maintenance in order to live. Keeping track of your business expenses can help bring your business to life, both in your mind and in the eyes of equally important entities, such as the state and the IRS.

You and the IRS

The second reason why you must record your expenses is for tax purposes. Before we go any further, there’s an important statement I should make.

I am not a tax attorney.

Do not accept any of this advice as final and/or binding. Always follow the tax codes, local, state, and federal, that apply to you and your business. Tax laws change, and you should rely on competent help to handle your finances.

All I want to tell you is that if you’re going to treat your expenses as deductions for your income tax return, you need to keep track of what they are and how much you spent. At tax time, your accountant will apportion those expenses throughout your return. In other words, a deduction for gas mileage to your book event might be listed in a different part of the form than your marketing purchases. So you must list each expense separately, and then add them up. Don’t just give your accountant the totals, such as X for publicity and X for meals and travel. You may find that some of your expenses should not be claimed, or that you don’t want to claim too many deductions relative to your income. Again, I am not a tax attorney, so I’m not going to tell you what to do beyond this.

Keeping track of your expenses with a consistent system will also make your accountant’s job easier. Tax time is the major season in a CPA’s life. Every client has to file a return, and most of the time they come into the office at the last minute, bearing a shoebox of receipts.

Don’t be one of those people. The tax year ends on Dec. 31, and if you show up on Feb. 1 with your income and your expenses neatly laid out, not only will you get a major obstacle out of the way, but you’ll ensure that your CPA will stick by you for life. Because clients who are easy to work with don’t show up every day.

How to Keep Track

If you’re using Excel to keep track of your book sales, there’s no reason why you shouldn’t use it to keep track of your expenses. Set up a simple file for the year that allows you to list the date, type, and amount, with a separate column for income and expenses.

Fortunately, I’ve created a simple Excel spreadsheet that you can download and modify for your own uses. Plus, I’ll throw in another Excel spreadsheet that’s even more basic, that allows you to enter your expenses according to their type (research, advertising, legal services). I don’t know if this will help you; I stopped using it myself. But it’s simple to use and can’t hurt, right?