Business & Accounting for Authors

Introduction:
An Author Is a Business

Treat Your Writing As a Business

Have you written or are you writing a book? It’s a good idea to treat your writing career as a business from the beginning. It doesn’t matter whether you plan on writing as a hobby, a secondary income, or as your primary business. It’s still a business. But don’t worry if you’ve been writing and selling books for a while, you still can apply the business basics and accounting to your business at whatever stage you’re in. As the saying goes, better late than never.

In today’s publishing environment, even if you’re traditionally published, you need to track your income and expenses. Most authors must cover many of their own expenses, which offset the royalties they receive from the publisher.

As an independent or “indie” publisher, you are doing everything a traditional publisher does for your books. It doesn’t matter if you do this gig full-time or part-time. It’s still a business. You do these business activities:

• Hire editors and cover designers, and maybe even formatters and copywriters
• Pay for advertising to market your books
• Make decisions on distribution channels to use
• Determine what forms of your product to publish
• Build relationships with others within the industry

I don’t consider myself “self-published.” For one, I use a team of professionals to help me produce the highest quality product possible. I don’t do this by myself. And for another, I’m an independent small-press publisher. My publishing company publishes books, just like any other small-press publishing company. I simply only publish one author—me. If in the future I decide it’s right for my business, I can choose to publish another author’s books—because I’ve set up a publishing company.

Even if you’re writing as a hobby without a profit motivation, you’re still in business. You’ll be doing the same tasks necessary to produce a high-quality product, such as hiring editors and cover designers. You’re probably also marketing your book so that readers can find it. In the US, if you consider your writing a hobby, you can only deduct your expenses up to the amount of income you had. You can’t take a business loss; whereas, if you’ve set it up as a business, you can deduct your business losses against your personal income. And who knows? If your books take off, you’ll be glad you already set up a business. It’ll be one less thing to worry about later.

Who This Book is For

Whether you are Indie Published or Traditionally Published, you need to understand business basics and how to manage your money to be successful. This book will go over the various forms of business available to you (in the US) and how to set up your business. I will give you a basic system to track your business income and expenses. (Note: this is NOT a book on taxes, although I’ll briefly touch on the tax aspects that will affect how you set up your business.)

You, as an author, are a business. The products you produce are books, whether they are ebooks, printed books, or audiobooks. Your business generates revenues (at least you hope it does) and incurs expenses (which they all do). At the most basic level, a business is successful if it generates more income than expenses. But how do you know what exactly those numbers are?

Through accounting. It captures your numbers and gives you a picture of how your business is doing.

Understanding business and financial basics will give you an edge over most of your competition. If you know how your business is doing, what streams of revenue are doing well—and which aren’t—and what your expenses are, then you can make much more informed decisions. A look at your financial statements will tell you if you can afford to spend more money on a marketing campaign, or if you should cut back. They can tell you if you’ve spent too much money, or just how much you’ve really made.

Many people consider if they have money in their bank account, their business is making a profit. That isn’t necessarily true. Just like in your personal life, you have bills that need to be paid, so too, your business may have outstanding bills and debts that need to be considered. And because of the way Amazon and the other book retailers pay, you have sold books this month, but you won’t receive the funds for them for sixty-days.

Even if you’re writing as a hobby, you still need to keep track of your income and expenses for paying your dreaded taxes at the end of the year.

Although much of this book is targeted to fiction authors, the principles apply to nonfiction authors as well. My intention is to make understanding your money and business as easy as possible. If you take your writing seriously and want a better chance of your business succeeding, then this book is for you.

My Background

Why on earth should you listen to me?

First off, I’m an author of both fiction and nonfiction. I write genre-bending fantasy books, and I currently have one epic science fantasy series published and am writing an urban fantasy series. I’m an Indie Authorpreneur (I love that term!). My publishing company is organized as a Sole-Proprietorship that I publish all my work under. As a business owner, I need to track my income and expenses to make the best financial decisions I can. I’m in the trenches every day, so to speak, living the life of a full-time author.

Secondly, I’ve been a Certified Public Accountant (CPA) for over twenty-eight years. Most of my accounting career was spent working with small business clients, setting up their accounting systems, doing their accounting, and preparing their financial statements. I’ve had an accounting practice where I worked with small publicly-traded companies. I did their accounting, worked with their financial auditors, and prepared and filed their quarterly and annual financial statements with the U.S. Securities and Exchange Commission (SEC). For three years, I served as the Chief Financial Officer (CFO) for a publicly-traded software development firm with operations in four different countries and listed on two different stock exchanges. I’m what I term, a financial accountant. The only taxes I’ve done for the past fifteen years are my own. Even when I did work for an accounting firm that did taxes, I did all the business clients’ returns because they usually needed some accounting work done first.

With my combined experience as an Indie Publisher and an accountant, I know what an author needs to manage their money and business. I’ve used this expertise to help me make sense of my own writing and publishing career.

Note for International Readers

I only have experience setting up businesses in the United States. The information on forming a business and the little bit about taxes apply to the USA only. However, the business basics and accounting are the same no matter where your business is located. Some of the terms may be different, but all businesses generate income and incur expenses.