Do bloggers need to care about bookkeeping? Now before you turn and run for the hills, I want you to stick with me for a second!
If you want to turn your blog into a business you need to treat it like one, which means you need to be on top of your money ish! So the answer is YES!
If you’re thinking Sheila, I’m not even making money with my blog yet…do I need to care about bookkeeping now? Can’t I just wait until the cash starts rolling in?
Because if you start NOW before the money starts coming in, you’ll be set up for financial success and save yourself all the headaches later when you start making an income.
And since I was totally confused about my blogging + biz finances when I started I brought my biz friend Katie of The Lazy Source to share her expertise on bookkeeping basics for bloggers. Katie is an accountant turned entrepreneur and now helps bloggers + small biz owners take charge of their finances. So she’s the perfect person to talk about this.
Keep reading to learn the FIRST STEPS you need to start taking to set your blog + business finances up the right way. Let’s turn it over to Katie!
It’s the ‘B’ word we all know and hate: Bookkeeping! You don’t like it, you don’t want to do it, you barely even know how.
I get it. I’m an accountant, but I hate bookkeeping just as much as you do. But, thanks to my background, I know something that you probably don’t…
Your books are actually incredibly simple.
Solopreneurs running their own side hustle or small business don’t usually have very complicated finances. When business owners like you would bring their stuff into the accounting firm I worked at, it would go to whoever needed a break from the rest of their work.
Yeah. All that stuff you keep pushing to the bottom of your to-do list because it takes you forever and makes you miserable? It’s an accountant’s low-hanging fruit.
Would you like to see your own finances this way? As the easy, quick-win task on your to-do list for the week? Let’s get you started.Bookkeeping Basics for Bloggers: What You Need to Know and How to Get Started! Click To Tweet
Why Bother with Bookkeeping?
First off, why bother? If it’s so simple, is it worth going through all that extra work?
My response to that is a loud and obnoxious YES.
As your business grows, your finances are only going to get more complex and more important. Whether for taxes, law, hiring employees or contractors, making strategic decisions, establishing partnerships, or whatever else that comes with growing a business, your ability to manage and organize your finances will be imperative.
The best way to start is to start now. Start while it’s manageable and while it’s something you can learn. One day, sure, you can outsource it. But today’s the day for you to learn and understand your own business.
Accounting is the language of business, after all!
Step 1: Create a Separate Bank Account
There is one critical first step that is the most important part of bookkeeping: you need to have a separate bank account for your business.
Even if you don’t touch a spreadsheet for the rest of your life, the best thing you can do right now is open a new checking account.
Unless you’ve incorporated your business, you don’t even need it to be a separate Business account. Just a regular ol’ checking account will do.
The key is to separate your personal finances from your business’. Bookkeeping is super important, but the bank account is the foundation for all of your financial organization.
You can learn more about why this is important here!
Step 2: Tracking Your Income
The next important aspect of bookkeeping is going to be accurately tracking your income.
This is especially important for tax purposes. The IRS (for U.S. entrepreneurs) won’t bust down your door if you forgot to report some expenses, but they sure will come after you if they discover you left out some income on your return.
Whenever you earn money, make sure you document it. The easiest way is to track it as it hits your bank!
But be careful – not all deposits into a bank are income.
Income is money from an outside source that was paid to you because you did what you’re in business to do! You completed a design, coached a client, managed a social media account, or sold a digital product to a customer. You earned that money.
Money that you transferred into your own business account from your personal funds is an owner investment. Or, if you take out a loan for your business (which I don’t recommend, anyway), that’s not income. Or maybe you received a refund on a purchase – also not income.
The most important thing is that you keep track of any money your business has earned.
Pro Tip: You should only track income once you have received it. It gets confusing when you’re dealing with ads and affiliates that usually have a 30+ day payout policy. But almost every small business should report their income and expenses only when the cash moves. In our case, that means when it enters and leaves our bank accounts!
Step 3: Tracking Your Expenses
Next, we definitely want to record as many business-related expenses as we can find! Why?
At least in the U.S., we have to pay taxes on our business profits. So if you made $3,000 with your business last year but were able to document $2,000 in valid expenses, you’re only paying taxes on that $1,000.
Aside from tax, we also want to know if our business is profitable. If you’re not making enough money to cover all the costs you’re generating each month, wouldn’t you want to know that?
Similar to income, the simplest way to track your expenses is to document them as they leave your bank.
And you have to be careful to track actual business expenses. Here are the types of expenses considered valid by the IRS (if you’re outside the U.S., this list can still be a useful framework to begin with):
- Advertising – promoted social media posts, running ad campaigns, etc.
- Subcontract labor – virtual assistants, social media managers, designers, developers, etc.
- Legal & Professional Services – lawyers, accountants, consultants, coaches, etc.
- Office Expenses – website expenses, software purchases, tools and plugins, office supplies, etc.
- Dues & Subscriptions – membership fees, software subscriptions, etc.
- Travel – costs to travel for client work, business conferences, professional events, etc.
- Meals – for business-related meals (taking a client to lunch, meeting a professional for coffee to discuss a potential collaboration, having a strategy meeting over brunch, etc.)
- Education & Training – courses, books & ebooks, masterminds, paid webinars, etc.
- Merchant Processor Fees – processing fees for accepting payments online
- Commissions and Fees – affiliate payouts (if you run a program for your products)
If the expense is necessary for your business’ successful operation, it can be argued as a business expense!
Pro Tip: If you spend money from your business bank account that was for personal use, that is considered an owner draw (though there are other names for it), and is essentially the opposite of the owner investment.
Step 4: Get Bookkeeping Tools
You may be wondering, “If all of this is in my bank account, isn’t my bank statement good enough?”
Definitely not. For one, banks make mistakes (more often than you’d like to know). But also, a bank statement won’t tell you profit or loss. It’ll only tell you about your cash flow.
You can have a $500 bank balance but be running at a $1,000 loss. This is why it’s important to keep separate records to track all financial activity.
What are the best tools for this? There are several options, and what you choose is up to you!
Some people are really old fashioned and like to use paper. I’m a paper girl myself, but I don’t find paper bookkeeping systems to be very sustainable in the long run.
Most people start with spreadsheets in either Microsoft Excel or Google Sheets. This is a better option than paper (at least you can use formulas to check your math!), but still requires manual entry.
Your best bet is to use an actual bookkeeping software that lets you download transactions straight from the bank! It’s a “lazypreneur’s” dream.
If you’re going to go pro, Quickbooks is one of the best programs on the market. Other popular options are Freshbooks and Xero.
All of these are great, but I prefer the free alternative for those of you just starting out! Wave is a simple bookkeeping program that has all the functions a small online business owner needs, and it’s actually completely free.
I have a training video where you can learn all about how to get started with Wave. You can check it out here!
Sheila stepping in here for a second: I use Wave and set it all up with the help of Katie’s training video. It’s so easy when she walks you through it!
We’ve covered a lot of the bookkeeping basics today: Get a separate bank account, track your earned income, track your business-related expenses, and keep it all organized in some easy-to-use software!
So what’s next? What do you do with this information? Here are some resources to help you on your journey to financial health!
- You’ll want to learn how to reconcile your bank account. This will help you to ensure you haven’t missed anything! Learn how!
- Next, you can generate your first income statement! Understanding your Profit & Loss Report is how you make all this bookkeeping applicable and relevant to your decision making. Learn about these reports here.
- Apply what you’ve learned! Did you know the bookkeeping aspect of financial management is only Stage 2 out of the four stages to financial success? Get access to the full framework and make sure your business is aligned with your profit dreams!
Bookkeeping doesn’t have to be scary. The key is to just get started. I promise, your dream will thank you later.
Also known for being a nap lover, buffalo wing addict, and overly-obsessed dog mom.