Disclaimer: I'm not an accountant, a lawyer, a tax expert or any other highly-degreed professional. This is not financial or legal advice I'm offering, just my own $.02.
As we continue to work through the step-by-step process of setting up a blog, we will soon get to the point where we will (hopefully) make some money. If we're going to be adding money to the mix, we'll need some things in place to deal with that.
Whether you've made money from your blog already or not, it's never too late to get your money matters in order.
Setting up your financial accounts before you make your first transaction is important because it can take a while to verify all your information, link bank accounts, etc. Better to be set and established before that first transaction comes around the bend.
If you've already started making money, you might still find some of these tips helpful.
1. Keep records of EVERYTHING and FROM THE BEGINNING
I simply have one folder designated as my business-related financial folder. It's nothing fancy, but anything related to money gets put in there — receipts, account information, invoices, tax info, copies of emails, etc. If I make a phone call about a financial aspect of my business, I jot a note about that conversation (date, time, with whom I spoke, questions I asked, answers they gave me, etc.) and stick it in my file as well.
My recommendation here is to be obsessive! It may seem like drudgery, but believe me, you'll be so glad you did (especially come tax time).
At some point, a more detailed record-keeping system will be appropriate, but if nothing else, just get one file going. It's simple and it's quick. No excuses!
There are plenty of bloggers who will tell you that they wish they had kept good records from the start. When tax time rolls around especially, it can be a major pain to have to backtrack and figure out what is what.
2. Set up a PayPal Account
You'll have to decide which type of account you need. I recommend at least a Premier account (you might consider a Business account if there are others who need access). All types are free to open. You can find a breakdown of the differences in accounts here.
Explore the PayPal site for more info about how it works and sign up for your own account. The sooner you do this the better because it takes time to verify your accounts and the longer you are a "verified member" the better — you look more trustworthy that way.
3. Set up a Bank Account Especially for Business
PayPal is pretty slick when it comes to dealing with financial transactions. (You can even get a debit card and use it like you would a normal debit card.) Still, I have a bank account set up (separate from our personal account) for business. It's linked to my PayPal account and I find it comes in handy if, say, I receive a personal check from someone that I need to deposit.
PayPal has been known to freeze funds arbitrarily, so I never keep more than $50 or so in my PayPal account. As soon as I reach that threshold, I transfer to my connected business checking account.
My recommendation here is to make it easy on yourself and keep your personal and business accounts separate.
4. Set up an Accounting System
There are all kinds of fancy accounting systems you could employ. My only advice is to simply decide ahead of time how you are going to handle your transactions and where your money will go.
A few things I do and would recommend:
- Because money trickles in from many sources, it can get a bit complicated to keep track of it all. I've been using a simple ledger I created in a spreadsheet and that seems to work the best for recording all income and expenses. I simply have 4 columns (Date, Person/Company, Income, Expense).
- Whenever money comes in, I immediately take out money for taxes. The amount for taxes gets socked away in a separate savings account. Taxes are part of life and you could very well have to pay. If you keep on top of it, it's a LOT better than if you don't (and could save you from having to pay a penalty come April 15). Read more about if and how to pay Estimated Taxes here. Also check out Tax Tips for Bloggers.
- There are countless tools you can use to track your money both online and off. We personally use a program called Budget (available for Mac or PC) that lives on our computer. It's the best thing we've found that works with Dave Ramsey's envelope system.
For you seasoned blogging professionals, what'd I miss?
Disclosure: There are affiliate links in this post.