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
Many (most??) money transactions online involve PayPal to one extent or another. That's why it's important to have your own 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.
Personally, I use ING Direct for this purpose, but any bank will do. Also note, don't feel like it has to be designated a "Business Checking" account. I simply us the Electric Orange Checking account at ING and get a (teeny tiny) bit of interest.
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:
- Since it's where most of my transactions are, everything gets recorded in my PayPal account. Even if it requires extra steps (ex. I deposit a check in my business bank account first) I make sure every single penny gets recorded in one spot. I want it all trackable.
- Whenever money comes in, I immediately take out 2 amounts — one for tithe and one for taxes. The amount for taxes gets socked away in a separate savings account (ING Direct allows me to do this easily). 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.
- One thing I have signed up for but have not yet had the time to explore in-depth (on my to-do list though!) is a service called Outright. It's a free online accounting application for freelancers and the self-employed. It has now switched to a monthly subscription model.
For you seasoned blogging professionals, what'd I miss?
Here at BloggingWithAmy you'll find tips, tools & tutorials about blogging and websites. In plain English. Want to 
I love using Outright. It makes life so much less complicated. I had been using an excel file but Outright does so much more in regards to ongoing tracking and providing printable documents for tax time.
Oh good…I'd better get on it!!
Adding "research Outright" to my "to-do" list… That looks like a really helpful resource. Thanks!
Blessings,
Michele
You also need to get an EIN (employer identification number) from the IRS for your business. I needed this number for setting up my separate business bank accounts.
I have 2 bank accounts for the business. One for operating expenses and owners draws, and the other for taxes and tithes.
Once you have your EIN, then it's important to go back in to all of your affiliates and revenue sources and change out your SSN for your EIN. The sooner you do this, the better.
Plan to set aside around 30% for federal, state and local taxes. Talk to your accountant for specific percentages.
See Amy's disclaimer above. Same applies to my advice here.
Erin
Speaking of EINs, here's another resource I've found helpful: a handy chart which tells you when to jump in and get one!
Thanks for the great input, Erin!
Ok I have a question. I understand income from affiliates and advertising, but what about comps? If I review a book and get a comp copy of the book to read, how do I document that? That this point I am saving shipping invoices and emails but I have no idea what to do with the information from there. I've been all over the internet and cannot find anyone who can answer this. I'm in the US, but I have a friend in Canada and she needs to know what to do too! Thanks.
So- Would you advise on getting a business license for this? I was reading above about the EIN numbers. I know you had spoken about not necessarily needing a 'business' account. With that aspect, do you claim this as personal income?
Too, I have been going through step by step and have not seen how to upload pictures to your site. I guess I may need to just play around still – I may be a little overly excited about this and missing something!!
I definitely recommend keeping your business and personal bank accounts separate. You can operate as a sole proprietor and there are other options too such as LLC. I'm certainly not qualified to give legal advice, so I'd do a little searching and make sure you are making the right decision for you. Remember, Google is your friend.
I haven't purchased this myself, but this might be a helpful resource.
I talk about uploading images into a post here.
So, I was thinking today that I needed to become more organized now that I am making a little income! (Hopefully, ha!) We have almost 200 facebook fans! 100 over night since I started my referral contest. I started implementing my "call to action" as you posted as your guest post last week, which is helping a ton. I knew I'd find exactly what I was looking for if I came and checked your site first before Googling anything! Thanks once again Amy.
You're welcome. That's awesome!
I think you covered it! My biggest mistake was not tracking from the beginning. I started my first money-making blog in the middle of last year and by the time I realized it made enough money to file taxes on it, I was so unorganized it was really sad! Luckily paypal kept track of everything for me, but it was not fun going through it all at the last minute.
Yes, it seems like each year I find another way to stay a bit more organized so I don't go as crazy with taxes!
I find this very useful for my blog and it will help me alot.