‘HANDLE THE FINANCIAL SIDE PROFESSIONALLY’
Now, that doesn’t sound very difficult right? Ask any blogger who is trying to earn a consistent income through blogging and s/he will attest to my view that it is, indeed, quite difficult. Grechen, however, has been kind enough to also tell us HOW. Here’s what she has to say on her post at IFB:
Establish a business FIRST
I actually did this…but it’s really important to have a business entity that you work under right from the beginning. I never took personal checks or cash or anything like that, I started with a PayPal account and sent and received invoices through that (I still do). You can set up an LLC, or a sole proprietorship if you want, you have to decide which one is better for you, but DO IT.
Make a business plan
Set goals for yourself and your business and then hold yourself accountable. Start small, and make a one year business plan, then circle out to include where you want your business to be in 5 or 10 years. I’ve heard that having a business plan can make you more productive and efficient (I honestly don’t know though, I have never done one. Although I know I should!!). It can also be useful if you’re looking for investment, even if only from friends & family.
Start with Quickbooks immediately
I started using Quickbooks a few years into my business and it was the best decision I ever made. I wish I’d started earlier, but even so, having an accounting system is ESSENTIAL to knowing how much money you make every year and filing your taxes. If you take some time every month to reconcile everything (now it’s much easier than it was 10 years ago!!), you’ll have nearly nothing to do at tax time, just fill in the numbers. I like Quickbooks, and now I use the online version, but there are other free services out there.
Separate business & personal accounts
After you create your business entity set up a bank account IMMEDIATELY, and then keep it separate from your personal account. I did this too, but I didn’t try very hard to keep it separate. I still don’t, honestly. It’s hard! The idea is that you receive money to your business account and pay business-related expenses from that, AND keep some in reserve, then pay yourself by transferring money into your personal account.
Also, if you earn any money from affiliate commissions you know how cyclical it can be. One month you’ll rake it in and the next, crickets. Unfortunately for you, the IRS still needs to get their estimated taxes every quarter, and you probably have bills to pay that don’t fluctuate with your income, so it’s important to save enough to cover the lean months. This is something that I still haven’t perfected.
Have an accountant
I still don’t have an accountant, but I wish I did. Especially if he/she would tell me how I can consider my clothing purchases business expenses!! Seriously, I think paying professionals is important, especially if you’re running a business. You do what you do best and let someone else handle the other stuff! I definitely wish I’d hired an accountant early on and kept him/her.
Invest in the business, tools, classes, etc.,
Ultimately, my regret boils down to not making the investments I should have in my business from the beginning: not investing the time to do accounting properly, and then not investing money BACK into my business, so that I’d have some reserves and the ability to purchase things I need to run it efficiently. Not just clothes 😉