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Charlie’s Choice
Weekly Tips to Help You Write,
Publish & Promote Your Book
SETTING UP YOUR OFFICE
AS A SELF-PUBLISHER
As I have pointed out in earlier columns, once you self-publish your book and begin to sell it, you switch roles from author to businessperson. That means there are a number of basic controls and records that you must maintain. Unfortunately, this kind of “house keeping” is nowhere near as glamorous or as much fun as writing and promoting your work. But it is every bit as important.
The suggestions I make may seem simplistic, but please believe me, they are essential as you move more deeply into the program of promoting and selling your books and purchasing the materials and services you need. You must keep careful track so your business remains healthy financially. But you also need these records to back up the Internal Revenue Service tax forms that you now have to file.
Tracking Expenses
I am sure that you have already begun to receive bills from the printer, cover designer, formatter, etc. And these have to be paid by a certain date. To maintain control and meet your payment deadlines, set up this simple system or something very similar. List the vendor name, amount and due date on a master chart. This can be done on your computer or manually. Place the actual bills you receive in a “To Be Paid” file.
Set up a second file for “Paid Bills.” As you pay each bill, record the date of payment on the master list you had set up, and move the paid bill from its old file to this new one.
There will be continuous small expenses, most of which will be paid on the spot when you complete the purchase. These will be for supplies and basic services. One of the most frequently recurring is mailing costs. You will be sending out books to customers on your own even if you have retained a distributor or fulfillment house. And there will also be a steady demand for stamps for your business correspondence.
I maintain a separate file for these smaller purchases. I take the receipt for payment and toss it into a file I mark “Office Expenses.” The vendor, date and amount is recorded on a ledger sheet. At tax time, I simply total up the sheet to determine the amount of these everyday expenses. I do keep separate records for subscriptions to business publications and events. Business meals are recorded on a separate ledger sheet because the IRS will reimburse only a percentage of the tab.
Recording Your Income
You will also (hopefully) have income coming in from sales of your book. I suggest you create a third file marked “Open Invoices to Vendors.” While the bulk of your sales will probably be to major wholesalers like Ingram or Baker & Taylor, there will numerous smaller sales that you must keep track of. Records of your bulk sales will be kept by your distributor, if you choose to hire one. But the direct sales you make must be recorded by you.
For example, I work with Baker & Taylor when I sell books to libraries. One day a smaller wholesaler who specializes in library sales contacted me out of the blue and gave me a small order for ten books. Since that time I have been filling his orders for anywhere from one to fifteen books at a time. Without an Open Invoices to Vendors file, I would never be able to control these account and be sure I receive all that is due to me.
When the vendor pays a bill, I shift it to a “Payments from Vendors” file. I also record the sale on a master ledger sheet that I label “Income from Book Sales.” That becomes the basis for my IRS calculations on revenue from these direct sales.
You undoubtedly have set up a web site with a selling page to accept orders. That page is complete with an online bank like PayPal to accept payments in your name. As PayPal reports the periodic income from sales it processes, that too must be recorded on your ledger sheet.
I recommend you set up a standard invoice to send to vendors that purchase from you. A copy of the invoice should be stapled to the vendor’s order form and placed in the file. Be sure to include the vendor’s order number on your invoice so that it can be easily tracked. Once payment is completed by the vendor, move the invoice to the paid invoice file.
IRS Regulations
The folks at the IRS have very defined regulations for your eligibility to charge off expenses on your income tax submissions . You are considered either a professional or a hobbyist. You become a professional when you post a net profit for three out of five years. More than two years of red ink will place you in the hobbyist category.
This is a very important distinction. As a professional, you can deduct all of your expenses that are directly pertinent to running your business. In you are classified as a hobbyist, you can deduct expenses only to the limit of your business income. You cannot claim a loss.
There are some cases where this distinction can be overridden. Of course, posting losses during the first year or so of your new business is almost expected. But even if you don’t make a profit in a later year, you may be able to convince an investigator that this fall-off in income is only a momentary slump. But you must be able to prove to the IRS through your work records that you have spent a significant amount of time writing and promoting what you have written
None of this should be very daunting to you. You will be running a relatively simple business, and this system is more than adequate for your needs. As long as you keep careful records and are very legitimate in what you post, you will never have a problem.
Next week, we will turn full circle from the POD and self-publishing columns of the last few weeks and take a look at traditional publishing and how it has changed in recent years. See you then.
Keep Writing!
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