The Author Toolbox: Keeping Excellent Business Records (Part 1)

Now that there’s a place to collect all that income and pay the expenses, let’s turn our attention to another important part of running a business…the files. I mean, have you ever seen an office without at least one filing cabinet? Even as some try to go paperless, there will still be a need for a virtual filing cabinet or place to collect all of the information in one place.

What kind of information to you need to save? First, that proof for the IRS that you are indeed a business conducting writing-related activity regularly (i.e. a journal or dollar store planner and a stack of rejection letters). Second, proof of your income and expenses in the form of receipts, bank statements, and PayPal printouts. Third, mileage records for business-related trips in your car. And eventually, all those legal contracts between you and your publisher, your agent, and the company that bought the motion-picture rights to your novel. (And since not all of that comes electronically, you’ll inevitably have some paper to keep track of.)

Tool #1: Set up an expandable accordion-style filing folder or three-ring notebook with a few clear pockets inside for this year’s records. (Thanks to IRS regulations, you’ll also need a place to store previous years of records in the case of an audit, but in an effort to reduce clutter around your writing space, keep only this year’s records at your fingertips.)
I personally use a binder with several clear page protectors inside. The first pages are a list of this year’s writing goals and a basic budget for my business. What expenses can I predict and what limits am I putting on that spending? And then, what income do I need to break even…or better yet, turn a profit?

The next pages are a motivating list of my writing history, almost like a resume but broken out by year starting in 2005. Gleaned from the pages of that tiny dollar store planner (or earlier from my faint memory), I have a basic list of what book-length manuscripts I wrote that year, how many articles and/or books were published, what conference I attended or class I took, and so on. On those days I feel like I haven’t accomplished anything as a writer, a trip down memory lane helps to recapture my momentum. Plus, when someone asks what year that book came out, I have the dates handy. Whew.

Next in my binder is a section of pages—one per book—listing a summary of books sold and royalties earned per year. I have the more detailed records within each tax year, but having a summary page is helpful when preparing a new book proposal that asks for sales numbers or even to identify that this new book is actually launching better (or worse) than a previous one. In January when I sit down to organize all the information to prepare my taxes, I tally up the royalty reports by title and even by format, then transfer those numbers to these summary sheets. Perhaps it’s not needed, but I like having a record in my “Business Records” notebook.

At the start of every year, this is all that remains inside my notebook with the exception of a single empty clear page protector that I’ll use to collect those loose receipts from the Post Office or UPS store. As the year unfolds, I’ll hole-punch and add copies of my bank statements, monthly printouts from PayPal, copies of rejection (or acceptance!) letters, the Amazon receipt for that craft book I ordered, a conference registration, membership dues, contest entry forms, and anything else to prove that the expenses coming out of my bank account are truly writing related.

My basic paper records are this notebook, my writing planner where I still track daily activity, and a file folder containing all my book contracts and correspondence with my publisher.
It doesn’t matter what system you use…as long as you have a system. Everything has a place, and then gets put there during a semi-regular filing binge.

Tool #2: Use Mapquest to easily calculate the mileage on writing-related trips. Since mileage can be deducted on your tax forms as a business expense, this is another area where record keeping becomes very important.

Transportation expenses are calculated either at a standard mileage reimbursement rate or as a percentage of your overall vehicle expenses. That last option makes sense if you were a Realtor who drove clients around town every day and needed to subtract a few grocery store or carpool trips from the total. As a writer, I’m more likely to use my car for family stuff with the occasional trip for something writing-related and therefore don’t want to bother keeping track of all the other details required to support that percentage calculation.

Whichever way you decide to go, both methods of reporting transportation expenses require a total number of miles driven for business activity. One way to keep track is to keep a small notebook in your glove box or cup holder and then remember to record the starting and ending odometer readings for every trip. The key being to remember to write it down.
If you’re anything like me, there are a handful of familiar places where you go for writing activities. That local writer’s group meeting, the Post Office to mail books to reviewers or contest winners, the library for research, or the local Panera or Starbucks for a writing binge session. Since you’re going to the same places over and over, why not calculate the mileage once then multiply by the number of times you went that year?

Mapquest or similar online mapping tools not only give you directions to get from Point A to Point B, they also calculate the distance for you. So even though you don’t need directions to get to your familiar haunts, go ahead and print out that map as documented evidence of a one-way distance and then file it with your other business records.

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