Zen Accounting for Bloggers

Bjork

by Bjork on Sep 09, 2014 in Business of Blogging, Growing Your Food Blog

There aren’t many things I’d rather be doing than accounting.

Zen Accounting for Bloggers: A simple system that bloggers can use to keep track their blog's income, expenses, and taxes. | foodbloggerpro.com

Okay, well… actually…

…now that I think of it there are quite a few things I’d rather be doing than accounting.

Things like:

  1. Juggling porcupines
  2. Taste testing cardboard
  3. Listening to Itsy Bitsy Teenie Weenie Yellow Polka Dot Bikini on repeat.

Are you with me or are you with me?

Here’s the deal though: if you’re working to build your blog into a business then you need to treat it like one. That means doing a good job with your accounting.

While I don’t like spending time in Excel or QuickBooks, I do like knowing that our books are in order and that we’re keeping track of our income and expenses.

So how do anti-spreadsheet people like Lindsay and I manage to keep our books in order?

We do it by using a system I call Zen Accounting for Bloggers.

It's a simple system that we developed over the past few years. This system allows us to keep really clean books while spending less than 30 minutes a week on taxes/accounting/bookkeeping.

And today I’d like to share that simple system with you.

This is the post that I wish would have been written when I was trying to figure out all this blog accounting/bookkeeping/businessy stuff out almost two years ago.

One quick thing. I’m not a tax professional, accountant, or lawyer. Those folks know a lot more about this stuff than I do…and they probably won’t use the word “folks,” which adds to their credibility.

Bottom line: Check in with a professional before making any big decisions.

Before talking about the system we use we need to talk about setting your blog up as a business.

Structuring your blog as a business

It was about two years ago that Lindsay and I realized that Pinch of Yum had officially grown into a business. The blog had just had its fourth straight month of making over $4,000. It was on pace to make more than Lindsay or I had ever made in our 9–5 jobs.

“Let’s make this thing an official business!” I thought. “I’ll just call our bank and setup a business bank account tomorrow. ”

Nope. Not quite that simple, Bjork.

There were actually a few things we needed to do before declaring Pinch of Yum a “real” business.

The three basic parts to our “blog as a business” setup

  1. Establish the blog as a business entity (we went with an LLC).
  2. Apply for an EIN (Employer Identification Number).
  3. Setup a business bank account.

1. Establish the blog as a business (we went with an LLC)

LLC stands for limited liability company. The idea with an LLC is that you’re limiting your liability.

For a blogger, the main advantage with an LLC is that it helps to separate your personal finances and your business finances.

The definition of an LLC.

Is it possible to not have an LLC and just keep track of income and expenses that are associated with your blog?

Yep!

Is it a good idea to do that?

Probably not.

Why?

Because, in theory, if something happened with your business (i.e. your blog) that resulted in a lawsuit then all of our personal belongings (house, car, etc…) could potential be taken from you.

That’s why it’s better to limit your liability and setup an LLC. This will create separation between your personal stuff and your business stuff.

I filled out the LLC paper work through the State of Minnesota website. It was submitted online and cost $155 dollars.

You can also use a company like LegalZoom to get help with setting this up. I’ve never used the service but I’ve heard of a few people that have. There’s also always the option of doing it the official way and working with an attorney. smile

2. Apply for an EIN (Employer Identification Number)

An EIN is like a social security number for a business.

The definition of an EIN.

Before having an EIN we had to send our social security numbers to the companies we were working with. It felt so…unsafe. I’d put my social security number into a document, upload the document to an email, and blast it out off into the interwebs…

Agh! What a scary thought.

Who knows how secure that person’s computer was or if that document is still sitting in someone’s unsecured folder. Now that we have an EIN for our businesses we can use that number instead of our social security numbers.

We also needed an EIN in order to setup our bank account. I’m not sure if this is a requirements for all banks though.

We applied for an EIN using the IRS.gov online filing system. We did this after setting up an LLC.

3. Setup a business bank account

Once we had an LLC and EIN we moved forward with setting up our business bank accounts (one for Pinch of Yum and one for Food Blogger Pro).

Business bank account definition.

The business account setup process is going to look different depending on which bank you use, so I won’t attempt to communicate how the process works.

We use a business debit card for 99% of all the purchases we make for Pinch of Yum and Food Blogger Pro. We prefer to use cash (i.e. debit) over credit, even if we get benefits or cash back from a credit card.

We have a generic “Pinch of Yum” credit card that we used when Lindsay was teaching. At that point in time, we had someone that was helping by occasionally doing meal prep and grocery shopping. We needed this support staff person to be able to make Pinch of Yum business purchases at the grocery store, so we opened a generic Pinch of Yum credit card with a low limit.

Setting up a business bank account is a really important step in the Zen Accounting for Bloggers system. You’ll see why in step #3. smile

Creating the Zen Accounting for Bloggers system

We had a lot of trial and error with our accounting system over the past couple of years. We’re finally at a point where we feel good with it. As I mentioned before, we spend an average of about 30 minutes a week with this current system.

Here are the things you’ll need in order to make this system work:

  1. Receipts folder
  2. QuickBooks Online
  3. Read-only bank account access for bookkeeper
  4. Monthly check-in

Here's a handy graphic overview of the different steps of the Zen Accounting system.

Zen Accounting for Bloggers: A simple system that bloggers can use to keep track their blog's income, expenses, and taxes. | foodbloggerpro.com

1. A receipts folder

We have both a physical receipts folder and a digital receipts folder.

Physical receipts folder

Physical receipts folder for blog expenses.

Whenever we make a purchase for the blog we use the Pinch of Yum business debit card. We keep the receipt and put it in that month’s receipt folder.

The most common physical receipt comes from grocery store purchases.

When we go to the grocery store it’s common for us to check out twice. Once for items that will be used for the blog (we use the business card for this) and once for items that won’t be used for the blog (we use our personal card for this).

Digital receipts folder

Digital receipts folder for blog expenses.

The majority of non-grocery purchases that we make for Pinch of Yum and Food Blogger Pro result in a digital receipt. Whenever I get a receipt in my email inbox, I create a PDF version of it and save it into a “receipts” folder on my computer.

These folders are organized by month, just like the physical receipts folder.

When you keep records like this on your computer it’s important that your computer is backed up. Check out the four ways you should be backing up your computer and blog post to see how we backup our computers and blog.

2. QuickBooks Online

We use QuickBooks Online for our accounting and bookkeeping. The important thing here isn’t the QuickBooks part, it’s the online part.

Using an online (i.e. cloud based) accounting system allows our bookkeeper and accountant to have access to our accounting without us having to export or send files to them.

We just create a unique login for them that allows them to sign in using their own email or username.

3. Read-only bank account access for bookkeeper

Let’s break this down a bit.

First, a bookkeeper.

A bookkeeper is someone that, you guessed it, keeps the books. In other words, a bookkeeper is someone that enters in the expenses and income from your business for a certain month and makes sure that all of the transactions in your books (QuickBooks in our case) match the transactions on your bank statements.

A bookkeeper is usually different than an accountant. A bookkeeper will handle the day-to-day stuff, while an accountant will handle the higher level stuff like calculating your quarterly or yearly taxes.

Second, read-only bank account access.

Pinch of Yum has two different bank accounts. One is with PayPal and one is with a “real” bank. We’ve setup read-only account access for our bookkeeper with both of these accounts.

Read-only means someone can login to your account but can’t make changes. There are also certain areas (i.e. private information) that are blocked from viewing when an account is read-only.

Setting up read-only access allows our bookkeeper to login to our accounts and download the necessary statements without us having to do anything, which is one less thing that I need to remember to do (and one less confidential document that has to be emailed).

4. Monthly check-in

Once a month our bookkeeper sends us an email with any questions she has. These questions usually have to do with how to classify a certain deposit or expense.

Most purchases we make are from similar places. For instance, every month we make a payment to Amazon Web Services for hosting Pinch of Yum’s CDN.

FBP Members: You can learn how to setup a CDN for your blog by watching the W3 Total Cache course.

Our bookkeeper knows to put payments from Amazon Web Services into the “Software” category with a subcategory of “Domains and Hosting.”

However, sometimes there will be purchases or expenses that our bookkeeper doesn’t recognize. In cases like this she’ll email and ask how the item should be categorized. She outlines the items in question and I enter a note explain how the items should be categorized and email it back to her.

The once a year stuff

Once a year we meet with our CPA (i.e. accountant) to have our official yearly tax meeting.

There is usually minimal preparation that is needed for these meetings because we’ve been maintaining our books throughout the year instead of cramming to get all our info together at the last minute.

When should I start to do accounting for my blog?

The answer to that question largely depends on your answer to this question: Is your blog a business or a hobby?

The IRS will be suspicious of anything that you claim is a business but doesn’t actually create a profit, especially if it’s not creating a profit for a few years in a row.

However, if you’re starting to consistently create income from your blog then I’d suggest setting up a systems similar to this as soon as possible. You’ll be thankful you did once April roles around. smile

Video Recap

What about you?

Are there any other accounting related tips that you think are important for bloggers to know? Any ideas for improving this system? Any questions you’re still getting stuck on?

I’d love to hear your thoughts!

Thanks for reading.


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