There’s nothing sexier than accounting for authors, right? Ha, Kidding. But it IS important.
As an author, you’re dealing with money, regardless of what stage you’re at. You’ll spend it to get your book published, and you’ll be making it once your book starts to sell. You already know you should keep track of what you’re spending and what you’re making. But how?
To help authors get on top of their finances, Mark Leslie Lefebvre and D.F. Hart joined forces to create their book Accounting for Authors: Financial Analysis, Budgeting, Costs, and Margin Made Simple.
Mark Leslie Lefebvre has been working in the publishing industry since 1992 and is Director of Business Development at Draft2Digital. He is also a prolific author: as Mark Leslie, he has published 14 works of fiction, fiction mainly in the horror genre, and six nonfiction books focusing on ghost stories. Writing under his full name, he has published three books about writing and publishing.
D.F. Hart (DeAnna)has two careers: she is an accountant with over 25 years experience and a suspense/thriller author. As D. Faith Hart, she has also written numerous romance novels.
Accounting for Authors has a publish date of Q1, 2022.
Check out the conversation on our podcast
We spoke with Mark and DeAnna about Accounting for Authors on our podcast and you can access and listen to that conversation here:
Why do you need to know about accounting for authors?
When authors have accounting questions, these usually have to do with taxes. To be able to do your taxes correctly, you need to have an accurate picture of what you’ve been earning, what you’ve been spending and what you’ve been spending money on. This is easy enough if you have a fixed monthly income and regular bills: the picture of income and expenditure looks similar from one month to another.
However, as an author, your income and expenditure are rather erratic. How much you make depends on your book sales: one month you may have sold only a few copies of your book but the next, after an interview or a book review or simply because it’s the run-up to Christmas—there are many different reasons why this might happen—there is a sudden surge in sales and you sell ten times more than usual. Similarly, you may go for weeks without really having to spend much on your book and then, one month, you have to pay the editor, the proofreader and the cover designer. Or you decide to try and boost your book’s profile by taking out ads in a few local publications.
Being able to understand and do basic accounting for authors means keeping track of your finances. It gives you snapshots of where you are financially at any given time. Keeping track of these snapshots helps you to make decisions about marketing, distribution, future books, even whether this book-writing business is worth the time and effort at all.
The accounting equation
This part of accounting for authors isn’t unique: it’s the same regardless of your vocation. Net income, cash flow, receivables, inventory, return on investment: as you learn about accounting, you’ll come across all kinds of financial terms. For them to mean anything in practical terms, everything eventually boils down to the accounting equation. This is that snapshot of your financial situation.
The accounting equation is:
Assets = liabilities + equity.
Assets are the things that you own: the things that have value. They can be tangible or intangible.
- Tangible assets are those assets that you can quickly and easily convert into cash: the money you have in your bank account and/or stashed in a box under the floorboards, the property you own, your car, equipment such as your computer, your reference books, your inventory – those boxes of print copies of your book. Basically, as the “tangible” part of the term suggests, they’re usually things that you own that you can physically touch. Receivables – earnings that haven’t been aid to you yet – are tangible assets too. As an author, your receivables will often be in the form of royalties.
- Intangible assets are those things that you own in a more abstract way: copyrights, trademarks, your brand as an author.
Liabilities are essentially everything that you have paid for and still need to pay for: your costs and your debts.
Equity is what is left over. This is the really important bit because how much equity you have tells you how healthy your financial position is. This is the part that tells you whether you need to adjust your budget and whether you need to change your approach to your career as an author. It’s also the part that the tax man is most interested in. Because equity is the part that you really want to see at a glance, it may be easier to turn the accounting equation on its head:
Equity = assets – liabilities.
So what about taxes?
What a book like Accounting for Authors can’t cover is how to do your taxes. The reason for this is that tax laws and regulations differ not only between countries but also between states or provinces within the same country and between cities, towns, and municipalities. They don’t remain static either, but can—and do—change from one year to another as policies change. To do your taxes, it’s always a good idea to set aside between 22 and 30 percent of your income throughout the year: this will help lessen the blow when tax time comes. Then, for advice related to the tax laws in your jurisdiction, it’s best to ask your accountant. Some things really are best left to the experts.
