If you’re a self-published author you are effectively an entrepreneur running an author business. The term authorpreneur is becoming a popular moniker for indie authors who are doing just that. Sure, most of your time is spent on writing and marketing. But running your author business also requires you to manage all the other tasks required of most entrepreneurs. For most indie authors, making money from their books and eventually writing full-time is the primary goal.
On any given day you probably have asked yourself at least one of these questions: How much money did I make from my books today? What are my expenses so far this month? Am I making any money doing this writing thing? How much money do I need to pay in taxes? Yikes! It can be stressful and sometimes overwhelming to figure all this out. I know how this feels because I am an entrepreneur too. I run my own business (Written Word Media) and some days I also have to go into finance mode. Below I’ve listed some tools that can help you manage your author business and make the job of authorpreneur a little less daunting.
I am not a certified financial planner, financial analyst, bookkeeper, accountant or any other sort of financial professional, so please speak to the financial professionals in your life if you have specific questions on how best to implement the tools below. Further, I am in no way being paid to promote these tools. They are simply tools that have a track record of providing good service to authors or entrepreneurs.
Okay, here they are. The four steps to becoming a more adept authorpreneur:
Step 1: Track your Book Sales
Tool: Book Report
Book Report makes it quick and easy to track the sales and KENP reads of your book on Amazon. Book Report is a browser extension which means you install it on your browser and it works as long as you’re logged into your KDP account. You do not have to give your KDP login credentials to Book Report. With Book Report you can instantly see your up to the minute sales as well as your historical sales. Book Report will also calculate the value of your KENP reads using the payout rate from the previous month so you no longer have to do the math yourself. Book Report is free for any author making less than $1,000 per month in KDP royalties. Once you hit $1,000 in sales, Book Report will cost you $19 per month. The biggest drawback to Book Report is that it only tracks Amazon sales. If you have significant sales on other platforms you’ll want to consider another solution, like TrackerBox .
Check out Book Report
Step 2: Get a Handle on your Revenue, Expenses and Profit
Tool: Xero
You now have a tool to help you track your book sales. But how do you track your overall business? Xero is an accounting tool that allows you to do just that. With Xero you connect your accounts so that each transaction is automatically pulled into one place. You are then able to categorize the transactions as revenue and expenses and Xero will generate an income statement for you. You can connect your bank account, PayPal account, and credit cards. Xero is only a good solution if you have set up separate accounts for your author business. Xero is not a good solution if you are depositing royalties into your personal account where you also receive a paycheck, or if you run your author expenses on a credit card that you also use for personal expenses. Xero starts at $9 per month and is well worth it if you want to track how much you are actually making, (or losing :-() each month running your author business.
Check out XeroStep 3: Pay your Taxes
Tool: Electronic Federal Tax Payment System (EFTPS)
Hopefully, after using Xero you now know how much you made from your author business. Before you start planning on how you’re going to spend all that dough, remember that you have to pay taxes on it first. It’s a bummer, I know. But if you forget to pay your estimated taxes every quarter you’ll be in for a nasty surprise come tax time. The federal government has a nifty online portal called the EFTPS which stands for Electronic Federal Tax Payment System. You can create an account and enter your bank information so that it’s quick and easy to make your payments throughout the year. You can make payments as often as you’d like but quarterly is usually a good cadence.
You’ll have to talk to your tax preparer to figure out which tax bracket you fall into so you know how much federal tax to pay. For example, let’s assume you are in the 25% federal tax bracket and you made $1,000 total in profit (royalties minus expenses) from your authorpreneur activities. You would owe the federal government $250 and you could use the EFTPS to make this payment. The EFTPS will also keep a record of how much you have paid so you can refer to it anytime. You will also be able to provide a record of your estimated tax payments to your tax preparer at the end of the year. In addition to owing federal taxes in your earnings, you will also owe state taxes. The amount of state tax owed will differ by state and each state has its own method for receiving payment.
Check out the EFTPSStep 4: Make Money off your Money
Tool: Marcus High Yield Savings Account
As your business grows, your cash surplus will grow. It’s important to pay attention to where you stash that cash. Most national banks do not pay interest on a checking account so you’ll want to consider moving excess cash to an interest-bearing account. There are numerous high-yield online savings account providers who will pay you interest on your deposits. Marcus by Goldman Sachs currently offers the highest savings rate (1.85% as of 8/13/18). You may think it’s not worth opening a new bank account for a low balance, but that’s not true due to the beauty of compounding.
Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings. For example, if you invest $1,000 in a Marcus account today, you’ll earn $18.50 (1.85% x $1,000) in interest in the first year. In the second year, you’ll earn 1.85% on your new balance and so on until you will have $1,096 in 5 years or $1,201 in 10 years. A couple hundred dollars may not seem like a lot but it is free money AND Marcus will automatically up your interest rate as rates rise so you could land up with an even higher cash balance in the future. Whenever opening a high yield online account, you’ll want to make sure there are no hidden fees (Marcus has no fees) and check the limits on transferring money in and out of the account. In general, it will take 3-5 business days to transfer money out of a high-yield savings account so it is important to only put cash in these accounts that you do not need day to day.
Check out MarcusYour first lesson in authorpreneur organization is now complete. What tools do you use to run your author business? Tell us in the comments.