AP 0226: How Do I Get Started Tracking My Business Income?

AskPat 226 Episode Transcript

Pat Flynn: What's up, everybody? Pat Flynn here. Welcome to Episode 226 of AskPat. Thank you so much for joining me today. Hope you're having an amazing week. Before we get to today's question from Stephanie, I do want to thank today's sponsor, which is MusicRadioCreative.com, a company that I got to know earlier this year.

I actually met Mike and Isabella, the owners of the company, earlier this year at an event, and they were amazing. They've helped me out so much. They actually helped create the AskPat intro that you just heard from scratch. They are so professional and have so many voices and resources and the ability to just do whatever you want with your audio for your podcast. I know a lot of you are thinking about starting a podcast, too, and whether you have one or not already, you also have to know that they offer podcast production services. If you go to MusicRadioCreative.com/askpat, you can potentially use them to outsource your podcast production, everything from metadata to audio branding, improving audio quality, uploading, and even show notes and publishing, too. Check them out, MusicRadioCreative.com/askpat.

Awesome. Now, let's get to today's question from Stephanie.

Stephanie: Hi, Pat. My name is Stephanie, and I'm just starting out in the online business world with my blog. I've been making a little bit of income, but not a lot. I'm still in college, so I don't have the money to pay for an accountant or really buy any kind of accounting software. My question is, what would you suggest for new bloggers who are just starting to make an income to track their expenses along with their revenues so that when tax time comes around, we're not completely lost? I love your website, and it's helped me so much. Thanks.

Pat Flynn: Stephanie, thank you so much for the question. Congratulations to you on being a somewhat of a new blogger, it seems. However, being able to start to generate an income, I remember that feeling, and it's awesome and it's so cool now that you are now at a point where you're thinking about how you can organize your finances, expenses, and income, and all that stuff, and that's great. It's very smart.

Before I get to answering this question, a couple things. One, I do want to mention that I'm not a certified personal accountant or a professional in any sort of way. I am just somebody who . . . I actually hire somebody. I'm at point now where I have to hire somebody to do all that because with all the different income streams, it just gets really confusing, and I have to pay someone to figure that out for me. Because it is a headache. It gets crazy, Stephanie. As your business begins to grow, as you become more successful, you're going to want to hire out, but I think it's really smart now to organize it in the beginning and understand sort of how this works, so when you hand it off later, it'll be easy for you. Setting yourself up for success now is great. Again, I'm not a professional, and I recommend for everybody out there, you want to get the right answers from the experts out there. However, I will give you information based on my own experience, Stephanie, and for everybody out there listening, thank you for that. You know I got to say that.

Secondly, I hope that you are separating your business accounts and your personal accounts. This is huge and something that's going to make your life so much easier. I think this is the number one thing that we should all be doing, especially when you're just starting out, is you need to have a business checking account. This is great for protecting yourself and your assets if you have an LLC or an s-corp. I mean, you have to have a separate account. I mean, when you're starting out, yes, I understand, it's your own personal account, but I mean, once you start to make money and you know that this is going somewhere and you need to incorporate, and then you need to get a business checking account. That's really important, and that's going to help in terms of organizing and tax time, seriously.

I remember when I first started, I didn't really know what I was doing. I was just sort of blogging, and then I started making money. I started selling this product, and I didn't have a company formed yet. I eventually formed a company in December of '08. This is months after I started selling my ebook, and it was just a mess. This CPA that I finally hired had to go back into time and try to figure out everything that I spent that was business related and try to get reimbursed for that personally, I mean, all this crazy stuff that was going on. The better you can keep track now, the easier it's going to be for you later, and if you can separate where your business expenses and income is handled and then your personal stuff is handled, it's just going to make life so much easier. That alone will help you in so many ways.

You need to keep track somehow. You need to keep track just so you know what's going on in your business, and you know if it's successful or not. I mean, I think it's important not just for tax purposes, but just to know that you are making more, hopefully, than you are spending. In the beginning, it might not be that way, but that you are actually headed on the right trajectory and just actually keeping track of what's going on, what's coming in, what's going out in your business. Even using something like Excel or a Google Spreadsheet or Numbers, if you're on a Mac, I mean, that is going to help you. Just keeping track every month, it doesn't have to be very complicated, but itemizing everything that's coming in, everything that's going out is going to be really helpful for you.

There are some apps there that are really helpful, especially for expenses as well. There's one app I want to recommend that I think everybody should get. It doesn't matter where you are in your business. It's called Taxbot. There's a lot of tax apps out there and expense and receipt scanning apps and things like that. This is sort of the number one app that I've found, actually. It's for business owners who need to keep track of their expenses and maximize tax deductions, which is really helpful. It helps to ensure that your records are bullet-proof against the IRS and any sort of thing like that. You can take photos of your receipts, and they get automatically put in there, you can add expenses and things like that, and you can keep track of those month by month. What's really cool is you can also add a trip, and that's something that you have to keep in mind, that if you're driving for business, you want to keep track of those miles. Sometimes, it's hard to remember what those miles were. You don't want to write it down in a notepad every time. You can actually add a trip using Taxbot, and this app is totally free, too. Again, it's Taxbot, B-O-T, and you can add a trip and it keeps track of the miles for you on GPS, so it's legit. It's cool. You could check that out. I know a lot of people in the world of online business who use that. You want to save your receipts, definitely make sure that's happening.

Again, another benefit of using a business checking account is that it's real easy to know what's going in and out of your business because you can print out those statements and see what's going in and out of your business. That alone's going to help you keep track, and that's what I would think is the minimum sort of thing that you should be doing. Separate business checking account and being able to have the transactions, money coming in, money going out, in that particular account.

Also, one thing I was recommended when I first started that was really helpful, because it can be really difficult, this sort of world of online business . . . You're making money, and it's not like you're getting a check every two weeks and taxes are pulled out automatically. You're going to have to pay quarterly estimates, eventually, or at the end of the year, you might have, specifically, a large sum of money that you've earned over the year, and then you have to pay taxes on it at the end of the year, which sucks because I've written checks for high five figures before, and it's just gut-wrenching sometimes. You need to plan ahead, so I typically say to myself, and this is different for everybody, and again, I would recommend that you find a professional or at least maybe somebody in your network or somebody you can speak to who has a professional that they can talk to for you or with you just to get some advice, but I feel like I at least save 50% of my income for tax purposes. Now, I don't spend all of that, there's different tax strategies and you could save quite a bit based on expenses and doing separate things with your money once you start to have money coming in, but just to be safe, I save 50%. Now, I don't have it all 50% in cash. I put it somewhere, I invest it, and it's just fairly liquid so when I need it, it can come out.

Yeah, so make sure you have money that you're going to eventually owe, if you do owe. Because I know a lot of people who, they're making a lot of money and they spend it all, and then at the end of the year, they're required to pay some money and they might not have it, and then they're stuck. Just keep in mind, stay safe, use common sense, be smart. Again, I can't really say much more than that. I mean, I'm not an expert, but these are the simple strategies that I would recommend for somebody who's just starting out.

Stephanie, I hope that answers your question. Thank you so much. If anybody else out there has any advice or resources, I would love to hear from you. I'm sure Stephanie would, too. You can use the hashtag #AskPat226, this is for episode 226, so #AskPat226 on Twitter. We can start a conversation off of this episode and help Stephanie and everybody else out there who's looking for tax help and tax suggestions and accounting suggestions and things like that. I'm sure there's free applications and free spreadsheets and templates you can get as well, keeping track of your profit and loss and all that stuff, balance statements and things like that. You should at least be keeping track of those things as well. There are templates you could use for your spreadsheets, and perhaps even templates you can have in . . . I know, for example, in Numbers, which is the equivalent of Excel in a Mac, there's templates you can use that are straight off the start a new document area that is for the purposes of keeping track of your business. You've got to find out what works for you, but get some advice if you can as well. Those are the things that I would recommend.

Stephanie, thank you so much. An AskPat t-shirt is headed your way. I appreciate it. For those of you listening, if you have a question you'd like potentially featured here on the show, just head on over to AskPat.com.

I also want to thank MusicRadioCreative.com, today's sponsor. Even if you already have a podcast, and you are just strapped for time, or you need help with it, or whether you're starting a podcast soon, check out MusicRadioCreative.com/askpat. They can help you with the podcast production, everything from the audio branding to the audio quality, adding metadata and all that stuff, uploading it to your server, show notes, publishing . . . They offer all that. Again, check it out, MusicRadioCreative.com/askpat. Tell them Pat sent you. Awesome. Thank you so much.

As always, I'd like to end it with a quote. Today's quote is from Jonathan Ive. He says, “It's very easy to be different, but very difficult to be better.”

Cheers, take care, and I'll see you in the next episode of AskPat.