When we first began as a small print press association, we had no experience with accounting. But, as with all small businesses, creating something sustainable and financially sound requires good budgeting and accounting practices. If you don’t know where your money is spent, to whom its going, and where you have to send taxes at the end of the year, you could get yourself into a lot of trouble – with both your authors and the IRS.
We did a lot of research on accounting for book publishers and small presses when we started out – everything from paying our authors to finding a good software. Now, we have a bunch of knowledge about this stuff, but not much to do with it. So, dear reader, we are passing this accounting guidance to you. Below, you’ll find some of our tips for the financial side of running a small press. Use them well.
Know the Difference Between a 1099 and W2
If you run a small press, you’ll need to understand the different types of workers. We’ll use a publishing house as an example. The people who work directly under you – editors, readers – are W2 employees because they work for the publishing house. Your authors – the people whose books you publish – are 1099 contractors. They essentially provide your business with a service, and you compensate them in the form of an advance or other payment. They are not employees of the publishing house, so they receive a different tax form.
Understand Your Budgets
Budgeting is more than just keeping track of your money. You’ll need to understand your business’s cash flow, growth, and potential profit. Do you want to focus on building the size and cash flow of your business, or are you satisfied with your current load and expenditures? Do you want to focus on making profit, or do you want to run a bare-bones operation with few expenses? These are questions you’ll need to answer before embarking on your journey as a small business owner. Importantly, you’ll want to figure out how you want to handle royalties for authors. These are an expense that can be easy to lose track of during the course of the royalty period. You’ll want to invest in a software tool that can help you manage royalties across several authors and payees.
Get a Software that Works
A small publishing press will have a disproportionately difficult time filing taxes. Even if you have only one or two employees (i.e. those who receive a W2) form, you will, ideally, have a number of writers who need to receive 1099s. On top of that, you’ll need to both manage royalties and have a payroll tool that can handle both direct deposits for employees and check processing for authors. You’ll need a tool that can handle all of those payroll-related tasks while also assisting with business-related forms and taxes. Find an accounting software for small businesses that takes all of this into account. << That is the one we use, but there are others. AMS was the cheapest we could find. Every penny matters!