After interviewing many of you over the course of my graduate studies and finally hearing your stories in person at this years Block by Block summit, one major theme keeps popping up: The need for more practical business knowledge.
As someone attempting to start up my own entrepreneurial venture, I can relate to the steep learning curve on the business side of things. Particularly when it comes to bookkeeping.
Bookkeeping is a necessary evil of running a small business, and as an independent publisher this topic might be on the steeper end of your learning curve. That’s okay. Let’s start with the basics.
We have all heard the term “bookkeeping,” but what is it really? According to Inc. Magazine’s online business encyclopedia, bookkeeping is the task of recording all business transactions, which include all amounts, dates and sources of all business revenue, gain, expense and loss transactions. So every time you pay your staff (if you are able to), sell ad space, raise money from an event or buy a stapler, etc., it goes in the books.
So why is bookkeeping so necessary?
According to an email from Ben Wirz, Director of Business Consulting at the Knight Foundation, “Bookkeeping (in combination with a budget) helps you keep track of whether the assumptions you have about your business are correct. It also helps you pay your taxes, employees, creditors and suppliers.”
If you don’t have the skills to do the bookkeeping yourself, it might be worth the expense to hire someone to get the job done.
“It is worth the expense to hire somebody who can just worry about that. As a business owner, I need to worry about the bottom line numbers. The bookkeeper provides me with numbers that I need to make decisions about the business. Any publisher that is thinking about doing this needs to ultimately come to some kind of balance between running the website and running the business. If we don’t devote time to running the business side, we won’t get to keep doing the content side,” Boraks says.
Still not convinced? Wirz provides some basic tips and tools to make the book keeping process easier.
1. Keep a separate bank account and credit card for the business. This will make it a lot easier to sort through what is business and what is personal.
2. Keep a Budget: The point of book keeping is not just to be able to pay your accounts and keep track of cash coming in and out of the business, it is also to test your assumptions regarding how your business is working. In short, in autumn you should build projections for the following year (if you don’t have them already), derive key metrics and plot both key metrics and revenues /costs over the next 12 months.
3. Book Keeping Tools: Once you have that sorted out, you can use free/cheap web-based tools like Wave Accounting, In Dinero or Less Accounting. These tools act like a mint.com for small businesses and are very intuitive for folks with a non-accounting background to use. You connect your online banking and credit cards to them, and they will help you track cash in and cash out on a monthly basis. They also offer the ability for your external accountants to access and export the transactions to prepare taxes. Most also offer the ability to generate invoices and track payments. If you feel comfortable with accounting, quick books is a more powerful (and common) software tool for small businesses to keep their finances.
4. Budget Tracking: No matter what you use, you should be able to track both budgets and actual results over the 12 months. If these diverge significantly, you should be able to look at your key metrics and determine which of these is off, and which of your assumptions for the year are likely incorrect.
5. Taxes/Payroll: The two areas where folks often realize they have bookkeeping issues are around taxes and payroll. For finance rookies, it’s often advisable to outsource both of these functions. Paychex and Intuit both offer outsourced payroll options. Tax services are available locally throughout the country and should cost no more than ~$500-600 for most small businesses.
If you are still unsure about bookkeeping, Boraks suggests treating it like any other challenge you’ve faced as an independent publisher.
“If you are a news person who has never done this, investigate what it takes and learn the skills you need to learn and get on top of it. It is as important as any story you do on your website. It’s more important if you want to keep doing this,” Boraks says.