First things first
If you're just starting out, have no idea how to file your taxes, or don't know how much money you're making - find someone who does. That can mean hiring an accountant, using an accounting service around tax time, or buying a software to help you out.
That being said, even if you're only making a few dollars a month, you should still use this system to keep track of your money! It'll help you see what you're doing right and what you're doing wrong.
Keep in mind this is how to TRACK your money - aka keep a record - aka bookkeeping. This is not accounting or taxes.
The Greatest Tool Ever
Okay, that may be a tad dramatic, but I seriously LOVE this website. Wave Accounting is what I've been using for over three years, for both my personal and company accounts. Wave has a ton of tools as well as one of the best (and free) bookkeeping programs I've found. Everything is online, so you can access it from anywhere, and did I mention it's free?
They also integrate with other sites like Etsy, Shoeboxed and Paypal.
Here's Some Words You Should Know
In-case you're totally new to all of this - there are some words you should know that I'll be using in this little guide.
This is keeping track of your money. Officially the definition is "the activity or occupation of keeping records of the financial affairs of a business".
Accounting is similar to bookkeeping, it's "the action or process of keeping financial accounts". The major difference is how the records are kept. Don't worry you don't really need to know anything about accounting for this.
This is anything you own. Your computer, your money, money owed to you, your car. "A useful or valuable thing, person, or quality", basically anything you can sell for money, or actual money.
The money you owe. This is bills, credit cards and money owed. "Something (such as the payment of money) for which a person or business is legally responsible".
The money you paid in exchange for something. Expenses can be supplies purchased, paying someone for a service or the cost of goods. "An outflow of money to another person or group to pay for an item or service, or for a category of costs".
The investments. This could be stock owned or money invested into the company. "The residual value or interest of the most junior class of investors in assets, after all liabilities are paid; if liability exceeds assets, negative equity exists".
A Tour of Wave Accounting & How I Use It
I wanted to start off with a link to Wave Accounting's YouTube Page. They have a ton of videos to guide you through account set up, so if you need any help, go check them out.
Setting Up Your Account
The first step is to make a free account at wave. Once you're signed up, make sure you enter all the information on your account info and profile. If you have a bank account for your blog/business - connect that by clicking "Add a Bank Account" from the dashboard. If you don't have an account, you can manually enter transactions from the transaction tab.
For etsy sellers, you can connect your Etsy account by clicking on Account then Integration from the upper right corner. You can also connect Shoeboxed and Paypal from this menu.
Once your bank, Etsy, Paypal or Shoeboxed are added to your Wave Account, you can edit, approve and categorize your transactions. Go to the Transactions tab and use the check-mark to verify your transactions so they will show up on your reports and dashboard. You can change the default categories by clicking on the Accounting tab and changing the categories for that menu.
Adding Transactions and Receipts
Wave will automatically add new transactions from any accounts you have connected. That means if you connected your Etsy account and someone buys a $10 item from you, Wave will automatically add that transaction. It will be marked as "Unverified" until you verify that the transaction is correct (all of this is done from the Transaction tab).
You can also manually add transactions from non-connected accounts from the Transaction tab by clicking "Add Income" or "Add Expense".
Wave also allows you to upload receipts and connect them to transactions, this way you don't have to keep a paper trail along with your Wave account. You can see how to do this with this video by Wave. There is an app you can download to do this on-the-go so you never have to save another receipt.
Reports and The Dashboard
Wave automatically generates 11 different reports to help you see an overview of your business. From the Reports tab you can select any report needed. I use the Balance Sheet and Income Statement to get the best overview of my income and expenses. All the reports can be saved and printed as a PDF, Excel or CSV file.
Along with the reports, the Dashboard gives you an overview of your accounts. The financial snapshot shows you your income vs expenses on a graph, a payable and owing table, your net income for the period and a breakdown of your business expenses. All of these give you an idea of whether your blog/business is gaining or losing money.
Wave Accounting has a ton of other great features; Payroll, Bill Pay, Invoicing, Tax Help and more. Some of the services require you to upgrade to a pro-version of Wave but all the free services will 100% work for basic bookkeeping. Wave's customer support and videos are extremely helpful and well done so if you have any questions or need help, there are many options for you.
Setting Up a Bank Account
One of the best ways to keep track of your income is by creating a separate banking account only for your business. You don't have to be a legal business to do this, you could simply open a second checking account or open Paypal account under your name and only use that account for your blog.
If you are a legal business (LLC, Ltd. or Corp) you can set up a bank account under your business name. You have to be legally registered with an EIN number to sign up for an account under your business.
Either way, setting up a separate account will allow you to track your money better and keep your personal finances separate. This will also help you better track how much you're making and spending on your blog/business.
Keep in mind, I run an Etsy shop, YouTube channel and Blog, you probably won't have as many expenses if you only blog.
- Website Hosting Fees
- Domain Name Hosting Fees
- Purchase of Software, Themes or Plugins
- Paid Ad Space on other sites
- Custom Graphics or Themes
- Supplies to create products or services
- Internet Fees
- Laptop or Computer
- Computer parts or accessories
- Photography equipment or editing software
Obviously everyone will make money from different sources. There are thousands of way to make money from a blog so I just listed the sources I actually have an income from to give you an idea.
- BlueHost Affiliate Revenue
- Google AdSense Revenue
- BrandBacker, Influenster, BlogHer and MassiveSway Ad Income
- eCourse Revenue
- Etsy Shop Sales
- Website Creation Service Revenue