Once your books start selling you’re going to have a business bank account with a big (or maybe not so big) pile of cash in it. You know you want to use some of that to pay yourself, some to pay your authors but then you also know you want to use some of what’s left for advertising or for saving up for future editing and cover design. How do you keep track of how much money you have for each thing and not overdraft your account?
I have tried a number of different systems from Excel spreadsheets to Mint.com to the “envelope system.” Then I found the YNAB program:
YNAB stands for You Need A Budget. And you really do! Let me show you some screenshots of my YNAB budget and take you through a little bit of how it works:
So first, every time money comes in or goes out you record it on the account page (number 1 above). Then the balance that you have appears in “available to budget” (number two above). You divide that into each category (the first column) as you desire until the “available to budget” is zero. This way you know what every single individual dollar is doing for you! The third column (circled above) are like your envelopes. Any money you put into them stays there and builds up as each month goes by and you add more to that category. If you spend it that’s recorded on the account page (number 1 above) and it shows up in the second column, automatically updating your “envelope” to how much you have left.
You can also put a note to yourself when you set up the categories if you want to have a particular percentage of your income go to each category. For example the “Cover Artwork” category could also say “Cover Artwork 2%” and each time you get money in, you put 2% of it into that category. The YNAB does allow you to be flexible, though, since you can always see how much you have in each category and if you need to pull some from something you don’t use as often for an immediate need, you can.
Eventually you get to a point where you’re recording your money in as income for the next month. So when you get money for, say, July, you record it as available for August and it shows up in August’s “available to budget.” This way you are always working from and paying bills from money that you earned already the previous month and is in your account. There’s no speculating.
It will take a few months of sales to get you there. Many sales channels, as with most businesses, will pay you in March for money earned in January. So there’s going to be a two month lag to start seeing money for your first sales. (This is called Net-60 and it means that the business has 60 days from the time you earned the money to get you paid. So for money earned in March, April first they know the full amount of March’s money and then they have 60 days so they will likely pay you at the end of May. Some, like Smashwords, only pays you quarterly and that based on how much of your money they have managed to collect from their sales channels. So there can be a bit of a wait for your cash).
You can also save for yearly or irregular bills by adding a small amount to the category each month, such as paying for this website which happens annually.
Here you can see some of the categories that I have. There’s also payroll, taxes, and paypal fees and a “to invest” category. I figure I can save a little bit each month until I have enough to put into a high-yield savings account and start generating some interest to put back into the business. But I’m not even close to that yet!
I completely adore YNAB. I use it both for Dev Love Press and for my household finances (you can easily create another budget and switch between them). It gives me a lot of peace of mind knowing exactly how much I have that I can spend on each thing and allows me to switch amounts around if I really want to buy a thing or a service that I haven’t budgeted enough for.
That said, I have not tried many official business softwares like Quicken. In the future I may need to upgrade to a system that has payroll included in it (Right now I pay my authors through Paypal and I have a category of money just for the Paypal fees).
I highly recommend trying out the free 30 day trial. Also, sign up for the web seminars teaching you how to use it. They are free and plentiful!
The cost to buy it is a one time $60, however you can save $6 by buying it through my referral link here. I bought it for $54 through another person’s referral link (after the trial period I went back to her website, which is where I first heard about YNAB, and bought it through her link). You get $6 off and I get $6 for you buying it through me, so it’s a win-win.
Whether you use this system or another, you’re going to need something that helps you manage your money!
There’s a lot of advice on this in the book Publishing for Profit by Thomas Woll. He has a ton of information about money management for publishers and some of it is a bit over my head, but I’m processing it piece by piece and integrating it into my business. He also has an appendix with recommended software for publishers that integrate sales, inventory, royalties, etc. I’ll be looking into some of those to see if they will be better than YNAB paired with a whole lot of Excel spreadsheets.
The book also has a number of suggested spreadsheets for things like Profit and Loss statements (to determine if a manuscript you want to acquire will be worth the cost to produce it) and Editorial Plans, Comparison of Books Sold, etc. I highly recommend picking up a copy. It will give you a great sense of the business side of publishing!