Figuring Out Your Finances

Admin note: double post today guys! So keep reading after this entry. :)

How did you learn the business side of writing? Whether or not to incorporate? Intricacies of running your own business, billing, making sure you get payment, keeping track of it all for taxes? Can you suggest any resources?

I learned the business side through trial and error, frankly. For example, the first few years I freelanced, I didn't think to pay estimated taxes. Whoops. Got married, got a proper accountant and promptly corrected that.

I've spoken with a lot of freelancers about how they track their payments, invoices, etc, and most of us agree that keeping things simple is the best method. There's no need for elaborate Quicken software or anything like that. Instead, I use an easy Excel spreadsheet in which the columns are broken down by Magazine, Assignment, Due Date, Payment Received Date. Whenever I get a new assignment, I log it in the spreadsheet, and ideally, as soon as a check comes in, I log that in too. (Of course, sometimes I forget, and I have to backtrack through my deposits to see if I really have gotten paid, but most times, I'm on top of it.)

And this method has paid off for me - literally. Just last week, I was adding in another assignment, and took a quick glance over the spreadsheet to see how many outstanding payments were lingering. Turns out that I hadn't yet been paid for several stories that I'd filed many, many months ago, so I promptly emailed my editors, and they hopped to it. Without some sort of system like my Excel sheet, I'm confident in saying that I never would have been paid, which would have been a loss of several thousands of dollars - sometimes, invoices and payments fall through the cracks, so it's up to you (unfortunately) to stay on top of them. The sheet is also great for assessing how much estimated tax I have to pay. Since I can see exactly when each check came in, and in which quarter it arrived, I don't have to play a guessing game as to how much I owe Uncle Sam.

As far as invoicing, some magazines ask for them, some don't. The best way to find out is simply to ask your editor whether or not she requires an invoice for payment. And then file that when you file your story. If not, it's too easy to forget. (Trust me, that's the one area that I'm lax in: I often forget to send in an invoice, which explains several of those delayed payments.)

Very few writers I know have incorporated, so I can't speak much to that, but maybe some fellow readers can.

Finally, some resources: I picked the brain of Diana Burrell, co-author of The Renegade Writer, which contains a chapter on finances and freelancing. In addition to her fabu book, she suggested that you pick up Kelly James-Enger's fantastic resource, Six-Figure Freelancing, which has an excellent chapter devoted to the subject, as does Margit Feury Ragland's Get a Freelance Life.

So how do you guys keep your finances straight? Any good suggestions?