Today, CPA and blogger Angela Williams joins us with a new series on accounting for food bloggers. Tracking income and expenses, doing your taxes... they can all send shivers down the spines of even the most experiences cook or restaurant reviewer. But Angela will be breaking it down and showing us that bookkeeping for your food blog doesn't have to be hard at all!
Each year, starting in early April, I see friend after friend lamenting on Facebook about how difficult taxes are. How they’re confusing and hard to understand and how they’re going to pay a visit to those guys with the green logo to have their taxes done.
My immediate response in seeing this is to yell, “Nooooooooo! Don’t do it!”
Why? Because I’m an accountant and I promise accounting and taxes don’t have to be scary.
My name is Angela, I’m a CPA, CA registered in the province of Alberta and I write at Cowgirl Runs and Accounting for Bloggers. Like so many things in life, once we have an understanding of a topic, it’s suddenly less scary.
Taxes might seem scary to you. For me, the thought of recipe development scares me, so kudos to all you awesome food bloggers who create the recipes I search for and make at home.
Tracking Income and Expenses
The first and most important thing you can do to be successful with your business taxes is to accurately track your income and expenses.
Regardless of whether or not your business is a sole proprietorship, partnership, or corporation (if you’re not sure what that means, head over here to read more), having a system in place to track your income and expenses is key.
Whatever system you choose (we’ll talk about different programs or even hiring a bookkeeper in the future) make sure you choose something that will work for you. I stick with Excel (Google Sheets, to be exact), because it’s easy for me to update on the fly. In addition to tracking, you’ll also want to have a system in place to keep your receipts organized.
Yes, I can hear you groaning from here. I get it, I groan over all the paper as well. However, the Canada Revenue Agency (CRA) does require you have support for the expenses you’re recording on your taxes. The easiest way to do that is to make sure you have your receipts on hand.
I have two folders: one for receipts to be entered and a second dated the current year where I file my receipts once entered. Periodically (and admittedly not as often I should) I move the receipt to the relevant category in Excel, and then the receipt is filed in the folder dated the corresponding year. Should the CRA come knocking, it’s easy for me to reach for the folder and hand it over.
For me, simple works best.
While this is all well and good, a particular CRA requirement does complicate things a touch. This requirement? Accrual accounting.
When it comes to accrual accounting, you record income or expenses when earned (for income) or when owed (for expenses). The timing of when you make or receive payment isn’t as important as when the obligation arises.
Let’s tackle two blogging-specific examples to help explain accrual accounting.
Ad Network Revenue
Many bloggers work with ad networks. We throw some ads on our site, earn money, and receive payment. However, the revenue you earned for the month of November 2016 likely won’t be paid until February or March, depending on when your network remits payments.
Using the CRA accrual rules, this income must be reported in your 2016 income, even though you won’t be receiving payment for it until 2017.
Another way to think about this is to consider that you’re matching your income with the month. The ads from November relate to your November performance, so the revenue will be recorded in that month.
When we purchase hosting, we pay for a year (or more) in advance (usually because there’s a discount available), and not month-to-month. How would this be expensed? One big lump sum and then nothing until the following year? What about if hosting was purchased in July, but we use a January 1 to December 31 year for our blog? What then?
When it comes to hosting costs, if you pay for one year of hosting on July 1, totaling $150 for the year, you would record 1/12 of the cost each month, $12.50/month, from July until the following June.
Using the same matching example as above, you’re matching the cost against the month you’ve used the hosting.
Remember your key takeaways for today:
- Hang on to those pesky receipts
- Find a tracking system that works for you
- Accrual accounting is a thing (and is required by the CRA)
- When you can (and should) expense items
- What items count as income?
I’ll be back in a couple of weeks to discuss when you can (and should) start expensing items for you blog.
In the meantime what are your burning tax and accounting questions? My goal is to make taxes and accounting less scary for you, so you can help me by telling me what you’re struggling with. Leave a comment below and let us know!
- Audit-Proof Your Food Blog - Part 1
- Audit-Proof Your Food Blog - Part 2
- Audit-Proof Your Food Blog - Part 3
- The Blogger's Guide to Creating and Managing Invoices
- Tax Time: Bookkeeping for the Canadian Blogger
Accounting for Food Bloggers was written by Angela Williams, a CPA CA registered in the province of Alberta. During the day, Angela works for an oil and gas company in Calgary and in the evenings you can find her running the river pathways or relaxing with her two cats, Merlin and Charlie. Angela also writes and manages two blogs, Cowgirl Runs and Accounting for Bloggers. You can find her on social media as well, at Instagram, Twitter here and here, and Facebook here and here.