Updated: Sep 20, 2023
Accounting might not be particularly exciting, but it’s an essential part of running a successful business and of your journey as a content creator.
The life of a content creator can be incredibly rewarding. You can produce your own creative content, tell meaningful stories that connect with your audience, and get paid to promote products that you believe in and have value.
Depending on your niche, you might travel, get paid to wear designer clothes or watches, play videogames, and so much more. However, you can’t forget the single most important part of the equation –– you’re running a business. That means you need to understand accounting and how paying taxes, managing accounts, and juggling various income streams affect your overall success and stability.
In this post, we’ll explore what you need to know about accounting and financial management for content creators.
Take a look at any successful business or entrepreneur. Despite differences in branding and even industries, they all have one thing in common: effective accounting practices. They don’t leave the financial side of the business to chance.
Good financial organization offers both short and long-term benefits and can foster growth and sustainability. It’s easy to tell if you’re turning a profit, how well your content is performing, and whether you need to pivot. You can prepare for peaks and slow periods while allocating your budget appropriately and making informed decisions that help you build a digital empire.
To enjoy those benefits, you’ll need to master a few accounting practices, however.
One of the great things about being a content creator is that you can exploit a wide range of different revenue streams. Some of the most common include the following:
However, to truly benefit from those income streams, you must track, categorize, and manage each one accurately. By understanding which platforms and strategies generate the most income, you can optimize your efforts, tailor content to your audience, and negotiate better deals with brands.
Additionally, different revenue streams are lumpier than others. While ad revenue can be fairly consistent, you might receive a $10,000 sponsorship one month and nothing the next. By monitoring diverse revenue streams, you can better plan your cash flow needs.
As a content creator, you’ll incur a wide range of expenses. You’ll need to purchase equipment, buy supplies for your content, deal with marketing costs, handle operational expenses, and more. All expenses have a direct, measurable impact on your profit margins, but if you fail to track and account for those expenses, it’s all too easy to find that they’ve eaten through your profit.
By tracking and managing your expenses, it’s possible to balance spending and income, make informed decisions about upcoming expenses, and chart a confident path forward. That might mean making hard decisions about the equipment you use, whether to hire an assistant or not, which partnerships to take on, and so much more.
Content creators have many choices when it comes to setting up a business. You can opt to be a sole proprietorship, but that formation offers little in the way of protection. There are better choices, but they all come with their own pros and cons. LLCs and S-Corps are the most common options, but there’s no one-size-fits-all solution that will work for all content creators.
When choosing your business entity, consider the level of protection you want when it comes to personal liability. Ideally, you’ll create a wall between the business and your personal assets so that if the business fails or if the brand is sued, your personal possessions are protected. And LLC provides that protection while a sole-proprietorship does not.
You also need to consider taxes. The same consideration applies here as to protecting your personal assets. The IRS sees single-member LLCs and S-Corps as passthrough organizations, and while that makes filing your taxes simpler, there are important tax differences between the two that you need to consider.
Tracking your income and expenses is made significantly easier by using an accounting tool. You’ll find a range of tools and software out there geared toward helping small business owners handle their accounting and tax needs. Some of the most popular include:
All of these platforms offer the chance to automate your accounting processes. It’s difficult to overstate the benefits of automation here. You get back all the time you previously spent manually tracking income and expenses while streamlining your processes and improving your accuracy.
Whether you do it manually or use one of the available accounting tools, keeping financial records is essential. Without financial records, you have no way to prove what you spent, what you earned, who you paid, etc. Keeping a detailed financial record will ensure you are getting every deduction possible.
Make sure your records are detailed and accurate. Your records should show the item, the amount paid, and the date, as well as the purchase retailer. Invoices should show your name and business information, the supplier or buyer’s name and information, date, amount, and other important information.
Absolutely. Even in the beginning stages, understanding your financial situation helps set a foundation for future growth and avoids potential legal or tax pitfalls.
Different tools cater to different needs. Depending on your scale and complexity, options like QuickBooks, FreshBooks, or even simple tools like Excel might be suitable.
Ideally, you should update your records regularly. Monthly check-ins are a good habit, ensuring you stay on top of expenses and income.
While not immediately necessary for everyone, as your operations grow, an accountant can provide invaluable advice and ensure compliance with all tax and legal requirements.
Accounting might not be particularly exciting, but it’s an essential part of running a successful business and of your journey as a content creator. Don’t think of financial management as a chore –– it’s a tool to foster empowerment and growth! Take the first step toward financial stability, whether that’s setting up a business bank account or scheduling a consultation with a financial expert.