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New Self-Publisher’s FAQ
What's an Invoice?
Basic Accounting for Publishers
•How do I handle accounting for my books?
•Create
files
•What
Is an Invoice?
How do I account for a comp?
•What
is a Purchase Order?
Check that P.O. carefully!
•Setting
Up a New Wholesale Customer
•Terms
•Collections
You should read some books on the business of publishing:
• Unlocking
the Secrets of Publishing by Sylvia Hemmerly
• Publishing
for Profit: Successful Bottom-Line Management for Book Publishers
by Thomas Woll
Marion Gropen of Gropen Associates is the acknowledged expert in this field. She offers classes in publishing accounting.
How do I handle accounting for my books?
Take a look at this webpage at Gropen Associates to get a basic idea of the terms involved.
For each and every book—whether it is a give-away (complimentary
or "comp")—retail
or wholesale sale, you need to keep track of where each one goes. You
need to know how much you spend on every book project—from acquisition
costs (if there are any) to book design to printing and freight. There
are fancy programs for publisher accounting. Two of the most popular
are:
Publisher's Assistant
JAYA123
Dedicated software may be too pricey for you, especially
when you are starting out. You might consider using
Quickbooks or
Peachtree Accounting Software if you are already familiar with
these.
You will want to set up your accounts so you can track:
production or plant costs (editing,
typesetting,
cover design, etc)
printing costs
freight (shipped to you)
supplies (office and packing)
vendors (folks who sell you stuff)
customers (repeat buyers,
wholesalers, distributors)
marketing costs
invoices
shipping (what it
costs to ship to your customers and wholesalers)
taxes
licenses
and many miscellaneous other items you may want to track.
It is imperative that you keep good records of your inventory, orders and invoices—both for your own fiscal sanity and for the IRS.
Remember all that talk about the paper-less office of the future? Fuhgeddaboudit! For every piece of paper you receive, from the Post Office receipt to the freight manifest for your books when delivered, you need to keep them. Get yourself a fire-proof file cabinet and make file folders for each of your vendors, wholesale customers, licenses—everything you get paper for. At the end of the fiscal year, box up the paperwork for that year and put it someplace safe—not where you live or at least in a different place than where you do business. The IRS requires that you keep these records for 7-10 years... or whenever the heck they want them.
Also, each week, you need to back up your computer accounting records and put them in a safe place—not where you live or work.
Here in Reno, we have wild fires and we are acutely conscious of the danger to our home and business. We have 2 back-ups of our computer records.
Every single book must have a piece of paper to show where it went (even if you give one to your vet). Your invoice will show your customer's name, address, terms, your invoice number and their purchase order number. You'll have places to show how many and what book was ordered, how it was shipped and what discount was given (if any). You'll then show the tax paid (if applicable. wholesalers and bookstores have resale licenses, so tax isn't paid; out of state sales are not charged a sales tax either) and total for the order.
When setting up your book in accounting, assign one listing for the book with list price, another with a list price of zero for your comps. When sending your book out to reviewers, booksellers and bulk sales prospects, enter in their address and contact information on the invoice. These reviewers, etc, will be listed in your accounting program under "Marketing expense." That way you can see where each book that you've given away goes, and see how your marketing dollars are spent.
Setting Up a New Wholesale Customer
When a new bookseller or store agrees to carry your books, or wants to place an order, always ask for a credit application to be faxed or e-mailed over. This gives the store's name, address, phone number, owner, bank name and creditors with whom they are in good standing. This lets you know they are as serious about doing business as you are. Enter all their information into your accounting program (you don't need their bank name or the creditors). Make sure you know who the book buyer is and who the accounts payable ("AP") person is. You'll need to talk to both in the future.
A P.O. or purchase order is what a wholesaler, library or bookstore issues you to order a book. Their request is usually on paper sent in by mail, or fax or e-mail. It will give their purchase number, which you should put on their invoice and on the shipping label when you ship. The P.O. also gives their expected discounts and shipping methods.
Be careful with big companies' P.O.s. Note that there is a difference where you will send the books (with a packing list). Ingram, Baker & Taylor and Amazon all require you to send invoices to one address and the books to another. You can double check yourself with the list below:
Baker & Taylor uses city codes for each of their warehouses. If the P.O. number shows these letters at the start of the order number, be sure you are shipping the books to that city:
COM—Commerce,
GA (for instance, COM15893)
MOM—Momence, IL
REN—Reno, NV
SOM—Bridgewater, NJ (must be in Somerset County)
TXS—Lewisville, TX
Ingram has
their own "letter + Z" prefix to P.O. numbers
CZ—Chambersburg, PA (for example, CZ123BJN)
DZ—Ft. Wayne, IN
EZ—Roseburg, OR
NZ—Lexington, TN
Amazon
uses a letter prefix but it doesn't seem to correspond to any particular
warehouse. Those warehouse are:
Lexington, KY (the main facility)
Campbellsville, KY
New Castle, DE
Coffeyville, KS
Fernley, NV
Phoenix, AZ
Make sure that when you receive a
P.O., you read and
understand what terms, what
discount (55% or 40% or?) are
requested, who pays shipping
(you, or the buyer: we have
Follett
paying for FedEx Ground and
Brodart
paying
UPS Ground, you
might end up with different deals), whether the buyer requires a
packing list or
invoice with the shipment, what to do if
the title is not available and all the little variables that go into
this business.
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Most invoices include a slot for terms. The usual statement for bookstores is "Net 30," which means that you expect the recipient to pay within 30 days. After that time, you can charge a late fee (say, 1%) per month, for every month the bill is not paid, but make sure you state this on the invoice. In actuality, very few booksellers will pay on time (most will pay up in 90 days) and when they do, will ignore the late fee. Be glad you are getting paid and don't make an issue of it.
Wholesalers pay in 90 days, so you put "Net 90" in the terms section. Why do we give them a longer time to pay? See the above description of booksellers' payment habits. Wholesalers sell your book to a bookstore and then get paid sometime within 30-90 days (this is why distributors pay you in 120 days. That's how long it takes to get the money from the bookseller to you in the system).
It happens to everyone—you've got an invoice that is over 90 days due and haven't heard a peep out of them. What to do?
While booksellers will slow pay, I've only once run into
one who just didn't pay—and they went out of business. Pick up the phone
and call the store. Ask for whoever is in charge of Accounts Payable.
We're always friendly and assure the customer that we believe the lack
of payment was simply an oversight. Being calm and pleasant really helps
pave the way for the response we want: "Oh golly, I completely forgot.
I'll put that in the mail right away!" And, in most cases, they do. But
the key is, stay nice and give them the face-saving excuse that it must
have slipped between the cracks. You will probably want to do business
with them again in the future!
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