Writing Like You Mean Business

by Eve Munsky

      Its lights out and the rest of the camp is very quiet.  Every time the on-duty counselor hears noise coming from my bunk, she stands in the doorway saying “No talking,” in a progressively louder, more annoyed-sounding whisper.   After an explosion of muted laughter, she charges up the stairs.  “Quiet in there ladies, I mean business.”

      We all know what that means.  She is not going to stand in the doorway whispering any more.  Another outburst and we’ll hear the electronic click of her walkie talkie followed by the dreaded, lumbering footsteps of the camp director.

      Even at a young age, it is understood that things are different when someone “means business.” 

      People write for a number of reasons, but once someone “means business,” while writing can still be fun, fulfilling or therapeutic, it is no longer a casual endeavor.  Obviously, when writing for profit, income and expenses for each project need to be tracked, so that profit can be calculated. 

      Although income from a project is usually obvious, expenses are harder to define.  Because of the tax focus of most small businesses, their owners frequently think of expenses strictly in terms of those they are able to deduct on their income taxes.  Even those are hardly set in stone.  According to writing.org’s Durant Imboden, deductible expenses dependon “your conscience, your common sense, and whether your name gets drawn in the local IRS office's game of Audit Bingo.”  People, especially the self- employed, tend to develop a tax persona that determines whether they prefer to be aggressive or conservative with their deductions.  Regardless, writing supplies like paper, printer toner, and postage are fairly standard deductions.   More subjective are research costs and the cost of using a percentage of personal assets like your home, car and computer for business.

      Despite the underhanded inference, larger corporations very legitimately keep two sets of books--one for tax purposes and one for management purposes.  There are even required AICPA financial statements as well as IRS schedules that reconcile the two.  A common difference between them is depreciation.  When large assets, like office equipment or trucks intended to last for several years, are purchased, their cost is usually written off over several years.  In order to stimulate the economy, IRS encourages businesses to accelerate depreciation or write off these purchases over much shorter times than their probable useful lives.  This lowers the company’s tax in the early years so they have more money to spend stimulating the economy.   A delivery van is, for example, according to IRS code, a five year asset. The entire cost of it is written off the purchaser’s taxes in five years.  Most companies would consider the van to have at an actual life closer to ten years, with some residual value even at the end of this period. While it is generally wise to accept the IRS depreciation schedule for taxes, for management purposes, financial statements might show the actual cost (purchase price minus the residual value) allocated over ten years, to more accurately reflect the expense of using the truck.

      When it comes to small businesses the water gets muddier.  The line between purchases made for business versus personal use is sometimes nearly invisible.  For example, let’s say you are a car enthusiast and purchase Car & Driver magazine on a regular basis.  Since you write articles about cars, your subscription can be tax deductible. While you might add this to your tax deductible expenses, if you are calculating profit for your own purposes, you might want to eliminate this one, since it is not actually an additional cost to you.

      If you own your car (as opposed to leasing it), for 2005, you are entitled to deduct 40.5 cents per mile for car expenses every time you use your car to drive for business, i.e., to the bookstore to pick up research materials, to the post office to mail submissions, even to your accountant’s office to work on income taxes.  However, depending on your car’s gas mileage, the way you maintain it, how magnanimous your mechanic is, etc., 40.5 cents may or may not even be close to what you actually spend.  Regardless, even if you use a healthy percentage of your car mileage for business, the costs that are normally most expensive with respect to owning a car – purchasing and insuring it -- would be incurred even if zero percent were used for your business.  Home office is totally a tax matter.  Most times, home offices are extra bedrooms or basement space.  The additional electricity costs for lights and computer use are a negligible percentage of the utility bill.  The rooms are usually heated, the house maintained regardless.  No matter how conservative you decide to be with IRS, if you play totally by their rules, you usually wind up ahead of the game in these areas.

      The hidden expense in professions like writing is one the IRS does not allow a deduction for.  It is what I like to call a loss on the sale of time.  For example, if you quote $1000 on a project you assume will take ten hours to finish, yet due to client changes, research and  meeting times, it actually winds up taking you fifty, you lost hours of precious time that cannot be accounted for.  Perhaps the bane of freelance writers is that on some projects, they wind up being the highest-educated minimum wage workers.  Worse, if you are depending on your writing for sustenance, is the loss of time that could have been allocated to more profitable projects.

      Admittedly some projects are ultimately total wastes of both time and money.  Others, even though short-term losses, serve a greater good.  Spending way too much time working on a project for one client that gets you a few referrals or a contract for more profitable projects is better viewed as an investment rather than a loss.  Projects that make you feel good about yourself or give you other fulfillment (even just in the egotistical sense of reading over your perfectly worded piece) give you the courage and confidence to take on other projects.   Often, research is applicable to more than one project.  Speculative projects may pay off really big in the future.

      The type of writing that normally brings you the greatest consistent profit may or may not be your cup of tea.  Depending on your budget and other financial factors, you may not have a need to profit substantially from your writing and may be afforded the luxury of writing for future gain.  If not, to keep your sanity and your focus, it is a good idea to keep track of the actual out-of-pocket cost of completing each project along with a count of hours spent.  You don’t need to spend time on complicated cost allocations.  Overhead-type costs can be computed on a periodic basis for tax deduction purposes.  While you should track mileage for tax purposes, unless your business related car mileage for a particular project is excessive, a quick approximation of gas and tolls costs is fine for your own purposes.  The important thing is for you to know on a project-by-project basis your actual out-of-pocket costs and the amount of time you spent.  There are software programs that are relatively cheap or even freeware products that act as time clocks you can turn on or shut off when you are on your computer working on a project. A track record of your time and costs on various projects will give you better guidelines when pricing future projects for the same client or for otherwise similar projects.  It will also help you in selecting projects to take on because when you “mean business,” you need to balance projects that are of a speculative or investment nature with writing that can pay the bills.