Note: I am an affiliate of Xero, which means if you click the links below and sign up for their service, they will send me a little cash as a way to say, “thank you for linking to us.” The affiliate relationship in no way changes my thoughts on Xero, and I’m only in affiliate programs of products I have experience with.
Joe and I do not live in the same neighborhood. We don’t go “to the office” in the morning, we don’t have a water cooler, and neither one of us commute. In fact, it’s quite the opposite. While I’m here, happily typing away in Portland, Oregon, he’s stuck in his mom’s basement in Texarkana, Texas. So our business exists entirely online.
Thank goodness we live in the internet age, though, because we have tools that we use to run our small business that are different than they would be if we had a physical location (or, heaven forbid, a fax machine).
Accounting is one of them, and I’m going to be honest here, it’s one of the things that is in neither one of our wheelhouses. Which means we need something easy to use, easy to work with, and inexpensive.
I thought that would be a tall order, but it turns out, that’s exactly what Xero does.
Before You Even Think About an Accounting Program
If you’re still thinking of your blog as a hobby and not yet as an almost-profitable side business, you need to rethink things and at the very least, set up a business account and start tracking your income and expenses. Because, as the saying goes, what gets tracked counts, and you won’t be able to evaluate the level of success of your enterprise if things are absorbed into your personal accounts.
That means you need to get an LLC (they’re $150 in the state of Oregon) and register yourself with the IRS. You won’t need an EIN until you start hiring employees, but they’re easy to obtain and they help prevent you from having to fill out official documents using your Social Security Number.
Then, get a business bank account/PayPal account/business credit card. If you need help figuring out the best rates, head to stackingbenjamins.com/magnifymoney (they’re our podcast sponsor) to see which accounts are the best for your situation.
Now you’re thinking of yourself as the head of your own small business, which will go a long way toward your inevitable success.
Now, back to Xero, the accounting software we use.
What Does Xero Do?
Simply put, Xero keeps you honest. Quickly: how much money did you make on your last product launch? Or, what percentage of your income comes from affiliates? How much money did you pay in PayPal fees in 2016? Can’t answer those right away? Well, if you’d categorized your income and expenses, you could (though if you’re anything like me, you won’t like seeing PayPal’s “cost of doing business” in aggregate).
You can plan for revenue, track revenue, and in general, understand what’s going on in your business.
It makes the business side of online business easier to understand, and if not fun, then interesting in the same way that solving a tough puzzle is interesting.
For me, it helps me not panic when it comes to end-of-year planning and budgeting. I can send invoices, reconcile my accounts, and categorize everything. Before Xero, we used a combination of memory (which is awesome, of course), PayPal, and our bank. We were so disorganized that we didn’t feel like we could handle even having business credit card accounts.
They have a plan that costs $9/month, and it’s geared toward freelancers who don’t do much in the way of invoicing (that plan is limited to five invoices per month). Most small businesses fall into the $30/month standard plan, which is what we use:
They have a discount going on right now, making your first six months 30% cheaper. That discount code is XERO30.
Do You Need Xero?
Honestly, you don’t need anything other than a spreadsheet to track your income and expenses. But if you accept payment through PayPal and/or Stripe, send invoices, and categorize every line item in your company’s budget, you need something more robust than Google Sheets.
I’ve used Xero for more than a year now, and I can honestly say it’s helped me wrap my mind around working online better than just about anything else.