Optimizing Your Blog's Financials with Ansley Beutler | The Food Blogger Pro Podcast

So let's say somebody comes to you, they're a blogger, they're, they're a creator and they say, hey, I need help bookkeeping. What are the first things that you're going to look at as the low hanging fruit and the opportunities to kind of level up? And why does that even matter? Like what, what is a blogger getting out of that? If they do come to you and say like, hey, I want better books. Why would anybody want better books?

Yeah. So two things that I would first look for is one, a business bank account. That's the first recommendation I would have is set up a separate account so you can easily separate that personal finances from your business finances. That's the first recommendation I would have. The second is a business credit card or a debit card so that you can have all those transactions just in one place. That's like bookkeeping 101. I feel like that's. It's so difficult, especially with food blogging because so many of our expenses are the same. You're going to grocery store, grocery store and you're not going to be able, you know, six months down the road to look back and say, hey, yeah, Tuesday in April. That grocery one was for my blog.

So that point being, then when you do go to the grocery store, you separate those out and you're like, great, I'm going to run this transaction. This is like a recipe I'm developing for the blog checkout. And then like this, these are my like double stuffed Oreos, which are not for the blog. I'm just going to eat these tonight. You run that as a, as a personal transaction?

Yes.

I think a lot of people would have a question around. When can I like, let's say I make a recipe for the blog and it's published on the blog, but then like, hey, my family eats it that night. Is that still something where you can kind of consider that to be an expense for the blog?

Yes, 100%. I would categorize that as a business expense. I know there's. That's probably one of the most common questions I get is there's a ton of different scenarios. You know, hey, I've made this lasagna recipe and we ate it after I took photos of it and put it up on the blog. You know, what do we do with these expenses? Expenses and you know that type of question, that's for business purposes. That's a business expense where things can get a little weird. I like to use an egg carton analogy. So if you buy eggs for Your blog. I mean, maybe you make cookies and you only use two eggs for the cookie recipe and your family eats the other 10. That's where things kind of be like, I don't. It's a hard. Yeah, you would have to basically get it down to an individual egg cost and two of those. So it can get a little, can get a little shady there. But what kind of a little tip I have is to actually buy different brands for your food blog and for personal. So I have specific type of eggs that I buy for. They're the really cheap, you know, huge pack of eggs that I just buy for my food blog. And that way I know that I'm not going to eat those personally and I buy other eggs for my personal self. So that's a good way to kind of differentiate between the two. If that's an issue.

Sure. And like in the case of pinch of yum, it's super easy because we have an office. So like, and if we do instacart or you know, shipped, they show up and it's just everything that we do is that ends up in the office isn't is an expense. Even if like last night Lindsay brought home, you know, three different recipes that should have been tested and we have those. It's like the ultimate life hack is like the efficiencies of creating a recipe and then bringing it home. But for those who don't, like, figure out some way to separate it. It's almost like you have to imagine that you're back to having a roommate or maybe some people do have roommates and you're like writing the name on the food so your roommate doesn't need it. It's almost like you have to view your blog as a roommate and you're like, hey, this is my blog's eggs, this is my blog's melt and kind of separate those out. So one of the things that I think is interesting with expensing items, whether it be a computer, blog, food, traditional expenses like hosting, obviously those are all business expenses, is in the early stages of any business. But creating a blog, creating following online, you're going to be purchasing a lot of stuff. You're going to be purchasing cameras, computers, maybe you already have a computer, which will be an interesting question to cover. But you probably don't have a lot of revenue. This is a little bit getting into a little bit of the weeds in terms of accounting and classification. But if you have a lot of expenses but no revenue, technically all of those expenses would be startup expenses. Is that right? And the thing that I'm interested in is maybe this is getting too nitty gritty details. But if you have expenses and no revenue, it's a startup expense, which, if I understand that right, has to be. You have to draw that out over a period of time and depreciate it. And until you have revenue, in which case you can count that as an expense right away. So I'm wondering, this is me thinking about tips for early creators. Do you want to technically try and make like $1 as quickly as possible with your blog? So you can start to count all of those things as expenses and deduct those against your personal income or your spouse's personal income if you're, if you're married or in a relationship. So those expenses can reduce your taxable income. That was a lot of rambling. But like, is that, that be a tip that we could give to people? And can you help explain that? Because I don't think I did a great job of it.

Yeah, no, absolutely. And, and yes, a lot. So much of that was, was very correct. So startup expenses, I'll. I'll kind of give an example. I actually helped with one of my good friends that's developing a brewery down in Florida, and they had all of these startup expenses. Obviously much more high dollars.

Totally. Thousands and thousands of dollars.

Yeah. Yes. And they're like, hey, I want to take this as an expense on my tax return. Well, the issue was they weren't open for business yet. And that's an issue with accounting. We call it a revenue recognition principal. So you want that the revenue to be able to match the expense in the same time period. I know that that's a very foreign thing to kind of grasp, but you want, you want those expenses. So for a food blog, those ingredients that you're purchasing to create a recipe to go up on your blog, it wants to need to be able to match it to a revenue that it's creating. And yes, unfortunately, with food blogging, that can take years for you to actually create revenue with something like food blogging, because as the brewery, they know that they're open for business when they open their doors, when they have the first customer. With a food blog, I would view it more as when you're trying to create revenue. So if you're trying to get on an ad network, if you're reaching out to brands to try to get some type of sponsored content, to me, that's, that's when you say you're open for business and yeah, you're going to you're, you may, you may have $0. You, even though if you have $0, you can still deduct those expenses. Expenses. As long as you're trying to create revenue. Now I say that, but the IRS does kind of give you a three year time frame to say hey, if you haven't turned, if you haven't made money in three years, then we're not really going to call this. Yes, it's a hobby.

Like I'm ultimate Frisbee player and I spend $10,000 a year on like gear and training and Frisbees. But like I've never signed a sponsor agreement for like a Frisbee company. They'll be like, you're not, this isn't a business. This is just you liking Ultimate Frisbee.

Yes, yes. And so, and of course there are ways around it. You know, Amazon went years before actually turning a profit, so they were technically a hobby. I'm sure they've, you know, it's Amazon, they've have ways around it to say no, we're actually trying to produce revenue, we're trying to turn a profit. Which is the same.

Well in that case they did. They had revenue but not profit.

Not profit. Yes.

Yeah, yeah, got it.

Yes. But yes, the IRS kind of gives you a three year period. If you look at a five year time span, they want a few years to actually be producing profit there. Sure.

So point that was with the three year rule. Point being like if you don't have profit for 10 years and you're just always at a loss, then it's going to be an issue. And for am this gets into the kind of nitty gritty details. Again with Amazon, part of it probably had to do with like their. You would know more than I would on this there with a type of company that Amazon was a C corp that those losses would technically carry over. Is that right? So they just continue to have. Which is people don't need to understand that. But it's an interesting, it's an interesting observation and growth to say like, hey, I'm just going to delay profitability as long as possible. And maybe if you are a creator, if you are a blogger and you don't need the money. Right. Not a lot of people are in that situation. But if you're lucky enough to be in that position, you might be able to say like, hey, I'm going to delay profitability and just try and grow as much as possible.

Yes, yes. And that's where I'm big on those expenses. I know that A lot of newer bloggers don't want to see a deep red. But I'm like, no, if there are any more expenses, if it comes the end of the year and you're, and you're not going to turn a profit and you're going to be in the red, see what other expenses, that's a kind of a little tax move there because you're going to be able to deduct them on your personal tax return depending on how you're set up.

Can you explain? I think that's a huge takeaway because I think some people think I'm early stages, I'm not making any money, I don't need to track this stuff. But I think one thing that people don't often realize is like, if you are really diligent in tracking the expenses, tracking your mileage, you know, tracking when you buy a computer, that it can go against your personal income and you'll pay less taxes in general. Can you explain that conceptually? Because I think that'll be a big takeaway for a lot of people.

Yeah. So if you're a sole proprietor or an llc, you're viewed as what we call a pass through entity is the technical term. And basically your business is viewed as you personally. So your business income or loss is displayed on your personal taxes. And so when you fill out your tax return and you have, you know, you lost $10,000 with your food blog, that's going to be deducted from whatever other income you have. So if you have a W2 job or what other job you have, say that you made, you know, $60,000, that's, that's your salary, you have a full time job and you have a loss on your food blog of $10,000. Only going to pay taxes on that $50,000. So it knocked down how much you're paying taxes on by that, by that loss. Which is why the IRS says, hey, you can only do this a few times if it's trying to get it in the green. But yeah, that's a huge thing that newer food bloggers and I see this all the time that they need to take advantage of. And it's not a bad thing to be in the red. Every business is going to be in the red on those early years and especially with the food blog, because it does take so long to find a way to produce revenue and stuff.

And it's one of the, one of the great things about starting a business is some of the things that you might otherwise purchase just to have personally could then Become a business expense that puts your business in the red but then deducts income from your, from your personal income that you're getting in other places. So how do you know, like, hey, I'm buying a computer, I'm buying a phone. I'm trying to like, I'm trying to look at the things on my desk, computer, phone, scanner, like microphone light on my desk. Like, how do you know when something is an expense? And what if you already have something and you start to use it for your business? Can you go back and like retroactively say, wait, I'm going to. This is now a business computer. I can take this as an expense even though I bought it three years ago.

Yeah, I would use more of a is it for a business purpose kind of functionality. I think of my printer. I use my, I bought a printer for business purposes. I work with a lot of brands that want, you know, hard, hard signatures. And so I have a printer. But yes, I do occasionally use it maybe to print off something personal, but I bought it for a business purpose and more times than not I'm using it for a business purpose. So that it was an expense was when I brought, when I bought this printer. Same with the desk. So a desk actually is one of probably the most beneficial expenses that you can invest in because it allows you to have that home office expense that you, you're probably well aware of if you're a food blogger, but you can't, you can't use it for personal, you know, use. So I have a business desk that I purchased in a year that I was already deep in the red. I'm like, hey, I'm going to go even deeper and I'm going to go purchase this desk. And this desk is actually making money because I have that home office deduction on my taxes because I have this set up as, as my food blogging space and I get a home office deduction. So I get to deduct a portion of my mortgage. Won't get into the details on it, but yeah, it's actually making me, making me money. So I highly recommend food bloggers go out and buy a desk if they can.

Yeah, yeah. And what about you, like a computer or a phone? I feel like that would be an example where phone might be like personal and work like, especially if you're a creator blogger. You know, you're using it a lot for business, but you're also using it for personal. Personal. How do you know even like the cost of it? So you have a $150 at and T Bill. How do you know how much of that should be divided between personal and business? Should you split it up? Should. Is it, is it like, hey, you know, once it gets to like 75% business, then it kind of tips over into just being able to expense all of it. Any advice for people who are like, ah, this is kind of right, right in the middle. It's not just business.

Yeah, I would definitely use like a 50% kind of threshold. And yeah, if you're. I use my. You're on all sorts of social media apps. If you edit photos or emails and stuff on your phone, that can be a business expense. So I, and it's really. I'm good. I'm going to throw out there that. Use your best judgment kind of kind of term here with these expenses. What, what you want is just to be comfortable defending your. You're not. Your thinking if the IRS were to ask a question about it. So yeah, if you, you know, if you say, yeah, I use my computer for personal use, I have all these personal photos on it and all these videos on it, and I deducted the entire thing on my return, the IRS is kind of going to be like, well, why did you, why did you deduct the whole thing? But if you say, hey, I deducted 50%, the IRS may say, okay, like, that sounds reasonable. How did you get to that 50% kind of terminal, you know, threshold, which is what I personally would view for both phone and laptop. Just kind of see how, how much you're using it for business purpose and how much you're using it for personal. Personal purpose to definitely take advantage of it.

Yep. So it's. I almost imagine it like speeding in your car. Like a spectrum. In terms of. When you talk about kind of personal judgment, it's also feels like personal comfort with how aggressive you are.

Yes.

And, and it's like some people are always gonna drive five miles below the speed limit and they will never get pulled over for speeding. And some people will drive like the speed limit and it will be like really, really rare for them to get pulled over. And then there's some people who will drive like 20 miles over the speed limit and they'll probably get pulled over, they'll probably get a ticket, but also like, they're getting places faster and they're comfortable with that. Like, in terms of where we stand, we're kind of like speed limit people. Like, hey, we're gonna. If we have a computer, like, I'm, it's a business expense. I'm Using it for, you know, I'll check my personal email on it. But like 90% of the time, even at home, I'm using it for business related stuff.

Yeah.

And so we're, we're comfortable with that. But what does that actually happen then? Like when you talk about talking to the irs, I think for some people they're like, what does that actually look like? And what are the chances that somebody does come to me and say like, hey, you expensed, you know, your water bottle. But that's actually, you know, not and not an expense. Do they, do they look through every line item? They talk to you about it and then what if they, what if you have expense something that they're like, that's not an actual expense.

Yeah. So what they're going to do if you do get audited, they are going to look through all of your books. This is also why it's important to have good books is because the IRS is going to ask to see them. When you, when you fill out your tax return, you fill out different, you know, this, different business expense categories is kind of how I classify them. The IRS is going to want backup of that. They're going to say, well, what, what makes up this $10,000 of groceries that you're saying that you have as an expense of your food blog? And yeah, they're going to ask for sometimes receipts, if it's large enough, they're going to ask for receipts, ask for credit card statements, all the backup to prove that you have actually incurred that expense and that you're not fudging the numbers there. The likelihood of that happening, I'm going to be honest, it's, it is slim just due to how many people there are in, you know, that are submitting these tax returns. I have heard though, just through the grapevine that I do think a lot of online businesses are becoming more of a target for an audit for. And it's going to be sometimes a random thing. Just.

Do you know why that is?

Yeah, yeah, it's because there's not, you know, when you work a corporate job, if you're, you, you're typically paid via W2. And if you, you know, a standard person that has a W2 income and then they may have, you know, a few different deductions on there, that's really kind of a cut and dry tax return. But you talk about someone that has an online business that doesn't have a W2, the IRS is going to say, well, they're going to have more room for error. We need to make sure that that's actually correct. And if they do find something that they're going to say, hey, that's not actually an expense, they are going to have you. They're going to figure out how much of a tax liability that removing that is going to create. And then they're going to charge you interest, maybe a penalty on that as well. If they do find out that that's actually not a business expense.

Yeah. So they look at it and say, hey, this shouldn't have been an expense. You should have paid taxes on this. You didn't. And because you haven't paid taxes for this amount of time, here's the amount of interest that also goes into that. Because we should have had that, that money would have been growing. So there'll be a penalty above and beyond that. Plus, I would imagine going through an audit is just an intense time suck. Like, it's just a lot of time to make sure that you go through the process of doing it. And I am thinking of an example of a somebody we know who got audited and they were doing piano lessons, but they didn't record that as income. I don't think it was super substantial. But I think what happened is the. The auditor probably looked through their bank statements. So they'll get their bank statements and see like, hey, we saw a deposit here. What is that from? He was like, oh, that was piano lessons. Oh, you need to record that as like income. Now the interesting thing is they probably could have, if they wanted to, like, run that as a business and created a loss. Like, it could have been the opposite where like, if they wanted, I think it was just like this casual thing where like a couple times a week would do piano lessons and would deposit that money. But yeah, so hypothetical situation. I'm curious. Let's say somebody has saved up some money to start a business. And I'll just use easy numbers here. Let's say they saved up $50,000. They've done a really good job of kind of storing money away, and they have this money to start a business and they want to start a blogging company. And they say, hey, I want to really make a lot of progress in a short amount of time. So they hire somebody, they invest in like a really expensive redesign and development of their site. And in a year they have $50,000 of expenses. And let's say they also had a W2 job where they earned $50,000 in a normal job in a situation like that, would they get to the end of the year and have zero personal taxes. Like they wouldn't owe any taxes in that year.

Yeah if they were qualifying business expenses. So if they have personal money, $50,000 that they're going to throw into the business that's you know that's going to be an owner investment. That's what it's called. And yeah if they use all of those, all of that money for business related purposes, contractor costs, you know, you know like I said website redesign and it's all those are expenses. Yeah. Their net income would be, their taxable.

Income would be zero and depending on how they had their W2 income taxed at the end of the year you would probably have a pretty substantial refund refund that you'd have. So which is just kind of an interesting, not that anybody will do that but just kind of an interesting way to look at it and to think about it to be strategic. If you do have money to invest in in your business, know that it's important to track that as an expense.