Inventory for Authors – Tax Time Advice

At the end of the year other thoughts, such as the rush of opportunities to sell your books, can take priority over business paperwork. However, tax time will be here before you know it. Determining the value of your unsold books is important as it helps to determine your profit. Doing it in early January is much better than in June. Or later.

For those with a publisher, only track the books you bought personally.

The calculations start with the first box of books. Find all the relevant documents: the order form, the shipping form and your credit card statement or bank records (or however you paid for them and any other charges). If you don’t enter these numbers as the books arrive, have somewhere safe (and findable) to store them until you do.

Remember that ‘filing’ is not a four-letter word.

A spreadsheet is very useful for tracking your inventory, sales and payments. Don’t assume that book costs will stay the same over time: variation in exchange rates will affect them most. Use the highest rate in the past year when setting your prices to build in some wriggle room and only buy your copies below that rate.

The total cost per book includes printing cost, shipping, exchange rate and GST/PST. Your credit card company will, of course, convert charges to Cdn dollars on your statement.

The table below mimics a sample spreadsheet with Createspace POD orders for one book. If you have multiple titles, have a separate section for each. If your order has multiple titles, split the shipping fee between them based on the number of each title.

Date Number $ Print $ Ship % rate $ cost GST/PST $ total Av $ # sold
Inventory 10 54.50 5.45 0
Jan 20 30 75 50 1.24 155.00 3.75 158.75 5.29 29
June 1 30 75 50 1.37 171.25 3.75 175.00 5.83 37
Sept 4 30 75 50 1.32 165.00 3.75 168.75 5.63 21
Yr end 90 Total Cost 557 5.57 87
Cost Sold 484.59
Value Inventory 72.41 13

The top line is the categories. From the previous year, there were 10 books in inventory on January 1. All purchases have 30 books. The first order in this year cost 158.75. That means each book costs you $5.29 CDN. The number sold at the extreme right is the number sold (and paid for) when you placed the next order, including any books given away or for review, or at year end.
The yearly average cost per book is determined by dividing the total cost by the total number of books ordered. ($557/100 = 5.57)
The cost of the sold books is the average cost x the number sold (5.57 x 87 = 484.59)
Inventory value for the next year is average cost x books remaining. (5.57 x 13 = 72.41)
Another method is to separate the cost of the book from the shipping costs, which are listed directly on your tax return. The value of inventory carried to the next year is less and all delivery charges are subtracted from current income.
Whichever way you choose, keep using that method. If you want to ‘save’ the delivery costs for later, more profitable years, use the first method.
Sometimes there’s a major glitch and the books you received are unsalable due to your error. How to account for them? If you have a lot of income, just write off the entire order under cost of goods sold. Otherwise, carry the cost as inventory and gradually write it off to drop your income.
In January, you should check with all the venues where you have put books on consignment. If there are unreported sales, send invoices immediately. Ask about unpaid invoices: resubmit them. Do not count books as sold until you have been paid to avoid confusion. A separate spreadsheet is needed to track income as your percentage of the sale price varies with venue.

As with any financial advice, consult with experts to determine your best course of action.

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About Sandra Fitzpatrick

Fitzpatrick Financial Services

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