Financial Advice For Influencers, According To Laura Davidson
Laura Davidson discusses financial best practices for Influencers - explaining the difference between accounting and bookkeeping, when to incorporate, and how influencers can avoid some common financial errors.
1. How is accounting unique for Influencers?
There are a lot of influencers well below the $30k mark (which is when you need to start charging HST sales tax in Ontario). Meanwhile, there are influencers out there who are working cross-border companies, making six-figures. There are different rules and strategies at both ends of the spectrum - just like scaling any business.
Ultimately, accounting always comes down to tracking your business expenses against the revenue you’re bringing in, and making sure you’re charging sales tax when necessary. Bookkeeping and accounting shouldn’t be overwhelming, and I try to encourage people to keep it simple. At the end of the day, you're the one doing the spending, and you’re the one who knows what’s coming in.
2. Is there an accounting/bookkeeping tool you recommend?
I love QuickBooks. It connects to your bank accounts and synthesizes your revenue/expenses into financial reports. Once you learn how to use it, it’s really straightforward. There’s a bunch of content online if you want to try to learn Quickbooks on your own, but every small business owner/entrepreneur/side hustler I’ve worked with has initially found the software too confusing on their own. It can feel a little like you step back into accounting class, which is why it’s something I help with!
A lot of people start businesses without going to business school. That doesn’t mean they aren’t smart or that they can’t figure it out - it just means maybe they weren’t taught in a way that makes sense to their career. In my practice, I want to help entrepreneurs bridge the gap between operations and accounting. One of my services incorporates QuickBooks - I help clients set it up, and then show them how to use it (so they can use it to do their own bookkeeping). Once influencers start using an accounting tool like QuickBooks, it makes the bookkeeping process so, so simple - it’s insane.
3. When should an influencer hire an accountant?
A lot of people think you need a great accountant, and you do - especially to save money at tax time. There’s a lot of clout around the CPA designation, and accountants are really helpful. But, don’t overlook the bookkeeping process. You need to maintain proper bookkeeping throughout the year. If you don’t have a bookkeeper, or you aren’t educated enough to be managing your own finances...there’s no way an accountant can effectively file your taxes or help you analyze your business growth or operations. Knowing your numbers as a business owner is by far the most important piece of the puzzle. If you don’t know how much revenue you earned, or how much money you spent, how do you know how your business did in any given period?
4. What common mistakes do you see influencers making with their finances?
Technically, if you’re gifted a product, it’s a taxable benefit, and you should be reporting it as revenue. Of course it’s difficult for the CRA to monitor, so I guarantee this isn’t happening a lot of the time. But, we’ve seen AdCanada crack down, and I do think the CRA will catch up.
Other than that, if you want to dive into the influencer world, remember to treat yourself like a business owner. Know when it’s time to charge HST, when it’s time to incorporate vs be a sole proprietor, and keep your books in order.
5. When should influencers file for incorporation?
You definitely want to consult an accountant before incorporating. The costs and benefits all depend on how your business is doing, and how much money you’re making. Incorporating protects you from a liability standpoint, and corporate tax rates are usually better than personal tax rates (once your revenue is passed a certain point). But, it costs money to incorporate, and it costs more money to file taxes as a corporation.
If you’re working as an influencer as a side hustle (and you still have a job with a T4), it might make more sense to incorporate your side hustle and keep your T4 as personal income - again, this all depends how much your side hustle is making and how much you make in your corporate job. Since corporate tax rates are usually better than personal tax rates, there could be tax benefits to separating those income streams (eg: filing both income streams together as personal income could put you in a higher tax bracket). The decision is personal, and an accountant can help you make the right choice for your business and your income amount.
6. What’s your biggest piece of financial advice for new influencers/entrepreneurs?
The biggest thing that I cannot stress enough is: open a business bank account, and separate your spending. Separate your spending, separate your spending, separate your spending! If you do get audited, and your personal spending and business spending is combined in one bank account, the CRA is going to rip into you. How could you possibly remember if a charge from three years ago was a business or personal expense? Only use business cards for business, and use personal cards for personal use. Nobody wants to get audited, but work in the sense of being audit-proof. You want to be able to say: this is what I spent on business, this is what I spent on personal, and here is the proof.
Secondly: Keep your receipts. If the CRA audits you and they don’t like what they see, they can go back seven years. Personally, I like to work with hard copies/printed receipts (depending how heavy the paper trail is). I know it seems weird to have to print all this stuff, but if you get audited, you have to mail it in anyway. In my practice, I teach simple organizational systems, so that if a client is audited, they have an exact match between bank charge and receipt. For example, make a folder in your computer and keep any emailed receipts/online orders there.
Finally, keep a record of what each receipt was for. Seven years is a really long time! Write down who you had lunch with or why you needed that new computer. Leave no room for error, and no room for guessing.
Have more questions? You can find Laura’s contact information on her website: https://www.lauradavidson.ca/