DAY 27

[TOMgirlApparel]

DAY 27: Assess your bookkeeping

Ugh. I thought I assigned this to Valerie.

Whether you keep your books on paper, through computer software, or hire an accountant or bookkeeping expert, proper bookkeeping practices are important to the operation and survival of any business. Without them, your business is susceptible to not only cash flow issues, but potential legal problems as well.

Business bookkeeping serves two purposes - to enable the IRS to evaluate your operations, and to help manage your business. Your books make up one very important part of your overall business records and should include all transactions made by your business. As a standard practice, several pieces of information should always be kept in your books.

Revenues and Expenses

How much money is going out, where it's going, and what money is coming in are all questions that can be answered by recording the revenues and expenses of your business transactions. Records can be maintained through a journal,
a popular method that details receipts and expenses, or a ledger, a method that records transactions as credits and debits.

Cash Expenditures

Important to record the cash your business spends so you'll have an accurate number of expenses each year. Writing reimbursable checks or keeping petty cash records are both valid methods of documenting cash expenditures.

Inventory

Maintain records of all inventory to prevent misplacing merchandise, keep inventory holdings to a minimum, and track business trends. Dates purchased, stock numbers, purchase prices, dates sold, and sale prices are all relevant information for inventory records.

Accounts Receivable and Payable

Always keep track of what customers owe you and what debts you owe others. It's prudent to record as much data as possible including invoice dates, numbers, amounts, terms, dates and amounts paid or due, balances, and client information.

Employees

Hiring even one employee invokes your responsibility to file and pay forms and payroll taxes. Employers are responsible for maintaining employee forms such as the W-4 (Withholding Allowance Certification) and the I-9 (Employment Eligibility Verification). You are responsible for maintaining records on withholding, employer matching, unemployment, and worker's compensation.

It doesn't matter how you choose to keep your books as long as you find the most efficient way to do it. If you decide to do it yourself, it is a good idea to consult with an accountant or bookkeeping expert to keep your business on track!

Many people use online services such as QuickBooks or Outright. I do a sort of combo of online and by hand. I know I can do a better job.

What do you do?

[Former_Member]

oh boy

[Former_Member]

Just started working on this the other day. Not sure which system to use yet. For now all receipts for expenses and profits are kept organized in a binder. I also keep an excel sheet to track expenses and scanned receipts incase they fade.

Etsy makes it easy to keep track of sales. So not worried there.

Thinking of getting quick books.

[Former_Member]

I keep a running inventory in my "books of crazy", that's what my husband calls my stack of comp books. I have several that I draft designs in for my weaving with the costs in the margin, one for prayer beads with the costs per bead and charms, one for soap formulas and costs. I have three just for inventory and suppliers to make supply ordering easier for the three different things I do. I keep all my receipts in a folder after I scan them to a folder on my external hard drive.

I use iBank for bookkeeping, you can add many accounts as you wish, it's easy to sort and you can print reports for income and expenses monthly, quarterly or for the year. I stuck with iBank since it's what I use for personal bookkeeping, I have the personal one linked to my bank account, it auto populates the minute something shows up at the bank. My personal expenses are very low and simple, so I let my MacBook do all the work for those. It's quite a time saver! When I opened my first shop it was simple to add that as an account and I already knew how the program worked, I don't have that one linked, I just do the entries by hand since the business bookkeeping is much more complicated than my personal one is. It's doesn't sound very business like but it works for me.

[VintageRescueSquad]

Oh boy is right. I have loads of Excel files:

INVENTORY CONTROL
(each file represents 6 months, and is broken down by month)
* what the item is
* where I bought it
* what I paid
(I can then go in after it sells and indicate the sold price, profit made, and where/when it sold)

OUTGOING EXPENSES/INCOMING REVENUE
(this is one file for each year, broken down by month)
* rent for antique mall booth
* etsy fees
* miscellaneous expenses (blog fees, flea market/show fees, etc.)

I also have a separate Excel file that does year-to-year month-by-month comparisons.

My 2 bugaboos are that all my receipts are thrown into one big vintage suitcase. I don't sort them until tax time.

[Former_Member]

if there is one thing in which i am worse than in SEO it would be this.
really bad in this. Given my low sales it did not bite me (yet). but it has to be fixed.

[BlackCrowCurios]

I have to get my act in gear on this one. I feel like the appropriate thing to say is:

Hi my name is Trish and I work in chaos.

No record of expenses (I use mostly found items so I haven't been too concerned)

Inventory is a huge mess, I waste time looking for my items and I have 125 items on average here there and everywhere. Hanging on walls, out in my workshop, stashed away where ever.

When I have a sale I engage my family in a lively 'where's Waldo' routine until someone come up with the appropriate sailboat, mermaid, fairy door, whatever. (its actually quite fun, although they are beginning to insist on prizes instead of my heart felt thanks)

I have countless lists of projects on the go that I can never find when I want them and found items that need to be arranged in categories.

Having spewed my weaknesses it's time to clean up my act. Probably not until tomorrow though as the water is looking so calm and still and I can feel it beckoning me...

[Former_Member]

I marked this Cleanse Day on my desk calendar because I really need to work on my book keeping.

I've had a system for years, but now that I am selling on Etsy I would like to get more efficient. Here's what I have been doing:

-I chuck all my receipts for art income and expenses in a file folder, and come tax time, I divide everything up into categories (rent, shipping, fees etc.)
-I make excel sheets for inventory each time I stock work in a store or participate in a craft fair.

My New Year's resolution was to find an accordion folder and divide the receipts as they come in. (Couldn't find one in January and I forgot all about it!) I also had planned to download the Etsy and Paypal data month by month instead of panicking at tax time, figuring how to download a whole year's data at once. I am a few months behind. : \

I would like to try a bookkeeping software but I don't like the idea of putting all my financial data online, like with Outlook. Any suggestions?

[swaddlemesnugly]

Mary, that's what put me off using Outlook or any of those services that you put all your financial stuff in it and it does things automatically for you - the privacy issue. So I use excel. I have a bookkeeping background and that made it easier for me to set up files for revenue and expenses, charts that all I have to do is enter the info, what sold, how much came in, what was the shipping cost, etc, and another chart for expenses, what was purchased, from whom, how much paid, and a column to enter supplies, equipment, etc. that I can sort at the end of the year.

For those who aren't comfortable with Numbers (mac) or Excel (pc) I like the paper notebook idea, one for revenue, one for expenses, one for inventory.

I have no inventory control - today's the day to create something. My inventory is all in the same bookcase and I paw through the stacks of swaddles, or bibs, or burp cloths to find the item that just sold. I think I'll start with a 3x5 card file with listing #, brief description, and date first listed on each card. A section for swaddles, one for bibs, etc.

[Former_Member]

I am good here
Old school but good

I keep an excel spreadsheet for tracking inventory and item costs
Cash in/out is done by hand in notebooks
One book for expenses and one for income.
I keep all receipts in a folder.
Has worked fine for doing taxes last couple of years.

[Former_Member]

@ Grannie K. I use Excel but I could be using Word for all the use I get out of it. I would have no idea how to do all the things you use it for.

In fact, I don't do any book keeping for my inventory - there isn't a lot to keep track of - I just keep the receipts in a folder, and order new supplies when they get low. I am sure I could have a much better system.

[swaddlemesnugly]

What works for you, Mary, is the most efficient thing you can do:-)

[Former_Member]

I'm okay on this but could do better staying up to speed....

For accounting, I use Outright. I like it in that it's simple and imports all my information and I can add expenses that don't come out of either paypal or my etsy account.

For inventory management, I use craftybase. I am behind on entering my purchases, but it works pretty well. I have over 800 entries though for gemstones, findings, metal, wire, chain, etc. So otherwise it would be extremely overwhelming. I only enter purchases though and then update with an annual physical inventory.

[Former_Member]

I love Outright. I don't like it to my bank account, preferring to enter receipts funded from that source manually because of the privacy issue mentioned by others. Now that I have a business bank account set up, I could do that, though. It's super simple to use, especially since it syncs with Etsy-based expenses and sales and everything Paypal related for outgoing (about 75% of my expenses get paid through PayPal), so that all I have to do is double check categorization. At the end of the year, a couple quick keystrokes and I have the data I need for my Schedule C filing for Income Taxes. Sweet! So the IRS part is handled.

What I really need to do with my bookkeeping is to sit down and do the financial analysis of it. This is when "data" becomes "information". For the first year, I wasn't too worried about it. I figured out I was coming up in the black, and as long as my business was self supporting and growing through its own revenue, I was content to keep moving it forward. It's not got a strong enough cash flow and I'm busy enough that I need to make sure time is accounted for and paid for, that I'm not nickel and diming myself by not doing better on bulk orders or taking advantage of significant sales, etc.

[TomboyPrettyJewelry]

I use Excel and Jewelry Design Manager.

Excel is used to track all business expenses for income tax and state revenue sales. All receipts are keep in a 3-ring binder.

Jewelry Design Manager is used to for inventory management and calculating keystone and retail pricing for completed product.