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Do you have dreams of crafting for a living? If so, this post is for YOU!
Over the past 16 years, I've started 2 six figure businesses. How'd I stay in business this long? By having good bookkeeping!
Why is bookkeeping important? It's the ONLY way you are going to know if you are making money in your business. And making money is what's going to keep you in business for the long haul.
By keeping an eye on my sales and expenses, I know when it's time to adjust my prices or if I can afford that new piece of equipment. Or more importantly… am I making enough to pay myself for the time I'm spending on my business? You can only make these smart business decisions when your bookkeeping is in order.
Luckily, I get to meet some truly amazing people through my work. Elise Laney (@pdbjay) is one such person. Elise is a legal accounting clerk and craft blogger. This combination gives her unique insight into the importance of keeping your online business and blog bookkeeping in order so you can succeed.
I recently reached out to Elise and asked if she would provide some tips to help crafters create some systems and best practices for keeping business expenses and income organized so you maximize your profits and face tax season every year with confidence.
Here’s what she had to say: (edited for clarity and space)
What should small businesses track with their bookkeeping?
Small businesses need to keep track of so many things. I know it sounds so intimidating when you hear “keep track of everything”, but it really is the truth.
A small business owner should be capturing all the costs that go into operating their small business. Keep track of your income as it comes in and do a happy dance for every sale. Expenses aren’t as fun, but you still need to track each and every one. Have to buy ink? Log it. Need to use bubble wrap, packing tape, or clear poly bags for t-shirts? Log them.
Even though this seems daunting, remember it is better to cover-capture all expenses and give everything to your tax professional to determine what you need or don’t need than it is to leave something out.
Why do you think so many people don’t do a good job with their bookkeeping?
Keeping track of your bookkeeping is completely overwhelming if you have no idea where to start or lack some system of organization. I actually created a guide (A Beginner’s Guide to Bookkeeping) to help small business owners understand best practices and create systems, and methods of tracking.
This guide lays the groundwork for you so you can find the tracking method that works best for you and your business. A t-shirt maker will have different supplies and business expenses from a SVG designer. Using some basic bookkeeping skills and then adapting them to what works for YOU will keep you motivated and organized in your own way.
Why is bookkeeping important for a small business owner?
Bookkeeping is important for your taxes but also helps your business in other ways as well. Knowing exactly how much it costs to make and ship your items will ensure you price your listings so you make a profit.
When I started my first Etsy shop in 2011, I only made $2 per item after I paid $27 to ship it. I would scour stores and yard sales for bird cages to make over and list in my Etsy shop. This took a lot of time and effort and I was devastated when I discovered I was making a whopping $2 per sale when I finally completed my taxes the following year.
This was a big mistake on my part for not knowing all my costs up front. Knowing your costs AND your income is empowering.
When should small businesses start thinking about outsourcing their bookkeeping?
I would prioritize bookkeeping/accounting over outsourcing other services like social media management, marketing, or even content creation. If you can hire something out, your finances should be at the top of your list.
If your goal is to make money in your business, you should take care of your money! If you find yourself constantly behind in your bookkeeping despite your best efforts, you may need someone to help you. It may not be the most glamorous or “fun” expense, but taking bookkeeping off your plate will free you up to do more things in your business to make the money.
Final Thoughts from Elise
Over the past decade, I have learned a lot about small business bookkeeping through my full-time accounting clerk job and some trial and error with my own business. I’m not a CPA and I have someone else complete my taxes but I do show up every year with organized receipts, category totals, and organized books for my tax professional. They love me for this!
If you are ready to get your bookkeeping in order, A Beginner’s Guide to Bookkeeping is a great guide to help you get started.