As TAX time quickly approaches, I’m betting most of us wish we had a bookkeeping fairy to turn to for advice (or one that could simply work her magic and our books would be done). Unfortunately, there is no such thing as a bookkeeping fairy – but I can offer up some advice.
Unfortunately, there is no magic answer for getting your books in order for your creative or handmade biz. You are just going to have to slug through it. It’s the price you pay when you don’t consistently work on your books throughout the year.
Last week I wrote about Getting the bookkeeping for your creative biz under control and offered some suggestions for getting your income and expenses organized.
Today, I’m going to offer you some advice about just getting your information documented and out of the way so you can file your tax return AND offer you some suggestions for getting the upcoming year in much better shape.
Here’s a recap for getting your biz information organized and the bookkeeping tasks out of the way
- If you’ve been saving your receipts in a pile or a box the first thing you need to do is pull them all out and make a stack for each month.
- Put those monthly receipts in individual envelopes.
Now, grab the following information and sort it by month as well:
- Bank statements for your business accounts
- Credit card statements
- Sales Reports from Etsy, Ravelry, Craftsy, PayPal, etc.
- Did you do a craft fair? Well you need that info too
- Reports from affiliate programs
Download my free Tax Time Bookkeeping spreadsheet by joining my Facebook community!
Now it’s time to get to work and combine all of that information into something that resembles bookkeeping!
Please print this blog post so you’ll have the instructions for using my Tax Time Bookkeeping spreadsheet.
I’ve divided the Tax Time Bookkeeping spreadsheet into the following main categories:
- Cost of Goods Sold
- Other Income
- Other Tax Related information
I did add in some details or examples. It’s up to you to fill in the rest by categorizing each type of expense and income from the information you’ve gathered. Below is an overview of what should go into each category.
This is where you enter your Sales or Revenue amounts from your PRIMARY income stream(s). Any Sales Tax that is collected or charged should NOT be included in the Income section – put that down at the bottom in the Other Tax Related Information in the Sales Tax Collected section.
Affiliate Income and Ad Revenue go down into the Other Income section.
Cost of Goods Sold
This section is really geared toward makers. This is where you enter the costs associated with the items that you’ve sold/sales that you make.
NOTE: Some Tech Editors and Pattern Writer’s either used Cost of Goods Sold to record the costs directly related to the service they provide or the patterns they create. Others skip COGS and just include these amounts in the Expenses/Overhead section. Totally up to you. If you’ve been tracking project costs then I would recommend that you use COGS. If you haven’t been tracking project costs directly expense it for now. BUT CHANGE YOUR WAYS FOR THE UPCOMING YEAR, as it gives you a much more accurate picture.
Notice that I’ve included a line for Inventory Purchases – simply enter the amounts that you spent each month on items that went into Inventory, you’ll need to know this at Tax time. BUT, keep in mind that you SHOULD do a physical inventory of all the things that you do have in inventory at the end of the year. More on Inventory later in this article.
Need help with figuring out the difference between Cost of Goods Sold and Expenses? Read this article on Keeping track of expenses.
This is where you enter all the expenses that you pay out to keep your business up and running – EVEN if you have no Sales or Income. Need more help? Read this article about Overhead Expenses.
Enter money your receive that has nothing to do with the sale of your finished goods or services.
Other Tax Related Info
This section hold other information that your CPA or Tax Preparer will need:
- Owner Contributions – money you’ve taken out of your own pocket to put into your biz
- Owner Draws – money you’ve taken out of your biz for personal use
- Asset Purchases – big ticket items you’ve purchased throughout the year. Read this post about Assets.
- Sales Tax Collected – the amount of Sales Tax you collected on your sales
- Sales Tax Paid – the amount of Sales Tax that you paid to your State Department of Revenue
Inventory includes not only all the materials and supplies that you have on hand for future projects, but also your finished items – at COST. At the end of EACH year you need to do a physical inventory of all the items you have on hand for future projects. Feeling overwhelmed at just the thought, read this post about Year end inventory tips.
Simply input your numbers and watch everything “add up”.