Getting the bookkeeping for your creative biz under control should be a high priority for every handmade business owner. If you are serious about running a creative or handmade biz you need to be serious about doing your bookkeeping.
Over the next few week, I’ll be giving you some tips to help you turn over a new leaf (for the new year) to help you get your bookkeeping under control.
This week I’ll discuss WHY bookkeeping for your creative or handmade biz is important.
Most creative business owners end up putting all their paperwork in a pile or throw it in a box and leave it there until ……… oh, I don’t know – the bookkeeping fairy comes along in the middle of the night to take care of everything.
Well, I hate to tell you – there is no such thing as a bookkeeping fairy!
If you’re ignoring your bookkeeping and only guessing at your numbers, you actually have NO idea what’s going on.
- Ignorance is NOT bliss
- That box of receipts is not enough
- Logging into your business bank account and seeing that there is money doesn’t give you the big picture
- Just because there’s money in your account doesn’t make it okay to spend $200.00 on yarn
According to the U.S. Bureau of Labor Statistics about 20% of small businesses fail before they complete their second year.
Two of the reasons that so many small businesses fail is because they:
- lack an effective money management system, and
- they have no bookkeeping system (or an inadequate one) in place
Ok, so I get it. Bookkeeping is complicated and time-consuming, no doubt about it. Many creative and handmade business owners find it a challenge just to stay on top of production and social media marketing – never mind keeping track of revenue and expenses.
But, seriously folks you need a good bookkeeping system in place in order to answer critical questions such as:
- Is my creative or handmade business profitable?
- Can I make (or set aside) money for year end tax payments?
- Is it really wise to invest more money in inventory?
- I need a new computer (or some other piece of equipment) but can I afford it?
- Is there a way I can cut expenses?
Preparation and a routine are the KEYS
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 for now.
You’ll need a few more pieces of information to get your books in order such as:
- 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
- Every business is different and you may have other income sources as well.
Now you can actually print these out and just like the receipts put them in the correct monthly envelope.
And you need to establish a routine where you actually MAKE time to sit down and do your books.
Some people will tell you to set aside once a month to do your bookkeeping, but I suggest you do it at least EVERY WEEK! And then there are some tasks that I suggest you do EVERY day.
Ok, that’s enough for this week. Come back next week and we’ll discuss WHAT to do with all the information that you’ve gathered 🙂
Until then, Happy Handmade!