Why do I need to do bookkeeping for my handmade business?

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Bookkeeping is essential for your handmade business. Transitioning from a hobbyist to a business owner requires a mindset shift and diligent tracking of income and expenses. By keeping accurate records, you can gain insights into your profitability, make informed pricing decisions, and fulfill your tax obligations. Though it may seem daunting, good bookkeeping is crucial for managing your business finances. Discover why you need to do bookkeeping for your handmade business.

Business and bookkeeping go hand in hand – it’s a fact of life just like death and taxes.  The moment you decide to transition from a hobbyist to a full-fledged handmade business owner, EVERYTHING changes dramatically!

Until now, you may have been creating items for your own pleasure, whether it was was:

  • giving them as gifts to family and friends
  • donating them to charity
  • or, even selling them for a small profit

Keeping track of expenses wasn’t a big deal because it was merely a hobby, a pastime you enjoyed. So it was no biggie.

But then either someone suggests that you take your creations to the next level by selling them, setting up an Etsy shop, or participating in craft fairs.

And just like that, you’ve fallen into the deceptive trap of thinking, “Starting a handmade business is a piece of cake!

I’m not exaggerating when I say EVERYTHING changes! It’s not just about creating beautiful things anymore; it’s about becoming a true business owner.

First and foremost, you need a shift in mindset.

You need to abandon the hobbyist mentality and embrace the role of a business owner. In other words, it’s time to view your craft as a job rather than a leisure activity.

One of the biggest changes is that you now need to do some serious bookkeeping! You’ll need to diligently keep track of every penny you spend and every penny you make. After all, the reason you started a business was to make money.  And the only way to know if you’re making or loosing money is to keep track of how much money you spend and how much money you make by keeping GOOD bookkeeping records.

I know, I know – for many small business owners the terms “bookkeeping and accounting” might just as well be the WORST four-letter words that they have ever uttered out loud!

However, bookkeeping, accounting, spreadsheets, numbers, paperwork and even formulas really aren’t anything to be intimidated by. They are key pieces of running a business, including a handmade one. They are just words, tools, and things – but they are done for some very important reasons.

Here are 3 reasons why you need to do bookkeeping for your handmade business:

  • Reporting information to the “Tax Man” at the end of the year when you file your income tax return. Otherwise you could be in for a very unpleasant surprise (such as owing a LOT of money).
  • So you can see exactly how much money your are making and spending and if you are making a profit from your handmade business.  Making money was our goal all along, right?
  • How to properly price your items.
An image of a woman holding her head wondering WHY she needs to do bookkeeping for her handmade business

    Bookkeeping involves the recording of all financial transactions, such as money made and money spent, and is a key part of the process of running any sort of business, not just a handmade business.  While I’d like to say bookkeeping is simple (and it sort of is), it does require a plan for organizing your records.

    You need a plan (or a pattern) for how you want to do your books and what you want to track.  You’ll need to record all of your expenses and your sales revenue (or income), either in writing or in software.  And, I don’t mean just throwing everything into a shoebox or a file folder and then looking it over at the end of the year.

    Do yourself a favor and start thinking about a bookkeeping system now that you can use in your business.  You might want to use a software program like QuickBooks desktop (my personal favorite), a simple Excel or Google Sheets spreadsheet, or even go old school and buy one of those special bookkeeping notebooks and dig out your trusty calculator.

    The first step is to just wrap your head around the fact that ……. if you have a business, you MUST keep books. In other words, there’s no way around it.

    Next, we’ll talk about some common handmade business expenses.

    A notebook full of notes for starting your handmade business

    This post was originally written on 10/19/2017 and was updated on 7/14/2023.

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