Your handmade business is making money! Congratulations! You’ve worked hard to get to this point! But what about the financial side of things? Are you ready for that? In this blog post, I’ll share 9 tips on what to do when the money starts rolling in but you haven’t setup a bookkeeping system to track your income and expenses yet.
As a handmade, creative, or craft business owner, I know you’re passionate about making and selling your finished items and patterns – and that’s where your focus has been.
You’ve spent countless hours doing all the things that the handmade business coaches have told you to do, in order to make money.
And now the money is just rolling in.
But let me ask you this………
What about the financial side of things?
Do you have a bookkeeping system in place?
Are you ready for that??
Most handmade, creative, and craft business owners are definitely passionate about making and selling their finished items and patterns. But aren’t so passionate about the financial side of running a business.
I get it, bookkeeping and finances are usually the last thing that handmade business owners pay attention to.
Bookkeeping is complicated. That’s probably why most handmade business coaches don’t talk much about it.
However, ignoring your bookkeeping can lead to serious problems down the road, such as:
- frantically spending hours trying to find, organize, and record a year’s worth of income and expenses in order to prep for tax time
- tax penalties
- cash flow issues
- missed deductions
It’s not enough to just write down how much money is coming in on a monthly basis. It’s important to keep track of all the details of your costs, income, and net profit.
Here’s 9 tips on what to do when the money starts rolling in and your handmade business is making money! But you haven’t setup a bookkeeping system to track your income and expenses.
- Make your business legit. All the handmade business coaches talk about this part, so hopefully you’ve already gotten your business setup to be legit. It includes getting a business Tax ID number (to protect your personal social security number) and registering your business.
- Open a separate bank account for your business. Coaches talk about this too because it will make it easier to keep your personal and business transactions separate and avoid mixing them up. You can then setup PayPal, Etsy, Square, etc. to automatically deposit your money into your bank account. You’ll also have a clearer picture of how much money you’re making and spending on your business, if you keep it updated.
- Choose a bookkeeping method. There are two main methods for bookkeeping: cash basis or accrual basis. Cash basis means you record the income when you receive it and the expense when you pay it. Accrual basis mean you record your income and expenses when you incur them – regardless of when the money actually changes hands. Most handmade, creative, and craft business owners choose cash basis.
- Choose a bookkeeping system. There are a lot of options available to help you record and organize your business transactions, from simple spreadsheets, desktop or cloud-based accounting apps. Some popular ones include QuickBooks, FreshBooks, Wave, Zero and others.
- Learn about all the bookkeeping STUFF! If you’ve never taken any bookkeeping or accounting courses, you’ll need to learn about all the bookkeeping STUFF! And there’s a lot to learn about doing the bookkeeping for a business. Fortunately for you, I can help – check out my workshops, webinars, eBooks and courses.
- Set aside time EVERY WEEK to do your bookkeeping. Once you’ve chosen a bookkeeping system and got things all set up, you need to make sure to set aside time EVERY WEEK to enter your income and expense transactions – while things are still fresh in your mind. This means recording every sale you have and every purchase you make and categorizing them into different accounts or categories in order to be ready for tax time. For example, you may have accounts for sales revenue, ad revenue, cost of goods sold, advertising, etc.
- Organize and keep your receipts. You need to keep all the receipts for the things you buy and the invoices for what you sold for 3-7 years! They will serve as proof of income and expenses in case of an IRS tax audit or dispute..
- Reconcile your bank and credit card statements monthly. Reconciling means comparing YOUR records with your bank and credit card records, and making sure that things match up. This will help you catch any errors or discrepancies, such as missing transactions, duplicate transactions, or incorrect amounts. You should reconcile your bank statement each month and your credit card statement before you make your payment.
- Review your financial reports regularly. Financial reports are summaries of how well your business is or isn’t doing based on your bookkeeping records. They can help you monitor your progress, identify trends, spot problems and help you make informed decisions. Like “can I afford to buy that new laptop right now”? Two of the most common reports are:
There you have it, 9 tips on what to do when you haven’t setup a bookkeeping system and the money is rolling in.
Bookkeeping may not be the most exciting part of running a handmade, creative, or craft business. But it is essential to your success even if your business isn’t making a lot of money yet. By following these tips and reading the linked resources, you can set up a bookkeeping system that works for you and your business.