There is one aspect of being self-employed which seems to be universally dreaded, recordkeeping. But it’s important because keeping good records shows you how to make a profit selling homemade crafts. Keeping up with your business records is like craftwork. Only the grade may be more important now than it was then. The grade is whether you have enough money to pay your bills and feed your family.
The key activity is to record and analyze your expenses and sales on a regular basis. You should start keeping records from the day you start planning your crafts business. Begin by gathering all business related receipts and entering them into a spreadsheet program like Excel or writing them down in a general accounting journal purchased at an office supply store or on forms like those found in this chapter.
The important point is to have a system you can follow up with regular entries. You can then extract meaningful reports from the information. Since Uncle Sam requires accurate records, you are legally responsible to do so anyway.
Should you hire an accountant or C.P.A.?
For most self-employed, the expense of hiring an in-house bookkeeper or accountant can only be justified when the business becomes so large that the owner can’t handle it alone anymore.
Whether you hire an accountant or not, you should know basic bookkeeping skills. You don’t have to have a degree or even formal training to learn accounting.
Small Time Operator, How to Start Your Own Business, Keep Your Books, Pay Taxes & Stay Out of Trouble! by Bernard Kamoroff, C.P.A.. This is a complete guide for anyone starting a small business. Covers everything including permits and licenses, insurance, financing, leases, business plans, bookkeeping, taxes, employees, partnerships, corporations, trademarks, dealing with the IRS, and much more.
You can also take a basic accounting class from your local community college or continuing education program. Small Business Development Centers or SBDC’s sometimes offer courses and many provide free counseling.
There are several basic kinds of records you to keep up with. Here are the ones you are most likely to need. You will find these forms and more details on how best to use them in How to Price Crafts and Things You Make to Sell
- Cash Flow Statement
- Profit/Loss Statement
- General Accounting Ledger
- Inventory Log
- Fixed Assets or Depreciation
- Accounts Receivable
- Accounts Payable
- Payroll Log
- Profitability Chart
- Telephone Log
- Mileage, Travel and Entertainment Log
- Weekly Income/Sales Journal
If you haven’t already opened a separate checking account for your business, you should do so. You can easily confuse business and personal transactions if they are both present in your personal checking account. When tax time rolls around, you’ll be grateful you kept your business records separate.
Keeping records can be done by hand on paper or by entering information into a computer. If you are just beginning your business and have no experience with personal computers, you may find it simpler to keep records on paper.
You may also want a plastic filing box or metal filing cabinet to separate and store all your records. For example, one divider will say “Rent” and contain rental receipts. Another divider might read “Cost of Materials” and include records of your purchases.
A paper recordkeeping system will work well until you reach a point when increased sales take too much time to record entries by hand. At this point, using a computer will become more cost effective. You will know that time is near when you find yourself spending more time than you can afford to spend looking up records, writing invoices, or trying to do a cash flow projection or balance report on the financial state of your company.
Another signal will be when you want to mail new product information or announcement of a special sale to 200 customers and you have to copy their names and addresses by hand.
There are many computer software programs to help small business owners manage their records. Most are sophisticated enough to give you in-depth reports on all aspects of your business in seconds.
QuickBooks by Intuit is recommended by the Small Business Administration and the program used by this author. QuickBooks is very easy to setup and customize for how to make a profit selling homemade crafts.