Bookkeeping Tips And Tricks That Etsy Sellers Should Know
Etsy is an excellent site for online sellers seeking niche markets. It also tends to be much more friendly to those just starting, as its online community is open to answering any questions about the platform.
The idea of monetizing your hobbies is an alluring thing for most people. With how easy it is to set up your digital storefront, the site has become a welcome home for artisans and those who love DIY crafts. However, the site’s more laid-back atmosphere doesn’t mean there is no opportunity for business expansion.
All Etsy sellers should have a reliable bookkeeping system, whether just starting or looking to expand their businesses. Whether choosing your preferred Bookkeeping method or using powerful accounting software, all these options can help you keep on top of your financial records.
Why bother with Bookkeeping for Etsy Sellers?
Many people just starting with their Etsy stores tend to ignore the business aspect for as long as possible. The best someone might do at this stage is to use paper records and notebooks for recording their financial data. However,
Although Bookkeeping might not be the first thing that Etsy sellers would aim to set up, it could save you time and money. Accurately capturing and recording every transaction ensures you know where every dollar goes in your business.
Etsy Sellers tend to have a larger number of transactions to keep track of when compared to eBay or Amazon sellers. Those on Etsy have to consider all the expenses in manufacturing their products. After that, they also have to record the expenses of selling and shipping it out to customers.
Most importantly, Bookkeeping allows you to create financial reports that help you to analyze how your business is doing. Everything from Profit and Loss Statements, Balance Sheets and Income Statements helps business owners decide. Running on accurate information is important in growing your brand, so do what you can to make your record-keeping efforts efficient.
The Cons of Using Spreadsheet Templates
Sure, using a readily-available template may be a good step toward understanding the Bookkeeping process. Excel is commonly used in small business ventures for recording purposes. However, there are some cons to using a system that requires manual data entry.
One of the issues is the amount of time needed to enter your transactions. It also makes you susceptible to errors, as Excel does not know you’re using it for bookkeeping purposes. The software can’t make suggestions or find errors within your manually inputted data. There is also the chance that you may forget to input certain details on your transactions, potentially leading to losses in the future.
Businesses looking to grow their operations cannot scale these templates to the growing volume of transactions. If you’re working on your bookkeeping efforts by yourself, it will also take more and more time to input their transactions onto spreadsheets.
Lastly, using spreadsheets and templates is not the most secure method you can use. While it is possible to encrypt your files via passwords, other record-keeping software offers more comprehensive security options. Spreadsheet files may also be lost or even stolen in some cases.
Ways for Etsy Sellers to Improve Their Bookkeeping
We can finally understand how Etsy sellers can improve their bookkeeping methods. All of these are ideas you can integrate into your business model to ensure that you keep an eye on what goes on in your business.
Single-entry vs Double-entry Bookkeeping
Firstly, we’ll look at how you can organize your bookkeeping efforts. Business owners can use single or double-entry Bookkeeping to keep a detailed record of their transactions. Below is a table summarizing the differences between the two systems:
|Single-entry Bookkeeping||Double-entry Bookkeeping|
|1. Used for simple and small business ventures
2. Only one entry is made for transactions
3. Entries are either a positive or negative amount (Revenue or Expenses)
4. Only calculates net income
|1. Used for businesses with more complex bookkeeping needs.
2. Each transaction is recorded onto two accounts: Debit and Credit
3. Can be used to track assets and liabilities
4. Can be used in preparing financial statements (Profit & Loss, Cash Balance, etc.)
For those just starting, the single-entry system may suffice if you still have a manageable volume of transactions. Those experiencing increased transactions might want to transition into a double-entry system. Check which one of these is suitable for your needs, although we strongly advise using the double-entry system for sellers looking to grow their prospects in the future.
Inventory Management Strategies
Bookkeeping does not only encompass keeping records of your transactions. It also considers Inventory Management, especially for those keeping larger stocks of material on hand. Various strategies can be enacted to help you in this endeavour, such as creating a specialized storage system.
Another way of managing inventory is by stocking products that you know are popular. This helps you to keep stock moving and help you to manage the expectations of your customers. Knowing when demand rises and falls is also important in managing your inventory, which makes the importance of financial statements all the more prevalent to aspiring entrepreneurs.
Larger operations may even field an SKU code system to navigate large amounts of inventory. This acronym stands for Stock Keeping Unit code and is assigned to all items within your inventory. Etsy does support the usage of SKU tags, making it easier for online sellers on the platform to organize their growing stock of products.
Learning the tools on your Etsy Page
Sellers can use Etsy Stats, located in the Shop Manager tab, to check data regarding your shop’s performance. For our purposes, you can use Etsy Stats to check in on the total number of orders sold, the revenue you made with sales and even a yearly comparison of your performance metrics between a specific time frame.
Another page sellers can use to avoid payment delays is “Payment Account” in the Shop Manager tab. Here, you can manage the amount due from the last month’s expenses operating on Etsy. Sales totals are tracked from the Sales & Credits tools, where you can download a monthly statement in CSV format.
You may also manage your available sales funds after refunds, taxes, and fees that are owed. These funds can be deposited according to a schedule that you set. The option is also to deposit your earnings as soon as the next day, although it is subject to deposit minimums.
Lastly, the Fees & Taxes tool shows the amount you owe for these items within a certain time span. Although the website automatically collects sales tax for items sold to customers, sellers can update the sales tax settings for those areas where this automatic collection feature does not work.
Making Use of Reliable Accounting Software
All Etsy sellers stand to benefit from the use of secure and efficient accounting software suites. If used at the early stages of your business, it’s possible to perform a more in-depth analysis of your business’s growth.
These accounting suites can connect to your accounts and automatically input transactions into their databases. Using these can also benefit you by having financial statements and summaries readily accessible immediately. Some even have the option of generating these reports daily, weekly, or monthly.
Automation is another boon that accounting software provides, streamlining tasks that may take your time. Whether it’s the creation of customer invoices, capturing transaction data, or even keeping tabs on the taxes you owe, using accounting software is key for improving the operations of your digital storefront.
Hiring Professional CPA Firms
Another option for sellers is to outsource their financial processes to professionals. CPA firms can greatly aid struggling owners in controlling their businesses. A CPA can help you by creating accounting solutions for you, organizing your financial data, and even assisting you in filing your tax returns. They also know ways to help you save a few dollars in taxes by using tax planning strategies.
However, it may take a while to set up these systems fully. CPA firms dealing with online businesses will tend to constantly communicate with their clients to understand their situations. The more you stay in contact with your designated CPA, the more you’ll be able to learn about the bookkeeping process and how to organize your financial data by yourself.
If you’re looking for more ways to improve not only your bookkeeping efforts but also the growth of your Etsy business, then why not avail of the services that Free Cash Flow offers? Our CPA firm focuses on serving Online Business Owners, delivering comprehensive solutions to all your accounting and tax strategy needs. With over 20 years of combined experience, you can focus on business growth while our agency handles your bookkeeping needs.