Turning your craft skills from a hobby into a viable small home business is a busy, exciting adventure. But amidst the half-done projects, searching for customers and learning the ins and outs of the market, it's important to pay some attention to setting up and keeping your business books. Here is a handy 5-step guide to getting it right from the start.
Separate Expenses. It's hard enough to make a profit and track your numbers without making things needlessly complicated. Mixing personal and business expenses is one big way to complicate your new endeavor. So, do yourself a favor and keep things separate. Open an account for your business costs and only use designated business payment methods.
Start on Paper. If your new venture is a micro-business, it's okay to start your record-keeping in a notebook or a basic spreadsheet. To begin with, simply log your earnings and your expenses in a list. If there are additional things you want to track, such as recurring customers or inventory, you can also do this here. By trying to go too high-tech, you could actually make it harder to use your bookkeeping method and outpace your business' needs. When it becomes a time-consuming chore to enter individual items on your paper, you will know it's time to look into a computer-based system.
Work with an Accountant. You likely will not need an accountant like Don Lamb CPA Inc P.S. on a regular basis yet, but you should talk with one at the beginning of your business setup. Meeting with a professional once or twice can help you learn what you need to track, what effect it will have on your taxes, what the basics of profit and loss are and how to report things. As your business grows, you will also have an established relationship with a professional on whom you can call.
Keep it Organized. Hopefully you will be busy making items and selling them, but be sure to take time each week to work on your books. Keeping logs current and entries organized is the best way to ensure you don't miss deductible expenses and know your true costs so you can calculate profit. Make sure to keep your receipts organized, your bank or online accounts balanced, and your email organized.
Think Long-Term. It's easy to get caught up in the details of your day-to-day business, but don't forget to think about your long-range goals and how you are going to get there. Setting up a bookkeeping system, for example, takes time to get right... but it can mean the difference between making money and losing it over time. Learn how to calculate profit and cost of goods sold and what deductions can be taken on your taxes (usually on a Schedule C). Make sales goals and ongoing connections with other crafting businesses so that you can learn new ways to grow your business.
While you didn't get into your craft business in order to spend time immersed in accounting, it's a necessary and useful part of your ability to make money. By following this guide and investing some time and money in setting up and maintaining your books, you can help ensure the most successful home business you can.