Why Bother Bookkeeping?
Let's look at another couple of reasons why we should bother doing the bookkeeping at all and I want to bring up an example of one of my very favorite people abby glassberg she's also a plush artist um she has fabulous blawg fabulous newsletter she does a lot of really great stuff with, uh, bookkeeping and with transparency around money in general she shares her quarterly and annual financial reports she will show you exactly how much money she made and how much money she spent on every item in her business. Um which is so enlightening? Illuminating, helpful um it's really wonderful and, um in your resource sheet actually, as part of the bonus materials, I have a whole list of other creative professionals who show their finances in that way who will let you take a look inside their books, which is great. Um those people are my heroes, anybody who because we don't really like to talk about money right? It's one of those sort of taboo subjects nobody talks about like how much they make o...
r how much they spent on their apartment or what their rent is or anything like that. Um and I think that that causes a lot of anxiety around money too um I think that's one of the reasons money has the power to make us feel bad and make decisions that we might not otherwise make uh so I love anybody who's going out there and just like putting it all out on the table for everyone to see like this is it warts and all come and get it guys that's fabulous so thank you to abbie and everyone else on that list um so I have a quote from one of her posts about when she started to do bookkeeping um she is not a money girl naturally she's not when those people was like yeah no, I totally grew up with two parents who are accountants and I had this in my dna I love doing math uh she really had to like push yourself to do this and she's so glad that she did and here a couple of things that she was a well to figure out um just by doing her bookkeeping um she was able to really evaluate what she was spending like do I really need to buy that new fabric or can I use something that I already have? Um she was able to be a lot smarter about her marketing she was able to see like what was actually paying off in terms of sales and we'll look at that later as well um and then it also drove her to work harder at her marketing because she had expenses associated with that and like, why spend the money if you're not actually going to put in the time right um she got to feel good when things started moving up into the right, right that's the direction you want to see those numbers going in? Um, it really gives you a boost. Uh, she was able to figure out where to get other, uh, streams of income from so she was putting out this block that all those great information, but it wasn't monetized in anyway. And so when she looked and saw it, well, I'm spending all of this time on this free resource how can I make that contribute to my business? She started a sponsorship program for that, um and feel confident that I can invest in things that will help me grow, even if they might cost a bit up front that's like the website example that we mentioned earlier? Um sometimes you want to invest in a big piece of equipment, right? Like if you're working with wood or you're working with metal, you might need to make one of those big capital asset purchases. You might really need that new band saw or sander or whatever, I'm gonna cost many thousands of dollars, and so you don't want to leave that money out unless you know what you're going to get back from it and so that's, what bookkeeping will do, it will show you exactly what you will get back from it um when it will pay for itself, how long and you'll be able to take a look at your cash flow and see this is when it makes sense to make that purchase let's have a quick couple of questions have come in lauren end alone, he has been asking people voted this are the principles that you're going to be sharing with us see, they're designed for small business owners and craft is but also well, they also apply to photographers because we have a very big photography community on creative life isn't the same principles all around? Yes, absolutely I'm so glad you asked me that. Actually, um, I know that this is titled bookkeeping for crafters, but I would say that ninety five plus percent of this information is applicable across all creative professions and even some, um, if you have a small business, and especially if you're doing, um either sales of retail items or wholesale items or you're doing services for clients like photography, most of this will be really applicable to you. You know, there's some things I'm not going to cover today, like, um, specific licensing agreements that photographer's might have, so I'm not going to show you how to enter that into the ledger today, but hopefully everything that that we're covering will allow you to then do that on your own he also has a certain early we've got amsterdam online we got belgium online we got canada and I've got a truly global audience and people just asking will the principal's book keeping do they apply globally they dio they absolutely dio bookkeeping in its modern form was invented in italy uh further refined in the uk uh so this is not american book keeping uh this is definitely global um it's been around for hundreds and hundreds of years so I'm not reinventing the wheel as they say um and like I mentioned earlier going to try and keep everything as global as possible and as applicability to everyone as possible um I think whether you're a crafter in you know bahrain or france huh? You've had similar experiences not really knowing how much to sell things for uh not really having an idea of where the money was coming in or going out and how to make decisions about your business. All right, so I wanted to give you one other example of a creative person uh also someone whom I know in love and who has several of her own creative life classes that are really excellent um for the rest of the entire rest of your crafty business I mean, I'm just the money girl but um carrie chapin knows all about um in addition to pricing she knows like how to get your stuff in retail stores she knows how tio you know, market things uh effectively how to I mean everything other than the bookkeeping basically is carrie so if you have other questions about that kind of stuff I recommend checking out her classes she has, um one really large starting a crafty business class and then she also has a bunch of fast starts on creative live um for specific drool for specific businesses, so if you have like, a jewelry business she has one for that um and when I talked to her about how she handles her money she told me that she likes to set a money date you know, get a glass of one like turn the lights down low so that you don't screen glare right? Um know what book keeping a sexy come on oh, come on, everybody is like, you know, it's not a very sexy topic. Yes, it is. Yes, it isthe bookkeeping is totally sexy because bookkeeping makes you money and everybody knows the rich people are sexy, right? Come on. I'm tired of people telling me that really good smelling of sixteen top yes, it is enough. Um, so here's some of the things that bookkeeping helped carry with again thinking about purchases before she was able to make them this comes up again and again when I talked to people um even though people sort of think about what they're buying before they're buying it they have a budget in mind. Um, when you actually sit down and you look at your numbers, you know, oh, I spent x amount on fabric or spent xml out on paint or spent x amount on materials. You know, I really need to get that down. Um, here the areas where I feel like I could trim. And then the next time you go out and you make one of those purchases or when you go online, um, to a store and you start by materials, it helps you comparison shop. It helps you think of alternatives. Um, it really keeps those purchases top of mind and helped you spend your money deliberately and that's that's what we're all about today, right? Is you making the decision beforehand? Um, it's, so easy for me to walk until, like, a michael zahra joan's and be like, I want everything, you know, and I went in there for, like, two yards of tan fleece this is all I need and I go in and I'd come out with like a bunch of stick on ryan stones and like a fancy new pen and then a kind of like swivel exacto knife that it didn't need just because it seems really cool it's like I you know, I didn't have that project that I was thinking about three years ago that uh you know, I could totally use this exacto knife for and I'm probably not going to do it for another three years but I should just have it I should just have it in case right um but if you know that that's not going to get you where you want to go maybe you put the swivel exact when I fact for this trip and you save it for another trip when you're actually at that point s o other things that she has uh gained from her bookkeeping um again analyzing the return on investment of marketing efforts so you're not just throwing stuff scatter shot out into the universe tweeting and facebooking and sending out newsletters and hoping that that drives customers but not really knowing if it's doing any good um I don't know about you but I hate that stuff I find it so hard to like sell myself and to be on social media all the time and to think about the messages that air going toe you know promote the business without sounding like humble brags and you know coming off is really sales and gross and terrible at that really bad at it and so when I do that kind of stuff, I want to make sure that it's having an effect if not I want to make changes because that's not how I want to spend my time um some people love that and they're graded it and fabulous more power to you but if you don't love that bookkeeping that will help you figure out exactly how much time to spend on this stuff and where to put that time um review the profitability of individual projects um something that you mentioned uh you have a ton of different things going on right now, right? You're diversifying and I think a lot of crafters do I don't know too many people who just make one kind of thing sell it that's the end of the story I think most people um tell me if I'm wrong guys, everybody who's out there most crafters and creative professionals you're making things and selling them but you're also doing some consulting uh you're also um maybe you have a part time day job uh maybe you are, um doing some services in addition to products, maybe you have several different product lines um all of this stuff can be tracked separately and together and it's really nice to see which things are profitable in which things there maybe not so profitable onto nowhere to move your efforts in your time based on what you like doing and what's actually making you the most money um make investments in my business that I know will pay off again knowing when to put the money toward that capital investment and feeling good about making that decision um and then one thing that carrie brought up that I thought was really interesting prioritizing paid project's first um this is something that I did not do very much of um when I started out uh because I was very d I y I made all kinds of things myself I made my own cash apron I made my own business wallet more about that later as well um I made my own mileage diary and it was out of recycle a bles that I got out of my bed next to my desk and I was like of course I'm going to make money I'm so frugal look at what I'm doing I took all of these scraps and I made my own business supplies like I'm amazing this is great I'm not spending any money on these things, so surely surely I will be a millionaire not a million you know, um and then figuring out what I spend money versus time we can't be good at everything and if you're going to grow as a business you can't do it all yourself for ever either so you know maybe down the line I'll hire marketing person someone to do the social media who's good at it and who likes to do it um because my time is valuable to uh your time is valuable and so you want to put it towards the things that are goingto make you the best return right? So here's what we're gonna accomplish today and the next day to calculate how much your time is worth going to start with that because that is the basis for everything uh we're gonna figure out where every dollar came from and where it went to you're gonna increase your profitability company wide and on a specific product level uh you're gonna learn how to manage your cash flow because as we all know there are some periods like right around the holidays when you've got tons of cash and then periods say around march wary maybe you don't have so much going on um make informed decisions about your business very deliberately uh determining what it is that you want to accomplish in where you want to go uh how to prepare your taxes like a pro not do your taxes you're not a c p a s and nobody expects you to do your taxes um and always get paid enough and on time wouldn't that be nice? Always get paid enough and always get paid on time so that bottom line you khun spend time doing what you want, teo, what you love, what you're passionate about, we only get one life I don't want to I don't know about you, but I don't want to spend it in a you know, closet that I've called my studio, selling the same meat shaped pillow over and over and over again. I got other things I wanted to your sustainable wage. Actually, I skipped one hoops. Oh gosh, I'm not using this correctly at all what will cover today? So this was what we're covering. This is what you will accomplish over there entire course, this is what we're doing just today to give everybody, uh, an idea of what the schedule will be, and so that everybody at home can also figure out where you're going to, like, take a coffee break. Uh, why bother bookkeeping? We've covered that calculating your freelance right? We're gonna do that right now. Uh, we're going to look a cash vs profit because those are not the same thing. Having cash in your bank account does not mean you are profitable, and vice versa, we'll talk about why categorizing your income and your expenses, putting everything into the right boxes so that it's trackable so that you can analyze those things that make decisions based on them. Um, we're going to use the ledger for that. Um, I have put together just, I think is a fence tastic ledger for you guys. Um, it's, part of the bonus materials, and, uh, I have two versions. I have a simple version that you can download if you like to do everything by hand. Um, you could just print it out. You can use a pen and paper. Ah, little calculator. Because I do not expect everyone to have, you know, spreadsheets skills. Nor should you. You should be able to do your bookkeeping without having specialized computer knowledge. That's one hundred percent fine. Uh, but if you do, like, using spreadsheets and you like things to be a little more automatic, there is also a fancy version of the ledger that has all kinds of fancy tastic formulas in it that I will show you on the screen a little later today. Uh, that will pull things in from where they're supposed to be. Add them up, stick them in the right categories, and then you don't have to worry about that, so, um, fancy ledger quicker. But you have to have a little bit more comfort with a spreadsheet program like microsoft excel in case you delete something by accident um and you want to put it back in then we're going to look at sales tax and uh that slash gsd goods and sales tax um I know a lot of people have questions about this area in particular on dh particularly in regards for you european union well and everybody outside the european union actually there are there's a new law as of january first that if you're selling digital products online that you have tio pay the value added tax the vet uh to uh any country in the in the u where the customer has purchased it from which just becomes really complicated and sort of a mess and so we're going to talk about that I think that's the single biggest question that I got before the class started was about this sales tax and vat stuff so don't worry it's on the docket for later today so if you're tuning in for that keep an eye on that on and then we're also going to talk about organizing everything physically like where to keep all of those receipts were to keep all of those invoices and bank statements and what to do with them how long do you need to hang on to that stuff do you need to just keep it forever in a giant filing cabinet? Um and that's, what we're covering today.