We're going tio actually, um enter a couple of things into the ledger um for the next fifteen or so minutes it's gonna be really fast too, but don't worry we'll come back to it here is the process is I like to do it um for bookkeeping um some people like to especially if they have different parts of their business like my friend who has the retail shop she co owns plus the etc shop um plus the craft fairs like to do all her bookkeeping for one of those things at a time because we're only looking at the ft shop right now this will work just great for that. Um, so the first thing I like to do when it comes to income is send out any new invoices um so this is like a number one, right? You have to get paid so many business I've seen businesses failed just because they're not sending out their bills fast enough and or they're not chasing their customers down to get paid fast enough and that's like a really, really crazy way to go out of business, right? Like if you actually have no problem ...
with your sales and no problem with your profit, why on earth would you ever want to go out of business just because you're not getting people to actually pay you what they owe you so send any new invoices for work that you've already done or for products that you've already shipped, um, record that date and the date that the payment is due in your ledger, and then I want everybody to have a calendar. I don't care if it's a paper calendar, I don't care if it's a little app on your phone, your ipad or something that you use on your computer, you have to have a calendar and ideally, it's, um, you know, something that's that you're going to check often, so if you need to integrate this with, like, your personal calendar, but color coded in a different way, that's totally fine. Um, but it shouldn't be something that you never look at that's the whole point of putting this stuff in a calendar is so you will check it regularly and then take action. Um, so after you enter the due date for that invoice in your ledger, you're also going to enter it in your calendar, and while you're entering due dates in your calendar, you should also look at your calendar to see what's already coming. D'oh um, and then I would send reminders for anything that's overdue or anything that's nearly dio so if a store or a customer or a client has not sent you your payment yet on debts due very soon or it's already past juice and then a nice little friendly reminder that says, hey, um, just wanted to give you a little heads up. You have this payment coming due in two days or hey didn't see a check come three I just wanted to make sure that you sent in it and get lost in the mail. Um, once you have any payments that have come in for past invoices, you will record those. And if you've already deposited that payment in the bank, you will also record those and then last but not least, you will update your inventory. So if you have a mme sent out products, you will mark down how many of those in which one's uh so on and so forth and then for expenses it's a very similar process. Um, anybody sends you a bill for something, you should open it up and check. Make sure that it's accurate first of all, and then again, you will record the date that you've got it in your ledger and the date that it's do. You will put that in your calendar. Check your calendar for anything else that's coming due excuse me and pay any bills that are about dio because it's also, um really crazy to me too I have to spend extra money just because you didn't pay a bill on time especially with like credit cards, the interest rates and the penalties for that kind of thing are enormous so you always want to pay those bills on time because you don't want your biggest expense category to be like bank fees that's silly uh ok uh mark the date and the day that you paid it and the payment type in your ledger uh if you paid by check I mean like paper check it's probably nice to record that in your checkbook I know that that's a little outdated nobody bounces their checkbook anymore and you know they keep copies of scans of all your checks on the banking website uh but I've had to go back sometimes pretty far toe look a check that I wrote because I didn't record it anywhere else and you know I've had the banks say sorry we only keep check images for up to three months up to six months and then I was s so well as they say um and then again update your inventory did you purchase any inventory? Did you have any expenses um in regards to purchasing inventory if yes, that goes in your inventory sheet so I would love to open up the ledger so that we can actually do a couple of these let's dio income first um and actually I'm not looking at any of this because we are looking at etc so here is my bill um this will show me all of the things that I have uh sold already um and unfortunately this doesn't show you the income that you have it on lee shows you the fees associated with those things so it only shows you your listings what I would need to do is I would need to go teo my orders but because my orders have sensitive information on them like people's names and addresses I'm not going to pull that up but I am going to enter this end to my income so that it matches an order and we'll look at the orders again when we go back to the um power point but don't want to keep switching back and forth like every five seconds because that's just going to take too long when we're short on time guys we've got a lot to cover still today so let's start with the income detail uh just girl too far okay, I've put in some examples in here already um as a twenty fourteen just so that we can see uh what some of these transactions look like um we might do a little bit of a quiz later for the in studio audience get excited amanda knows what this is like uh ok, so let's start down in um february and enter this let's assume that I have sold a small him. Ah, actually, I have this already in here for january let's just use what we have in here because if you'll recall, you will see that I had purchases on there where I didn't collect the sales tax that I was supposed to do. You remember when I showed you I was like, oh, look, I have an order from california to orders from california, but one from sacramento and I've got one from san francisco and I didn't collect the sales tax on that. So um, let's say it was a small ham that I sold ah, typically those costs twenty six dollars, uh sorry twenty five dollars um in this case, though, I needed to figure out what the price was with sales tax included because I had to pull that out. So if I put in twenty five dollars, then I get my total here and let's say this was san matteo, not sacramento, um and it's, you know, eight and a quarter percent that puts two dollars in six cents on there. That total is twenty seven dollars in six cents, but I actually only collected twenty five dollars, because I forgot to add in that two dollars and six cent sales tax, so what do you d'oh if you forget to collect the sales tax or if you're let's say at a craft there and you just don't want to collect the sales tax because it makes thing you have to keep like pennies and nickels and stuff in your cash paper and you just want to deal with dollar bills were just fine thanks to do that all the time um you still have to pay the sales tax so then instead of your base price being twenty five dollars it's actually going to be lower right? Because your total prices the base plus the sales tax my total has to be twenty five so I need to figure out then what's the base price plus the sales tax that will equal twenty five dollars, because that's what I collected so in order to do that I will just if this is my total price um I will divide it by my base price plus the sales tax, which is what I don't know it's something one of my cost um plus the eight and a half percent so I'm going to divide it by one point oh eight to five and dividing it by itself plus the eight and a half percent does that make sense? This is the hardest math I'm going to do today I swear this is the hardest math of all and I recently went into a brand new store that opened in my neighborhood um where where they did this, where they had to take a they gave me a discount because I had a store credit, but they didn't enter in the sales tax when they took the discount off and so then they were trying to back out to what was the actual discount? What was the actual sales tax? And I said it's okay, you just take that number and you divide it by one point zero, eight, five and he was like, no, no, no it's final figure at least that it's ok, I got it and the manager went in the back. He came out thirty seconds later, he's away. What was that? It was divided by one point. What? Uh so we divided it by one plus the tax rate, which in this case is eight and a quarter percent, which is point zero eight to five great percentages are hundredth ah, and that equals whoops! I didn't put an equal sign if you're working in a spreadsheet and did this yesterday too. If you're working in a spreadsheet and you don't put an equal sign, it will calculate anything for you, so my new base price is twenty three dollars in nine cents what I actually sold this hand for, even though it was listed for twenty five dollars on etc what I actually sold it for was twenty three dollars and nine cents because when I add eight and a quarter percent sales tax which is one, ninety one then I get twenty five dollars so then I have marked down in my ledger the appropriate sales tax that I then oh the state when I turned in my return um and for account here you can see I've put in product sales I've also got consulting and then here's allowances um so if I had offered a discount uh on this small hamm er I could put in a separate line item for the allowance so let's say that I put in a coupon let's insert a row here let's say this was also on january two a second uh customer coupon ah and that coupon was for twenty percent off so it was times this times point too and then I have to make that a negative number because remember allowances are a negative income account so this is equal tio negative and it puts it in parentheses if you're using a spreadsheet as a negative amount as opposed to the minus sign uh and then when I get to the end here I will track that as an allowance so that later on I can sort and add up all the allowances I had and I can compare that to my profit and if it turns out that my allowances are higher than my profit at the end of the month at the end of the year, I'm giving away way too much and discounts right and you can see that in black and white my discounts are way too high um if at the end of the month you are able to see that your profit margin is twenty percent but you're giving away on average twenty percent in discounts you've just erased all of your profit, okay? And we'll talk about um a little bit more about coupons and sales and discounts and all that stuff and when it's good to use them and when it's not as appropriate to use them and sort of what situations make more sense than others um it's very good to use them extremely deliberately there very often the first line of attack for new sellers they think, well, this sort of thing isn't selling or I'm not reaching my monthly goals. What do I dio? I put everything on sale that's an easy way to go about it or I don't have any marketing news to tell people about what can I do to remind my customers that I exist? I'm going to send out a post about a coupon like that's a really easy way to go, but I was just being way more deliberate about that um okay, so we have handled income I'm going to breeze through a couple of expense examples and um then we will break for lunch I think cause we're running really short on time who okay, this is the expense summary I wanna look at the detail okay uh maybe this is where I will quiz you guys as opposed tio entering too much in here. Ah, a couple of things that I want to point out in the ledger remember I was talking about that prepaid sales tax where I've paid tax on something that I actually bought wholesale this is where you would put that in so normally when I buy something like say printer ink um that sales tax is wrapped up in the amount I don't pull it out separately although you could if you really wanted to you could put in just the cost of the printer ink and then put it another line item underneath it for just sales tax um in case I don't know, you live someplace where the taxes are super high and that may be the case you may live in a country where the vat is like twenty or twenty five percent um and you want to track that as a separate cost of doing business um I don't tend to do that so in this situation where I I'm not buying something wholesale I just wrapped the tax up into the cost of the item itself nothing separate to pull out there this is pretty straightforward. I bought printer ink on the tenth of january. I paid for it with my business visa. Um, because it was a sale that I made in store the date that I incurred. The expense is also the same data was due in the same day that I paid it right. This is not like a bill I got in the mail, so any time somebody buys something from you, uh, right on the spot, all three of those dates are the same. Same thing. If you buy something right on the spot, all three dates are the same. The date of the expense is the same as the date that it's that the payment is due in the same day that you made the payment. Those air all happening all at once on the same day. And then I put in the account office supplies pretty straightforward. Right? Um, down here on the thirtieth of january, I bought some blank cards that I'm going to turn into greeting cards going print on them. Um, I have calculated the cost of these cards per piece and that's pretty critical to do when we talk in the next segment about product profitability. If you want to find out how profitable each of your individual products is, you need to know how much each of them is costing in terms of material on a per piece basis. So assuming that I bought let's, say, six packages of twenty and this is how much it came out to one hundred twenty three dollars in sixty cents, how much is that per card? So if you back into that, um, you end up with a dollar and three cents per card, ok, great, I bought those at my local stationery store let's say I did buy them online from a paper goods wholesaler or anything like that. So I ended up paying my eight and a half percent sales tax on that that these air actually wholesale items, because I'm not the end user, I'm not just going to mail these cards out at holiday time, I'm gonna print on them, they're going to sell them to other people and they'll send them out at holiday time, so I have now paid. I've pre paid ten dollars and fifty one cents in sales tax that I shouldn't have, so I'm going to keep this marked in my ledger so that when it comes time to submit those sales tax returns at the end of the year or the middle of the year, as it were, um, I have a total of all of the taxes I've already paid. That I then don't need to send into the state again that's what's really nice about this is that if you are actually buying wholesale and you pay tax it's not like you just eat that money um that doesn't just disappear and become an expense. Um, that's something it's actually, well, anyway, it becomes something that you then we'll get back as a deduction to your tax bill at the end of whatever period you're submitting for. Does that make sense? Ok, let's do a little bit of a quiz. This is sort of not fair because I went through the chart of accounts so fast. Um but, uh let's let's do a couple of these and you tell me what account, what category they go into. We'll just do a few of these before we break for lunch. Um, studio rent, which is this is this column is not quite wide enough to see twenty two percent of my apartment. So this is the studio within my apartment. Um, this expense two hundred sixty two dollars and ninety cents uh is twenty two percent of the rent for my whole apartment. So this is the amount of rent that's going toward my studio? What category is this? Anybody know home office, yes, the home office alright, well done, um and you guys can look on with because she has a print of it. Actually, I have I have an extra one appear to you let me give this you guys all right? Two of you guys can share and then if you want to come on up and grab this for me so that you have a reference for the quiz someone I'm not cruel it's an open book whiz come on, you guys all right? Um next we have web hosting so this is a monthly fee that I pay to host uh, let's say my blogged or my own online shop um what would this go under and again? There's not always one right answer either because this is sort of up to you. So what category would you put web hosting into? Can we hear from either a net or stephanie on this one? Advertising promotes advertising and promotion. Yeah, that's a perfectly reasonable place to put that absolutely a printer ink stephanie one hazard a guess on this one. Um material supports s so it could be materials and supplies if it's part of your cost of goods sold. If this is hank for a printer that you used to print products absolutely it goes under materials and supplies for cost of goods sold it this is printer ink they use for printing invoices or shipping labels then it's office supply that's what I was going to say, officer yeah, so it totally depends on what you're using it for, right? I mean, these things are kind of flexible. Um, what about the business license? I kind of breezed through that one a little bit, and I said a business license is technically a was that legal and professional? No. It's a really good guess. Uh, texas. Yes. Attacks. Well, you take good notes and have that sheet in front of you having your great yeah, um, we will get you a copy of the turner any any materials that are part of the bonus materials, you will receive his part of the studio audience so you don't need to take, like, furious notes stuff that we've already put together for you. Uh, ok, uh, gas gasoline. I don't mean, like house gas. Like he didn't get part of travel. It could be part of travel. It could be part of car and truck, right? It depends on when you used it. S o if it's gas that I used to get from here to a conference or here to a yeah here to a craft there, well, depending on how far away that craft there's, um, that could be part of travel um otherwise it would be part of car and truck if it's guess that I used to go pick up materials um locally that's probably not travel that's more car and truck ah hand button right? I talked about how suddenly I was able to buy them for twenty five cents a piece by the thousands and my hand was so happy. What would that be? Other inventory inventory? Yes, inventory purchases. How about my december etc? Listing fees? Those air merchant service fees, I guess under commissions and fees. Yes, so they're not merchant service fees. You have them under advertising. The listing fees are part of advertising and promotion. The merchant service fees are the direct check out the humans that he takes out right? This is what's so confusing. This is why we have to go through all of these things. Oh, yeah? Yeah. Ok. Um and then the etc sales commissions those commissions and does go under commissions. Yeah. Um ok. Ah, wire transfer fee. I'm just going to tell you, um, that's one of those banking fees that I put under miscellaneous expenses if you do a lot of things like a wire transfer fees or someone asked in the bookkeeping for crafters class about, um the fees that they get for converting currency that they do business with a lot of customers out of the country. If you get charged a lot of fees from your bank in a particular category, you may want to pull that out and not stick it in. Ms elaine, these fees. You made it. You might want to make that a separate chart of accounts.