Chart of Accounts and Expenses
Chart of Accounts and Expenses
7. Chart of Accounts and Expenses
An Introduction to Etsy14:56 2
The Etsy Sales Process03:46 3
How We Use Etsy and Why We Love It10:11 4
Setting Up Your Etsy Shop22:34 5
Shop Settings & Policies10:24 6
Payment Methods17:17 7
Chart of Accounts and Expenses14:41 8
Consumer Tax and Understanding VAT13:48 10
Bookkeeping Process22:26 11
Deposits and Payments33:13 12
Profit and Freelance Rates24:25 13
Business Profit19:36 14
Understanding Statistics & Web Analytics18:27 15
Digital Products08:55 17
Sustainable Wages02:59 18
Sales, Coupons, and Discounts16:32
Chart of Accounts and Expenses
Let's dive right into it I said that we were going to look at the chart of accounts and we are chart of accounts is just a fancy term for list of categories uh, when you are doing your bookkeeping, frankly, I think that this is the most difficult part of it people say ah, bookkeeping, I don't like math, I don't like numbers the math involved in bookkeeping I guarantee if you're a maker of some kind is way less complicated than anything you're doing in your actual crafting if you adjust patterns of any kind, if you're counting stitches or bees or anything like that, you're already using more complex math and we're going to use today this is all, like elementary school arithmetic. I would not be afraid of that. Um what I find the most difficult is figuring out what boxes to put everything in um the chart of accounts is totally flexible. You can categorize your income and expenses. However, it makes the most sense for you in your business. So for example, uh, well, we'll look at it and we...
get to the next page, but I don't pull out my shipping supplies from the rest of my office supplies, but if you do sell and ship a lot of products, that may be something you want to track separately and that's perfectly reasonable to dio you can create if you have, for example, materials and supplies. And you want to track one category of materials versus another category. That's. Another place where you might want to split that out and track it. Uh, in a different way. The categories that you choose a really up to you. This is a sample chart of accounts ondas j k o mentioned you can download that as part of the bonus materials for this, um but it's it's totally flexible and you can change it to suit your own business. I found that these air the categories that worked best in general for handmade businesses. Um, if you're an nc seller who's doing vintage or your during supplies, you might have a very different chart of accounts from this. There might be in a different way that you want to label things. Um, unfortunately, we don't have enough time in just a one day class to go through a chart of accounts for all three of those categories on etsy today. So I will be looking mostly at the handmade chart of accounts just because that's the biggest category and s e and that's likely to apply to the most people. But the principles are all the same even if you change the names on some of these to suit a vintage business or to suit a business that sells art supplies aa lot of these will still be very similar you'll just tweak him a little bit so uh let's dive right in and look at some of these first off you have your income accounts on people of said, you know, like, well, I don't understand I thought an account referred to like what you have in your bank accounts just means categories for this purpose is just an accounting term we say accounts for everything bank accounts, income accounts, expense accounts we'll also look att some other accounts like prepaid sales tax and owners equity which are not included here because they're not sort of positive or negative but let's talk income first so I have this split up into product sales and the shipping and handling because those are separate I want to track those separately um and then consulting anything I do on a service basis so product sales, shipping and handling pretty self explanatory consulting is anything that I do um on the side I might still create a product for someone and I do a lot of, um, product design and props for clients. You know, somebody needs something for a photo shoot in a book or a magazine or they need examples of craft projects for an activity book um I will create those things and then they get photographed included but that's still a consulting job that's not really um the sale of a product as I want to track that right, I want to track my client jobs separately from the products that I make and then sell two retailers or and customers on then you have this other income category which just captures other little fiddly things that may come your way sort of accidentally like cash back on a credit card or rebates if you want to buy something at the store office supply store the craft store and you got like, an instant rebate um these first three things together um I have labeled as gross receipts andan highlighted other income for the folks who are watching in the u s any of the accounts any of the categories that are listed in bold also match the categories on the irs schedule c that's the profit and loss from business form that you would need to fill out at the end of the year. Um, so if you're preparing for tax time uh, these categories and bold are the ones that are already listed on that sheet so that's one of the reasons why I've organized these things this way is because it makes tax time at least in the u s um a bit easier um things that are not listed in here, you would have to lump into some other category on that form, so product packaging you would have to either lump into materials and supplies or other expenses. Um, for the purposes of your tax return. But I pull it out separately because for my business, that's, how I want to track it. I want to make sure that the materials that go into actually creating the product are separate from the materials that I use in the product packaging, because I might be spending too much in one area, but not the other. Right? And so I want to pull everything out on the most detailed level possible so that I can make the most accurate decision. Um, let's, look at expenses. So I have a category here called dogs that's, short for cost of goods sold, and it includes anything that goes into making the actual product that a customer will take home with them. So the materials and the supplies that you use to create something eso if you're creating jewelry, the beads, the wire, the class that's, all part of your materials and supplies the needle nose pliers that you used to make that, uh, necklace or whatever it is, do not go into this category because they don't end up with that customer they don't end up in the box with the customer at the end of the day there's product packaging and j k if you wouldn't mind handing me that fish down there deep creek that would be great yes, but one of the deep creeps thank you. Um I have these in my etc shop now since they changed their rules um this bag that this toy comes in is part of product packaging um, no one I used to sell uh, the plush meet toys instead. Um I sort of had an optional gift wrap a deli rap where I would put it in butcher paper and slap a sticker on it that was not really part of the product. It was optional. You could have it as gift wrapped, but it wasn't something that like a customer would keep it wasn't something that they would use again it wasn't something that it would be displayed in in a store for example s o I would not put that in the product packaging but this this does get displayed with the toy in the store. This bag does end up getting used over and over and over again. This product does not really get sold without it it would be out of context and a little bit weird so to go back to that jewelry example um I'm just gonna put this down here for now to go back to that jewelry example if you sell a pair of earrings and you're putting them on a product car that has um the name of your business on it um and that hangs on iraq in a store that's part of the product packaging if you then take that card with the hearings on it and you put it in a box that has a little bit of padding on it on dh then you put a lid on that and then you but stickers on it and then you put a little bow around that I mean a lot of people's ship their goods this way um and that's perfectly fine if that's in line with your marketing your customer service and the branding for your business um that's not necessarily part of the product packaging that's a really nice gift box that you put it in um but unless it's necessary to your product you probably don't want to track it as product packaging you would probably want to track it separately um because it's not necessary to the cost of your goods sold right it's not necessary to put that product in the hands of a customer um this bag is pretty necessary because first of all it protects the plush if this were just sitting out all day in a store by itself you know it can get dirty you can get damaged um you can get full of dust um this is very often how they're displayed because it both stands up on the shelf because this thing will fall over otherwise or you can hang it. Um so becomes part of the display um and it gets used over and over again by the customers after they take it home. So that's product packaging does anybody have any questions about the product packaging? Okay, so this does not apply to shipping supplies. I think that little gift box would either be part of your marketing and selling expenses, which we're going to get into next. Or if it's very protective, you might lump it into your shipping supplies, so product packaging does not include shipping supplies. It does not include the box, the bubble wrap, et cetera that used to mail things to customers. Okay, next we have inventory. This is products that you buy outright and then resell. So this is a category if you have a vintage shop on etsy or if you have a supply shop on etc that you will use a lot. Um, this is not necessarily the things that you make yourself. This is something that you buy and then sell again to the customer without much intervention. Um, so when I had my meat shape plus joi business, I had these little buttons that said on them, I love you more than insert name of meat here I love you more than ham I love you more than bacon I love you more than pork I love me more than steak umm they were a great marketing tool um and they were something that I bought once I figured out that I could, um basically I used to make all of those buttons by hand with one of those like little clam per button makers um and I was really injuring my hand which was terrible because as a creative professionally needed my hands to make the rest of my money I needed to draw with that hand I needed to so with that hand I need to to type that do bookkeeping with that hand um so making all of these buttons on this little like clapper it was just not good for my health. Uh so then I found out oh, there are tons of places that will make these buttons for me you know, twenty five cents a piece like an order hundreds of them or thousands of them and nobody cares that my buttons are not like made by me in my studio there still made on a bun machine by your person you know, um so I started buying those as inventory and then reselling them um and then some of them I took out of inventory and use them as marketing to put, uh onto the toys when I sold them um production labor so this is if you hire somebody else to help you make stuff um this is not your own labor uh we'll talk a little bit more about equity in a second but what you put into your own business uh is neither an income is neither income nor an expense um that's equity and we'll talk about what that means in a moment but eso your own labor your own money none of that is part of this cost of goods sold. None of it is part of the income or the expenses. Um this is also not people that you hired to do anything for you other than and help you make the products itself. Um so if you hire somebody to help you string those necklaces ah that's production labor if you hire someone to help you design your website that's contract labor and we'll get to that on the next page because there's a whole other page of these woo yeah, we're speeding right along. Um and then other cost of goods sold expenses like, for example storage if you carry a lot of inventory it's very big need to pay for storage somewhere. Okay um questions about any of that okay marketing and selling this is the other big expense category that you will probably have as an etsy seller first of all you've got you're selling fees and were to break these down in another slide shortly but you have all those different fees that we talked about, right? You have your listing fees you have um e commerce fees you have craft fair fees uh you've got the merchant service fees that etc charges for the direct check out and then you've got their commissions where they take a cut of every sale that you make you've got advertising and promotion, which is a really big category includes business card that includes sponsorships it includes trade shows, other things like that andi even other expenses like if you were going to register intellectual property like copyrights or trademarks were maybe even patents either a design patent or like an actual patent if you make things and you've discovered a novel way to make something on you were parenting that okay great, but then into your marketing and selling expenses and and as well as we'll discuss a little bit later where you categorize things with some minor exceptions is also up to you in the same way that the names of the categories are essentially up to you. So if you wanted to put web design under uh, advertising and promotion as opposed to under contract labor that's kind of your prerogative if that's how you want to track it if you're trying to set up a marketing plan for yourself a budget around that on you consider a new web design to be part of that. You may want to keep it within the advertising and promotion category, as opposed to the contract labor category. If, on the other hand, you're concerned that your hiring too many people to do parts of the business that you could be doing yourself, or that you could be finding less expensive contractors. For. Then, you might want to track it in contract. Labor, it's all about the goals that you have for your business and what you want to track.
Ratings and Reviews
This is a meaty course that has you at a run from the moment it opens. If you are like me and you have been wanting to start a handmade business using Etsy, this will be a great course for you! What I like best about this course is the information that is given is not from a sterile corporate perspective. She has been down in the handmade trenches from the very beginning of Etsy so she has seen all the changes. Lauren also shares the realities of business and shows you how to calculate the actual costs that go into your products. She gives you the knowledge and resources to know how to set up your book keeping as it relates to Etsy. The only negative about the course is that there is literally not enough time to cover EVERYTHING that you might run into for your personal situation concerning Etsy, but she does give you enough information and resources through her Extras that gets you in the right direction. I would sincerely recommend this class!
a Creativelive Student
This was so helpful! I have been wondering about so many things the last few months since I opened my shop on Etsy and have found some information, but often it is encrypted in such technical terms that it feels so unclear. I felt like Lauren answered so many of my questions (as well as questions I didn't know that I had) with such clear, easy-to-understand ways! I can't recommend this course enough! Thank you Lauren for making complex processes of bookkeeping seem reasonable and doable. Thank you for sharing experiences to back-up the information that you shared. This was wonderful!
a Creativelive Student
This course has a lot of helpful information, but I do caution that there isn't really enough time to get it all down if you are watching the livestream. Also, quite a bit of time is spent talking about VAT rules which are out of date, and much easier to deal with now.