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Know Bookkeeping for Etsy Sellers: A Guide for Creatives

When you opened your Etsy store, you probably thought about local bookkeeping services in Denver rather than spending hours crunching the numbers. You don’t have to be a math ninja in order to grasp the concepts of bookkeeping. This blog will teach you the basic bookkeeping skills every Etsy seller needs to know. Using tools also makes it easier.

The process of keeping a record of your financial transactions is known as bookkeeping, regardless of whether you use accounting software or physical books. Payroll & bookkeeping services in Denver can help you create accurate financial reports such as income and expense statements. You can use this to determine if your business has made a profit over a certain period of time.

Bookkeeping for Etsy

Your bookkeeping will differ slightly from general business bookkeeping because Etsy is a platform for ecommerce.

There are some considerations that will only apply to ecommerce, however.

  • Sales tax
  • Merchant Fees
  • Inventory Management
  • Tax deductions
  • Returns
  • Transaction volume
  • Compliance

Many DIY accounting programs can automate these processes. Some even integrate with Etsy. Many DIY accounting applications are available because managing your transactions manually can be time-consuming and laborious.

To manage the accounting department of Etsy sellers, many payroll & bookkeeping services in Denver use QuickBooks Self Employed, QuickBooks Online, Xero, and Wave. There are some limitations to QuickBooks for Etsy Sellers.

How can bookkeeping help your Etsy business?

Some renowned local bookkeeping services in Denver record, organize, and maintain financial transactions systematically. These services include recording income and expenditures, preparing financial reports, and managing payables and receivables. Accurate bookkeeping is essential for making informed decisions about your business and complying with tax laws. How accurate and current your books are directly related to your company’s health.

Maintaining your bookkeeping helps you to manage your cash flow. Cash flow plays a significant role in the failure of 82% of small businesses. Updating your books allows you to:

  • Make more business decisions based on data rather than gut feelings.
  • Tax deductions are identified.
  • Understand how to manage cash flow in difficult seasons.
  • Find fraud and other bank errors easily.
  • You must provide a detailed financial history to qualify for a business loan.
  • Avoid fines and penalties.
  • Set clear growth benchmarks, and identify trends.
  • Create inventory forecasts.
  • Making effective financial decisions and producing financial reports.

Etsy users can also determine other functions using financial data, such as:

  • How much did each of your finished products cost?
  • What was the most popular product on Etsy this year?
  • How much profit did your Etsy shop make last month?
  • What live-selling event generated the highest revenue?
  • Will you overspend on supplies?

While “bookkeeping,” “accounting,” and other terms are often used interchangeably, these are two different functions. Accounting examines the financial transactions of a business, while bookkeeping is the company’s records.

You may be asked to perform a number of common tasks in bookkeeping, including:

  • Transactions categorization
  • Invoicing
  • Inventory tracking
  • Create profit and loss and balance sheets
  • Reconciling bank accounts
  • Management of receivables and payables
  • Understanding Cash Flow Management

Accounting has a broader perspective. Accounting analysis is a valuable tool for Etsy businesses that want to grow. However, the accuracy of this analysis is directly related to their bookkeeping records. Accounting calculations are inaccurate when bookkeeping software is outdated.

Here are some of the tasks that accountants usually perform, such as:

  • Examining the financial statements of a bookkeeper
  • Prepare reports, statements, and models
  • Auditing Books
  • Tax filing
  • Financial forecasting
  • Completing risk analysis

The Bottom Line

Your Etsy business’s success is largely dependent on your bookkeeping. You may love making macrame wallhangings or crochet blankets, but ignoring your finances will lead to poor decisions and higher risks.

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