End of year prep

[Lin19687]

I know the year isn't fully done but I just started to put all my receipts and such together for taxes and such.

Do you wait till the end of Dec to calculate how the year was or do you do it as you go?

I have one of those accordion folders where I put receipts and such in. But then I stopped using it because so many items were purchased online that I figured I would just print them all out at then end of the year.

I didn't realize how many little things I bought through out the year at local shops to try out new things

I am not even sure how well I did this year but I know that a few of my bigger shows were not as good as last year.

So have YOU started to get your Tax stuff together and how was the year for you?

 

[soapmaker]

Oh dear Lin. My poor mind can't handle waiting till end of year. I print each on line invoice as I go and file it in order by date with all my other receipts. But as to how well I did, that I wait till the end of the year to find out as my months vary so much because I sell from home mostly. I did one show in September, didn't do too well. And one in November, did very well.

 

[Nanette]

I know the year isn't fully done but I just started to put all my receipts and such together for taxes and such.

Do you wait till the end of Dec to calculate how the year was or do you do it as you go?

I have one of those accordion folders where I put receipts and such in. But then I stopped using it because so many items were purchased online that I figured I would just print them all out at then end of the year.

I didn't realize how many little things I bought through out the year at local shops to try out new things

I am not even sure how well I did this year but I know that a few of my bigger shows were not as good as last year.

So have YOU started to get your Tax stuff together and how was the year for you?

I file tpt taxes quarterly, so I have the totals and receipts at least that much organized....lotta receipts to keep track of if you wait until the end of the year. And I havent done as well this year as last year.

 

[amd]

It depends. I keep track of all my sales and COGS (cost of goods sold) throughout the year, mostly because I pay taxes bi-annually, so I at least need to know sales so that I can pay them in July and January. Because of all the different taxes (city, county, state, and in some cases tourism tax) and my faulty memory, I've discovered it works better if I track my sales weekly because there's a better chance I'll remember when I sold it and which taxes apply. I've got my sales tracking spreadsheet mostly automated so that I can select the state, city, county, and tick the tourism/no tourism box and everything autofills for me. I love excel formulas.

I do inventory following every show and the market that I sell soaps at is really great about sending me an inventory sheet that says which soap sold, so that helps me keep track of COGS.

My other receipts - show fees, office supplies, etc - I'm not so much on top of. I try to do it once a month, but I'm pretty sure I haven't done any since June...

I only use my business acct for business expenses, and there's only a slight difference (maybe $150) between what my spreadsheet says I took in in income and what's in my bank account, so I think it's safe to say that I had a really good year!

 

[TheGecko]

Speaking as an accountant, the least favorite job for any business owner is bookkeeping...so much so that even bookkeepers have bookkeepers. LOL

It’s a good idea to establish good record keeping habits from the beginning. I print out all my orders so I can check them against my packing slip, because sometimes I use ‘guest’ checkout, because eBay and Etsy eSellers come and go and if my computer goes down or I lose Internet access, I still have a paper trail.

Even if you are a small Sole Proprietorship, you can apply for an EIN and establish a business banking account and then only use it for business to make tracking income and expenses a little easier.

As for tracking income and expenses, follow the KISS rule. You can use a ‘journal’ and record how much of what you sold. If you don’t think you will have time to record each sale at a market/fair, then do an inventory before and after. You can use a spreadsheet program like Excel or you can use a ‘checkbook’ software like Quicken.

I really dislike doing my own bookkeeping because that is what I do for a living, but because it’s what I do for a living, I know how overwhelming and time consuming it can be if you let it go for too long and how easy it is lose receipts or forget little things. So like it or not, I spend an hour in front of my computer once a week doing my ‘books’ even if I am only accounting for the ingredients used to make a new soap or something.

 

[MarnieSoapien]

@TheGecko - Good suggestions and advice. I file taxes quarterly and am a bit lax now. But when I start selling, I will need to be much better organized. I had an excel spreadsheet with all of my ingredients, date purchased, distributor, cost per gram, etc, etc in my computer, plus another document with each batch of soap made, batch number and the like... and then I accidently dropped my computer and now it needs to take a trip to the computer repair shop. So, I might have to invest in a notebook too.

 

[TheGecko]

@TheGecko - Good suggestions and advice. I file taxes quarterly and am a bit lax now. But when I start selling, I will need to be much better organized. I had an excel spreadsheet with all of my ingredients, date purchased, distributor, cost per gram, etc, etc in my computer, plus another document with each batch of soap made, batch number and the like... and then I accidently dropped my computer and now it needs to take a trip to the computer repair shop. So, I might have to invest in a notebook too.

Bookkeeping for soap making (and other 'bath and body') falls under two categories...retail and manufacturing. Retail is fairly easy...you buy a product, you sell a product; at the end of the year you want to have the least amount of product (inventory) in stock because you pay taxes on it. Manufacturing is a little more complicated because you are turning raw ingredients into a product which requires two different valuations and then there issue of year-end inventory. You can let yourself run low on raw ingredients on December 31st and then have a huge order delivered on January 2nd. but then there is an issue of your soap (inventory). Not counting the saponification process which can take anywhere from 18 hours to three days depending on your recipe, you have curing time so how does the valuation work? Best guess is that it's not soap until it's ready to sell. I say 'guess' because there is a new area for my boss and myself and we are researching it. But honestly, for a small soap making/bath & body business, I would just use raw ingredients.

The three parts of the Profit & Loss Statement is Income, Cost of Good Sold and Expenses. Income is fairly self-explanatory...it's the money you get from your customers when they buy your product. COGS and Expenses are a bit different; COGS is money you spend that is directly related to sales. This would be your raw ingredients, merchant fees, packaging, shipping supplies and shipping costs. Expenses are stuff you still pay for even if you never sell a bar of soap; advertising, website, insurance, utilities, licences, rent, tax prep, office supplies. And because I know someone might ask...what about equipment? Molds, stick blender, racks, shelving, scale, bowls, containers, spatulas, etc. These can fall under two categories...Assets and Expenses. For your first year of business, these would be lumped all together as a General Asset and fully expensed as they only have a year of 'life'. After that, they are Expensed as Supplies. The exception would be more expensive equipment...something that you have dropped a few hundred (or more) dollars on and that will last you for several years; those are Assets.

The bottom line...money in - money out = profit and that is all the government really cares out. You can track it on a cocktail napkin if you want or you can use fancy software, but best practices...track it as you go. That way when the year ends, the majority of the work is already done.

 

[Carl]

I've been doing this for soaping and for some other business activities in the past that I've done.

Every receipt gets scanned into a .pdf. The filenames of the PDFs are 19001.PDF, 19002.PDF, 19003.PDF, etc.

This filename then references a row in my Excel spreadhseet.

So my Excel sheet may look like the following:

12/01/2019 Turnpike Tolls $10.00 Transportation 190001.PDF


This way at the end of the year, I can order the Excel sheet by the classification, highlight the rows and sum them up. I try to make my classifications as close to possible as the boxes on the IRS forms.