Abby Glassenberg is a sewing pattern designer, craft book author and teacher. She writes about small business and the sewing industry on her While She Naps blog and is the author of The Artful Bird and Stuffed Animals. Abby’s ebook, The Insider’s Guide to Starting an Online Sewing Pattern Business, has helped hundreds of people start their own small businesses. You can subscribe to her newsletter to get the best in sewing, blogging and small business from around the web each week delivered to your inbox on Wednesday mornings.
Abby’s Baby Butterfly is a popular tutorial on our site, and her post about How to Turn Your Love of Sewing into a Pattern Business was a Sew Mama Sew Top 25 post in 2014. We appreciate Abby’s upfront discussions about the online sewing and craft industry, and we asked her to participate in our Sewing Resolutions series to help give us a fresh start to the new year. If you own a creative business you may be setting work goals right now, and Abby’s tips for bookkeeping will likely come in handy! In conjunction with this post Abby is also writing on her site about whether you need a bank account for your business or whether you can use PayPal alone. Take a look at While She Naps for Abby’s thoughts on this important decision.
The beginning of a new year feels like a fresh start. By making new year’s resolutions we state our intentions to improve ourselves in the year to come. This will be the year we actually go to the gym three times a week, or keep our studios organized, or eat healthier. While we typically think of New Year’s resolutions as personal promises, the new year is also an ideal time to make a fresh start for your creative small business.
As you’re looking ahead to 2015 and setting some business goals, add weekly bookkeeping and quarterly financial analysis to your list. Although they might seem tedious at first glance, conscientious bookkeeping can reveal fascinating information about your business that you’d otherwise be missing. It can help you decide where to focus your energies and choose what changes you might need to make in order to increase revenue and reduce expenses.
For many of us, sewing starts off as our hobby and slowly develops into a business as people ask to buy what we’ve made. Even if you’re only selling a few things here and there you should still do bookkeeping, especially if you have any aspirations to grow your hobby into a full-fledged business some day. Recording and analyzing what you’re spending and what your earning right now will help you to see what you would need to do to ramp things up in the future.
Weekly bookkeeping doesn’t have to be complicated. In fact, if your business is small, it can be very simple and, if you tend to it each week, can take just a half hour or so. To begin, gather a few supplies:
- Two-pocket folder
- Two file folders
- A Dedicated notebook for recording expenses and revenue OR a spreadsheet OR bookkeeping software like QuickBooks or Wave
Open the two-pocket folder and label one pocket “weekly revenue receipts” and the other pocket “weekly expense receipts.” When you get home from the post office or the quilt shop, put your receipt on the expense side. When someone writes you a check, photocopy it and put the copy on the revenue side. If someone pays you in cash, create your own receipt and put it there too.
Now choose a day and time that you’ll set aside each week to focus on bookkeeping. For me it’s Friday mornings. Empty out each side of your pocket folder and record what’s in there in your ledger. If you’re using a notepad, make a column marked “revenue” and a column marked “expenses.” Add a note next to each entry indicating what kind of revenue or expense it was – postage, fabric, web hosting, etc. If you sell your products online in an Etsy shop, enter each of those sales and don’t forget to enter the PayPal or Direct Checkout fees in the expense column. Once your ledger is up to date for the week, add things up. How much did you spend and how much did you earn that week? Which categories earned the most?
One week’s worth of data can only tell you so much, though, which is why quarterly financial analysis is also necessary. Again, it doesn’t have to be complicated. To get started, mark the end of the each fiscal quarter on your calendar (March 31, June 30, September 20, December 31). At quarter’s end add up the prior three months worth of revenue and expenses, separating it out by category. Try to pose some questions that the numbers might answer. Are you discounting your products so often or so deeply that you’re barely making a profit? Are you paying for an online service that you’re not really using (like blog hosting)? Are you charging enough for shipping and handling? Do you sell a product that is so popular that you should make more like it? Use the conclusions you draw to plan for the next quarter and to reevaluate your year-long goals. (To see what quarterly financial analysis looks like for my business take a look at my income reports: 1st quarter, 2nd quarter, 3rd quarter and 2013 Annual Report.
Sticking to a new year’s resolution is hard because it requires you to change your habits. Here are some tips to make weekly bookkeeping a resolution that will last:
Set Short-Term Goals In Order To See Long-Term Results
Take just half an hour to enter your revenue and expenses each week. Once you get a system in place, it’s a quick and easy task that, in the long run, produces powerful results.
Schedule Time For It
Choose a day and time for bookkeeping each week and put it on your weekly calendar. Setting aside time for it increases the likelihood that it’ll actually become a part of your routine.
Find a Friend Who Can Help Keep You Motivated
Do you know someone else who also sells the things they make? Promise each other that you’ll keep up with your bookkeeping this year and then hold one another accountable.
State Your Goal Publicly
If you blog or have a Facebook page, publicly state that one of your business goals this year is to keep up with weekly bookkeeping. Once you’ve said it out loud you’re more likely to keep your promise.
Celebrate Small Victories Along the Way
At the end of each quarter, once you’ve added up the numbers and taken a look at what they’re telling you, take a moment to celebrate the progress you’ve made over the past three months. The results of all your hard work are right there in front of you!
Reassess Along the Way
Perhaps you start the year off by recording your revenue and expenses on paper in a notebook, but mid-year you realize that it’s just too time consuming to do it all by hand. That might be a sign you need bookkeeping. Instead of giving up, take the time to implement a new system that will be more efficient.
Get Back On Track If You Slip Up
There may be a week or two throughout the year when you simply can’t complete your bookkeeping on the appointed day. That’s okay! It happens to the best of us. Just get to it as soon as you can. When instituting a new habit, the most important thing is to get right back on track when you slip up.
If you’d like to learn more about bookkeeping I highly recommend two upcoming CreativeLIVE classes taught by small business accounting expert, Lauren Vanell. Watch Bookkeeping for Crafters on January 15-16 and Bookkeeping for Etsy Sellers on January 17. Both classes run from 8 a.m. – 3 p.m. PST and are free on the day they air and available for a reasonable cost afterward.
Weekly bookkeeping makes tax time less stressful, but it’s also a powerful tool for you as a business person to understand what works and what doesn’t, what’s costly and what’s making you money, and to be able to make the changes you need to make so that 2015 can be your most successful year ever.