The Business Chat – The Joys of Bookkeeping!

You’re an artist, a craftsperson and
a passionate small business owner, but there’s a good chance you’re probably
not an accountant. Or a finance expert.
And you shouldn’t have to be.
We all know that the finance side of
managing a business can be challenging and not quite as much fun as making
pretty shiny things. When faced with a choice between playing in the studio and
doing your bookkeeping all of us would prefer to play.
However the health of your finances
is what keeps you in pretty shiny baubles. And maybe even allows you to pay
yourself.  
Staying on top of your finances is
not complicated or hard. I am a full-time lampworker and jewelry designer and I
do all my own bookkeeping. I don’t use any accounting software, just Excel
spreadsheets. I spend 2 hours a month on my books. That’s it. 2 measly hours. Every
spring I take my spreadsheets to my accountant and he files my taxes.
Easy-peasy.
There are 2 lessons I learnt early
on in my career.
First is that you need to do your
books every single month, consistency is key. You want to avoid that horrible
feeling in April when your taxes are due soon, and you have 8 shoe boxes of
receipts from the last year that have to be dealt with. Now that is NO fun.
Second lesson was to hire an
accountant to take care of filing my taxes. I do not know the tax laws and I
don’t want to learn them. An accountant went to school to learn this, I did
not. I would rather take jewelry classes. A good accountant will save you
oodles of money by finding deductions that you don’t know about. Spend the
money (mine costs $275).
In a nutshell here’s my monthly bookkeeping
routine.
On my desk I have a large blue
plastic envelope. This is where I throw all my receipts when I go through my
wallet and the bottom of my purse. I have a desk tray (lime green) where I put
my incoming statements (bank, credit card etc). I usually do the books around
the 18th of the month after all my statements have come in.
All my finances are in Excel
spreadsheets. I have the following sheets:
  • Income
  • Expenses
  • Income Statement
  • Cheques written
  • Account Payable – Money I Owe
    • Accounts Payable is often empty. It does fill up in the winter time when I am booking shows. By putting a line item here for fees that will need to be paid I can keep the amounts on my radar screen. It’s also useful for remembering things like the annual fee for web hosting, or other stuff that can catch you unaware.
  • Accounts Receivable – Money I am Owed
    • As I sell only for cash it is rare that there is anything in the Accounts Receivable sheet. If you were selling to stores on terms such as Net 30 you would be owed money.

My 2  hour sessions includes:
  1. Check my wallet again for missing receipts, also the bottom of my purse
    and grocery bags.
  2. Download my monthly paypal statement, this lists all my online sales.
  3. Download all my e-statements since most utilities are paperless. If you
    are working out of your house you can deduct a portion of your house expenses
    (such as hydro) as business expenses so make sure you have the statements.
  4. I make sure all income from the month is on a spreadsheet. ALL income.
    Make sure you separate the taxes collected from your actual sales. 
  5. Next is expenses. I use an Excel spreadsheet with different worksheets
    for different categories. For example, one worksheet is for supplies, another
    for office, another for rent (booth costs) etc. How you want to break your
    expenses down is up to you. I suggest that you ask your accountant. If you are
    a really small business you might just maintain one worksheet and have a
    separate column called Notes where you mark down what the expense is.  Again, make sure you separate the amount and
    the tax paid. 
    1. Note: when you claim expenses back when you file your income
      tax  you can only claim the actual amount
      and not the amount plus the HST paid. 
  6. Now I go over my bank statement. I have a separate business bank
    account. (link to separateing the 2) I check to make sure that I can account
    for everything coming out and that it is entered in my expense sheet. I check
    to make sure all incoming money is on my income sheet. I enter the banking fees
    onto my expenses form. If any cheques have cleared through I take them off my
    list of Cheques Written (oh so technical!).  
  7.  I go over my credit card statements. Sometimes spontaneous
    purchases happen, I want to make sure they didn’t happen too often. I also want
    to make sure that I have a receipt for each item I bought. 
  8. I check my Accounts Payable sheet to see if there’s anything coming up
    that will need to be paid.
  9. Last I enter both income and expenses onto my Income Statement sheet. An
    income statement is a sheet that list income and expenses telling you the net
    profit or loss. If income is higher than expenses you made a profit, if income
    is lower than expenses you lost money.
  10. I take all receipts for both income and expenses and shove them in a manila envelope. Label the envelope with the month and the year and stuff it into a box (blue of course). All business receipts must be kept for 7 years. 

 Do you see the other big advantage
to doing this on a regular basis? By separating out the taxes I have a running
total of how much tax I have spent and collected. When it comes time to filing
my HST return it’s done.
Finances aren’t hard
or scary. They only become scary when you let them morph into giant boxes of
unknown receipts or stacks of unpaid bills. Maintaining your business books
doesn’t require complicated formulas or calculations, it’s nothing more than
entering data from receipts onto a spreadsheet. 

4 Comments

  1. I agree with this. Bookkeeping is really something not everyone would like. But I think it is really important that we know something about it. Even though most of us think that it is boring, it is still very useful especially if you own a business.

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