Etsy has emerged as the go-to destination for every small scale business. Its vivid interface, easy to understand and operate features, and a constant and heavy footfall of customers make it ideal for all sorts of business runners and owners. It has seen an exponential rise in both entrepreneurs and customers in the last decade. However, there are many financial and bookkeeping mistakes that these sellers keep on making which reduces their profit by a great margin.
Whenever someone opens up a business for the first time, there are many things that they need to know and understand. For instance, how to manage their taxes comes on the top of the list. However, there are areas of improvement in this, as anything done for the first time is prone to mistakes and errors. There are many online solutions available for this issue. You can also find many Etsy accounting solutions to help you keep clean tabs and records of all your expenses.
However, there are still a few mistakes that are made so commonly by the sellers that it does not look like an error to them, and hence it gets repeated. But do not worry, as the following article has got you covered. The following sections contain 5 common bookkeeping mistakes that all Etsy sellers should avoid:
1. Not Being Regular
If you want to stay at the top of your game, and make your business a booming one, then you must be regular to your books. Bookkeeping is the art of maintaining the books on a regular basis. Invest at least 10 minutes of your daily time to update the books. These updates must be done in a sequential fashion in order to avoid any last minute hassle and confusion. Also, a well-arranged record would make it easier for you to understand the sales and finances better at the end of the financial year.
Being regular does not mean that you have to study the records on a daily basis. Additionally, there is no use in giving extra time to it than that it is required. There is no benefit in wasting time which can be used in some other productive work.
2. Not Starting Early
Many businesses do not actually start to keep a record of their transactions from the very beginning of their journey. Most of them actually wait to get big and flourish first, which is understandable to some point. However, doing so is not a good practice, since everything in this economy demands proper documentation.
If you are planning to run a business on Etsy, and want to have a great time with the least hassle, then it is advised that you record and document every ounce spent or earned from the very first day. These proper receipts can be used to get tax benefits, as many things can be waived off, or reimbursed with their original receipts and valid reasons.
3. Forgetting About Sales Tax
Another important thing that most of the sellers forget is to register for sales tax, and include the same in your products and services. Many times, the sellers only charge the customers for the products without the sales tax. However, they are required to pay the sales deficit at the end of the financial year to the governing body. This usually results in a generous loss, and becomes a learning moment for them.
If you want to prevent yourself from such an expensive learning moment, it might be a good idea to understand the sales nexus beforehand. Doing some research and development of the same and making sure how much you would be liable to pay at the end of the year is also a great way to start.
4. Not Remembering Service And Platform Fees
Etsy charges its sellers quite a lot under the guise of its various fees, such as the platform fee, transaction fee, listing fee, advertisement fee and what not. Not being aware of these from the very start, or taking them lightly can cause a big hole in your earnings, making them go out of sight real soon. Therefore, it becomes quite important on your part to study each and every clause of your contract with the site to make sure that it is the best place for you to operate and run your business successfully.
Moreover, understanding every aspect of these fee structures would give an upperhand in the competition around you. Plus, these are usually common for everyone living in a country, but might vary as well. So be sure how to handle and manage your inventories.
5. Not Getting A CPA When In Need
A CPA, or a certified public accountant, would help you organize and make the best out of the bad deals. They are publicly available professionals, who are willing to manage your business and all its expenses for you in exchange for a nominal fee. Most of the time, sellers try to sort everything by themselves, and usually find themselves tied up in a spider’s web.
This sticky situation can be easily avoided by hiring someone to do the messy work for you. All you will have to do is to send them a copy of every receipt and order from your Etsy page.
They are also willing to help you understand how finances work, and how to file up for a return on investment at the end of the financial year. If you are vigilant enough, you can actually learn a lot from them, and might be able to do the work yourself as well. But until then, if it all gets a little too overwhelming, hire a CPA.
Whether you are a first time seller, or have a well-settled business on Etsy, there is always some room for improvement. There are some common mistakes that nearly every seller on this enormous platform makes. However, only those who identify and rectify these mistakes at the earliest have a great and flourishing business, be it on the platform or anywhere else.