Disclaimer: I am not a tax professional and this is not a comprehensive look at keeping records for your home or jewelry business. Please contact a tax professional for a complete list of IRS or tax requirements.
While I have devised a record-keeping system that meets my needs, here are some resources to help you establish a system of your own:
Getting Started
The system by which I've chosen to keep my records is electronic. I scan all receipts, and import into electronic files all mileage, cost of goods, and sales or expenses as they occur (ideally) or as an end-of-month record keeping task. These files are not only stored on my laptop, but on an external hard-drive, a secondary business computer and a cloud service. While at least one is always current, the other redundancies are updated monthly.
The system by which I've chosen to keep my records is electronic. I scan all receipts, and import into electronic files all mileage, cost of goods, and sales or expenses as they occur (ideally) or as an end-of-month record keeping task. These files are not only stored on my laptop, but on an external hard-drive, a secondary business computer and a cloud service. While at least one is always current, the other redundancies are updated monthly.
These e-files are broken down into the following categories:
- Tax Year
- Income & Expenses
- Shipping Fees
- Packaging Supplies
- PayPal Shipping Fees
- USPS Shipping Receipts
- Website Sales: Imported from my sales platform on a monthly, or quarterly or bi-yearly basis. This tracks transaction number, payment portal, customer contact information, date of purchase and purchase amount.
- Non-Website Sales: Includes screenshots of PayPal invoices sent and paid.
- Mileage Includes (Spreadsheet): Starting yearly mileage, date of trip, beginning and ending address, purpose of the trip, starting and ending mileage of the trip, total trip mileage, ending yearly mileage, total yearly mileage.
- Trips to Include (but are not limited to): post office for the delivery of customer purchases, post office for passport photos (when required for business-related international travel), airport, lunch with business prospects, hobby or craft or office supply stores, trips to tax professionals.
- Trips to Include (but are not limited to): post office for the delivery of customer purchases, post office for passport photos (when required for business-related international travel), airport, lunch with business prospects, hobby or craft or office supply stores, trips to tax professionals.
- Shipping Fees
- Inventory (Spreadsheets)
- Cost of Goods
- Cost of Goods Sold
- Cost of Goods (Gifts and Promotions)
- End Inventory (Raw Materials)
- Start Inventory (Raw Materials)
- Receipts (Possible Categories Include):
- Advertising
- Bookkeeping
- Office Supplies
- Electronic Devices
- Gemstones, Beads, Wire
- Payment Processing Fees
- Meals and Entertainment
- Displays
- Travel
- Tools
- Income & Expenses
Inventory (Raw Materials)
While most of the sub-categories listed above are self-explanatory, let's take a closer look at one possible way of maintaining records for inventory. I have, in the past, used Jewelry Designer Manager Pro, but found the program rather cumbersome for my needs. I've discovered, through the years, that keeping a minimum amount of materials on hand is most beneficial to me when calculating the tax benefits or disadvantages involved with ones inventory records. Purchasing materials as needed, verses an inventory surplus, means my capital is not tied up in unused materials. Remember: you can only claim deductions on materials in your costs of goods sold in any given tax year, not necessarily on materials purchased. However, inventory purchasing habits are entirely dependent upon the needs of your business, the nature of your product, and the market to which you sell.
Since my inventory of materials is limited, I find spreadsheets sufficient for my needs. Let's take a look at how I've set up my spreadsheets for inventory maintenance.
While most of the sub-categories listed above are self-explanatory, let's take a closer look at one possible way of maintaining records for inventory. I have, in the past, used Jewelry Designer Manager Pro, but found the program rather cumbersome for my needs. I've discovered, through the years, that keeping a minimum amount of materials on hand is most beneficial to me when calculating the tax benefits or disadvantages involved with ones inventory records. Purchasing materials as needed, verses an inventory surplus, means my capital is not tied up in unused materials. Remember: you can only claim deductions on materials in your costs of goods sold in any given tax year, not necessarily on materials purchased. However, inventory purchasing habits are entirely dependent upon the needs of your business, the nature of your product, and the market to which you sell.
Since my inventory of materials is limited, I find spreadsheets sufficient for my needs. Let's take a look at how I've set up my spreadsheets for inventory maintenance.
My categories include: Wire & Sheet Metal, Metal Findings & Incidentals, Seed Beads, Swarovski, Gemstone Beads, Gemstone & Glass Cabochons. Each category is listed alphabetically and these materials are stored in their containers alphabetically, so conducting an inventory checklist (quarterly, ideally) is as painless and seamless as possible.
When new materials are purchased, each are broken down by item name, size, number of items purchased, price per number purchased, price per each, and total cost in inventory. For wire, while most calculate the cost of wire used by inch, I have decided to calculate by weight, into price per gram. Sheet metal is broken down in price by sheet, but may be broken down further in my Cost of Goods spreadsheet, depending on how many pieces I'm able to complete from a single sheet. When a strand of beads are purchased, the strand is broken down by price per strand, price per bead, and total cost of beads available. Every time a bead is used in a piece of jewelry, for example, the amount of beads is subtracted from the Inventory spreadsheet and added to the Cost of Goods Spreadsheet.
Cost of Goods
When new materials are purchased, each are broken down by item name, size, number of items purchased, price per number purchased, price per each, and total cost in inventory. For wire, while most calculate the cost of wire used by inch, I have decided to calculate by weight, into price per gram. Sheet metal is broken down in price by sheet, but may be broken down further in my Cost of Goods spreadsheet, depending on how many pieces I'm able to complete from a single sheet. When a strand of beads are purchased, the strand is broken down by price per strand, price per bead, and total cost of beads available. Every time a bead is used in a piece of jewelry, for example, the amount of beads is subtracted from the Inventory spreadsheet and added to the Cost of Goods Spreadsheet.
Cost of Goods
When determining the cost of goods, each item used is transferred from the Inventory spreadsheet to the Cost of Goods spreadsheet and adjusted to reflect the amount used in the goods. So, for instance, I copy and paste the line "Copper Round Wire, Dead Soft 28g" from the Inventory spreadsheet, then adjust the "Grams/Pieces" column to accurately reflect the number of grams used in the piece while also subtracting that amount from the Inventory Spreadsheet. This way, both spreadsheets accurately reflect the transfer of inventory as each piece is constructed.
While this may sound complicated, once the spreadsheets are initiated, it's only copy and paste to keep each updated. I always maintain an unedited record of my inventory at the start of the year, and create a separate inventory list which is modified in real time, as jewelry is made and supplies are purchased or used. When an item is used entirely, the line item remains at zero in my End Inventory spreadsheet. This allows me to accurately determine all the supplies utilized from the beginning of the year, including supplies purchased and used throughout the year. At the end of the year, however, all lines with zero items is deleted, and this creates a "Start Inventory" list that will remain unedited in the following year. In essence, the "2017 End Inventory" list becomes the "2018 Start Inventory" list, minus all zeroed line items.
Cost of Goods is copied and pasted to the Cost of Goods SOLD list as each piece is sold. Customer name and date of purchase is added beneath the photo.
Now, using a program like Jewelry Designer Manager can certainly simplify the process for some, since it's all-inclusive in a single program and tax documents can be individually exported as needed, I personally found it more work towards its initial set-up than I was willing to invest and, upon discovering that tech support was not offered for the life of the program, I hesitated to perpetually re-purchase. I once had to transfer the program to a new computer, my files were lost and no tech support was offered to help recover those files, so I had to start from scratch. Insert the use of spreadsheets, especially those created in a free cloud service, which are updated and saved in real time and can be accessed from any device.
While this may sound complicated, once the spreadsheets are initiated, it's only copy and paste to keep each updated. I always maintain an unedited record of my inventory at the start of the year, and create a separate inventory list which is modified in real time, as jewelry is made and supplies are purchased or used. When an item is used entirely, the line item remains at zero in my End Inventory spreadsheet. This allows me to accurately determine all the supplies utilized from the beginning of the year, including supplies purchased and used throughout the year. At the end of the year, however, all lines with zero items is deleted, and this creates a "Start Inventory" list that will remain unedited in the following year. In essence, the "2017 End Inventory" list becomes the "2018 Start Inventory" list, minus all zeroed line items.
Cost of Goods is copied and pasted to the Cost of Goods SOLD list as each piece is sold. Customer name and date of purchase is added beneath the photo.
Now, using a program like Jewelry Designer Manager can certainly simplify the process for some, since it's all-inclusive in a single program and tax documents can be individually exported as needed, I personally found it more work towards its initial set-up than I was willing to invest and, upon discovering that tech support was not offered for the life of the program, I hesitated to perpetually re-purchase. I once had to transfer the program to a new computer, my files were lost and no tech support was offered to help recover those files, so I had to start from scratch. Insert the use of spreadsheets, especially those created in a free cloud service, which are updated and saved in real time and can be accessed from any device.
A Note On Bookkeeping Software
I admit that I am woefully unskilled in utilizing programs like Quickbooks to their fullest potential. For a couple years, I used GoDaddy Bookkeeping, which was incredibly intuitive and easy to navigate, though still (for me) an unnecessary monthly expense. While it tracked sales, payment processing fees, returns, in-state purchases (for state sales tax reports), receipts and quarterly tax payments made, I discovered these were all things easily exported from my sales platform and payment processors, into quarterly spreadsheets, and it proved itself a redundancy I just didn't need. I'm saving myself a yearly bookkeeping fee and only adding 10 minutes of work to my monthly bookkeeping processes. And, honestly, most of this bookkeeping and exporting of data would keep until my end-of-year review.
Ultimately, however, your sales, platform, payment processors will all determine your need for a specific bookkeeping software.
I admit that I am woefully unskilled in utilizing programs like Quickbooks to their fullest potential. For a couple years, I used GoDaddy Bookkeeping, which was incredibly intuitive and easy to navigate, though still (for me) an unnecessary monthly expense. While it tracked sales, payment processing fees, returns, in-state purchases (for state sales tax reports), receipts and quarterly tax payments made, I discovered these were all things easily exported from my sales platform and payment processors, into quarterly spreadsheets, and it proved itself a redundancy I just didn't need. I'm saving myself a yearly bookkeeping fee and only adding 10 minutes of work to my monthly bookkeeping processes. And, honestly, most of this bookkeeping and exporting of data would keep until my end-of-year review.
Ultimately, however, your sales, platform, payment processors will all determine your need for a specific bookkeeping software.
In Conclusion
Bookkeeping, inventory, taxes are all evil words.
Evil, evil words.
Though I have an understanding with my bookkeeping process, and me and my process are cordial to one another and exist as a working business partnership, I will admit I wont be inviting my inventory out for a drink any time soon.
And while I understand this article is only a quick outline of things to consider, I hope you found it useful during the discovery and establishment of your own evil, evil bookkeeping system.
Bookkeeping, inventory, taxes are all evil words.
Evil, evil words.
Though I have an understanding with my bookkeeping process, and me and my process are cordial to one another and exist as a working business partnership, I will admit I wont be inviting my inventory out for a drink any time soon.
And while I understand this article is only a quick outline of things to consider, I hope you found it useful during the discovery and establishment of your own evil, evil bookkeeping system.
