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Your Finances Made Easy

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One of the most important goals of Hello Etsy is to cover a broad range of topics that are useful to small business owners. Whether it's social media or understanding why community-based economies are important we hope we've  covered most everything you need to know to make your business work.

 

Keeping track of your finances is certainly one of those topics. And while it may not be your favorite thing to do the good news is that it doesn't have to be difficult. Or at least that is what our friends at Outright have promised us! If you are able to attend Hello Etsy in Portland, Los Angeles, San Francisco or Brooklyn you can see for yourself at one of the workshops they will be leading. But for those of you who can't make it we asked Outright's Ryan Thompson  for a little insight on how to keep our finances in good order. The first thing he suggested we tackle is the income statement.

 

One of the easiest ways to get a handle on the cold hard facts of your business finances is to look at your income statement. Also known as a “Profit and Loss Report,” an income statement shows how your business did over a period of time, say the month of May 2011 or January 1 through December 1, 2010.

 

Let’s go over some terms you’ll encounter when looking over your income statements, plus some ways you can make more money through your business.

 

Income: This covers everything you’ve actually sold through your store or jobs you’ve worked. Anyone selling products online values income as “x” units sold – 100 necklaces, ten handmade soap sets, etc. To grow your sales and make more income, you must either sell more items or adjust prices. If you’ve never tested your pricing, right now is a good time to start.

Cost of Goods Sold: Cost of Goods Sold, or COGS, is every penny you’ve spent making or buying the products you sell online. For many Etsy sellers, this includes money for fabrics, beads, junked items, or gallons of paint. If it went into making your product you sold online, it goes into COGS.

Operating Expenses: Of course, COGS are not your only expense. You were probably wondering where printer ink, listing fees, and marketing expenses went. Well, you found it – it’s called operating expenses, and it includes everything else you spend for your business that doesn’t directly go into the product you made. Now you have a place to categorize all your PayPal fees!

 

What’s left? Profit, i.e. how much money you actually made by being in business. Well, except for one exception: taxes. Depending on your exact situation, you may have collected sales tax which you’ve paid in. That must be figured in, as does any income tax. But tax deduction is a topic for another day – stay tuned.

 

 

 


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