Turn Bookkeeping Into an Endurable Task

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Whether you sell online as a hobby or a business, keeping good records of your financial activities is important—but it doesn’t have to be a dreaded chore. The key is not to ignore your finances until April comes around. We’ve come up with a few suggestions and hints you can enlist to keep recordkeeping as simple as possible. Take a look below.

Keep your records from your online selling activities separate from your personal activities, or other business activities. This doesn’t have to be complex or burdensome. Try keeping a filing cabinet devoted only to your business. Each year, securely store the records so you’ll be able to retrieve them quickly and easily when needed. You might also want to consider a separate bank account just for your online business. This way all the proceeds from your sales will go into this account, intact. Also note that disbursements, i.e., money going out of the account, should only be related to your business or to you personally, not to other personal expenses.

Consider using a computerized bookkeeping package. There are many bookkeeping packages available, and they’re affordable and easy to use. One of the first things you’ll need to do with these programs is define a chart of accounts, or CofA. This simply means you’ll need to create categories of the types of revenue (money coming in) and disbursements (money going out) for your sales. If you take the time to carefully define your CofA then producing meaningful reports later will be much easier. Remember, if your sales are a business, third parties (e.g., banks, IRS, etc.) may need to see reports on what your business has been doing over the years.

Keep track of all revenue and expenses. Of course the main reason to keep accurate records is to know how much of a profit you are making. To really know for sure, you need to accurately record all the revenue and expenses related to your sales. When recoding your revenue, make sure you are recording it in “gross.” This means before any bank, credit card or online fees are deducted. These fees should be recorded as expenses. Make sure you are considering all of your expenses. If this is a business that you are reporting on your tax return, then you’ll want to take advantage of all allowable deductions.

Break up the work. Depending on how active your business is, devote some time every day to keeping up on your financial activity, or do it once a week if your business is less active, to keep the workload manageable.

Get help if you need it. There are computerized tax-preparation products available that can help guide you through the ins and outs of deductions. And, of course, you can visit a certified tax professional. The benefits may greatly outweigh the cost.

Remember, keep it simple, accurate and up to date, and your bookkeeping will be easy.