Last but not least in the world of Etsy is bookkeeping. You won't know if you made a profit unless you keep track of what comes in and what goes out. Your level of bookkeeping should keep pace with your level of buiness activity, and if things feel disorganized, they probably are. Don't wait until taxes are due to figure out if your business needs to file a Schedule C. If you get audited without filing and it turns out that Etsy is more business than pleasure, there could be trouble.
- KEEP GOOD RECORDS! Very important, and often ignored. I was not financially organized for the first 4 months of my life on Etsy, and it took some doing to get to a point where I could say with certainty that my shop was actually turning a profit. For tax purposes you will eventually need to keep track of your inventory and cash flow to be able to legitimately file a Schedule C income tax form (required for sole proprietary businesses), so there’s no time like the present to start!
- My personal solution is a homemade Microsoft Access database. Excel can be fine for lower volume sales and expenses, but Access will allow you to do more with the data - you can manipulate it in more ways without retyping the info. Anything that lets you spend less time doing the grunt work and more time making things will lead to a happier, more-productive you. Both Access and Excel will be able to accept the .csv (comma separated values) files that you can download from Etsy and PayPal that include detailed information about your Etsy fees and all of the data contained in each PayPal transaction. With Access, I am able to print labels for each listing, generate reports that allow me to copy and paste information to reduce the typing required when I list, and link information between Etsy and PayPal to find out exactly how much profit I make from each item I sell. You can do so much with it that it is worth a browse of a MS Access tutorial if you already have the software on your computer.
- Information that you can download from Etsy includes detailed data about your sold items (found at the bottom of the page in the 'Sold Items' tab in 'My Etsy') as well as your Etsy Bill (found at the bottom of the page in the 'Etsy Bill' tab in 'My Etsy'). From PayPal, you can download all account activity, or a filtered version of it, by going to drop-down menu of the 'History' tab while logged in to your account, and selecting 'Download History.