As an Etsy seller, you’re probably wearing a lot of hats. You’re the seamstress, the marketer, the salesperson, and the bookkeeper.
But don’t worry – I’m here to help take one of those hats off your head.
In this article, I’ll go over the key points that sellers like you need to know about Etsy accounting. Then I’ll cover some Etsy accounting software to manage your finances in a speedy, stress-free process.
Difference between Etsy bookkeeping and Etsy Accounting
Though bookkeeping and accounting are used interchangeably, they are two different things.
Bookkeeping is the process of recording financial transactions. While accounting is the process of interpreting, classifying, and summarizing those transactions. In other words, bookkeeping is the foundation of accounting.
There are a variety of Etsy shop bookkeeping tasks to do:
- Track expenses and taxes. Make sure that all the money coming in and out is accounted for.
- Enter Etsy sales invoices and bills into accounting software to track payments and spending.
- Settle these transactions against payments received and money spent. Spot any discrepancies.
- Generate balance sheets from inventory and stock information to know your Etsy shop’s financial health.
Meanwhile, accounting gives you the bigger picture. Etsy accounting tasks include:
- Financial forecasting and planning. they help you identify potential problems and opportunities.
- Auditing your books. This ensures that all your financial records are accurate and up-to-date.
- Filing tax returns. It can be a complex and time-consuming task. Still, it’s important to ensure that you’re paying the correct amount of taxes.
- generating financial statements and reports. These provide valuable insights into the health of your business.
Understand these Etsy bookkeeping and accounting tasks, and know the difference between them. You can then better manage your finances and ensure that your business runs smoothly.
Important things to know in accounting for your Etsy business
Etsy accounting can be a bit daunting if you’re not sure where to start.
For taxes, find out your reporting responsibilities.
These vary between countries and even states/regions. So make sure you know what paperwork is required, and when. Etsy has a great article that outlines the general requirements for US taxes.
Check with your accountant/tax advisor to see if there are specific requirements for your country.
Here are a few more pointers to cross off your checklist:
- Keep track of all sales and purchases. Include shipping fees charged to customers, and refunds paid back in your records.
- Process incoming payments and apply them to the correct invoices.
- Record all outgoing payments too. Along with any discounts you’ve given.
By tracking sales, purchases, and payments, your Etsy businesses can run without financial worries.
The best Etsy accounting tools
1. GoDaddy Online Bookkeeping
GoDaddy Online Bookkeeping is a tool to create professional invoices, track sales and simplify taxes.
GoDaddy Bookkeeping helps keep track of your Etsy income and expenses. It will show you profits and losses, as well as other important information.
Track how much time each customer spends in your store to understand how much it costs you. You will be able to see when an invoice has been seen or paid. You can also set reminders and accept payments online.
The Godaddy Essentials plan starts from $7.99 a month.
2. QuickBooks Online
QuickBooks is software that helps you with your taxes. You can connect it to your bank account and to Etsy. It comes with accounting features as well.
Enjoy features like invoice creation, tracking, and quarterly tax estimates.
The three pricing plans are
- QuickBooks Self-Employed Plan
- QuickBooks Self-Employed Tax Bundle
- Self-Employed Live Tax Bundle.
They cost $7.50, $12, and $17, in order.
The QuickBooks Self-Employed Tax Bundle comes with extra features. You can make quarterly tax payments and export Schedule C to TurboTax Self-Employed.
With the Self-Employed Live Tax Bundle, talk to a real CPA when you need. Get help and advice all year, and have a CPA do a final review of your Etsy store.
Xero is an accounting software for small businesses and it works with Etsy stores.
With Xero, record your cost entries and reimburse expense claims. Plus, with the expense management tools, you can view your spending too. You can use Xeros to:
- take photos of receipts
- reimburse expenses
- track employee spending
The software is also good to track your finances with accounting reports. Compare and calculate reports. Apply formulas to compare budgets versus actual spending.
Xero has three pricing plans. Early for $12 per month, Growing for $34 a month, and Established at $65 a month.
Sage accounting software is an industry leader and has options to start small. Then if your business grows, you can opt for bigger plans. It’s for Etsy shop owners who want to focus more on selling, and less on crunching numbers.
Its top features are:
- Send and track invoices
- Save receipts
- Stay on top of sales tax
- Do forecasting
- Make easy payments
- Share access with other collaborators on your store
Sage has two pricing plans. The Sage Accounting Start plan costs $10 a month, while The Sage Accounting plan costs $25 per month.
Should you use accounting software or get an accountant?
When it comes to managing finances, small businesses have a few different options. One is to use accounting software to handle bookkeeping and other financial tasks.
This works best when:
- your business isn’t too complicated
- you are comfortable with numbers
- you have some knowledge of accounting
- you can navigate around software easily
Another option is to hire an accountant. This can be a good choice when:
- you’re just starting a business and have the capital to spare
- you want someone else to handle your finances
- you don’t feel confident using expense tracking and accounting software
- your financial data is complex
There is no right or wrong answer when choosing between accounting software and an accountant. The best decision will depend on your needs and preferences.
Etsy is a great platform for artists and craftsmen selling online. But don’t neglect the financial and accounting side of your business.
This article is a basic overview of software and accounting processes. If you have more complicated concerns, it’s always best to consult with an accountant.
But this article has given you a good foundation from which to understand the financial side of your Etsy business. And don’t forget, the best way to keep track of your finances is by using accounting software designed for Etsy sellers.
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