![]() That means you’re legally obligated to register for a sales tax permit in that state and collect sales tax from buyers who live there. In short, sales tax nexus refers to the situations where you reside in one state, but meet a certain revenue threshold in another. One particularly tricky topic in the sales tax realm is sales tax nexus. Determine your sales tax nexusĭepending on your income, product, and sales platform, you may be expected to pay sales tax quarterly or even monthly. Most frequently, you’ll see accrual accounting with larger, more established businesses. You always know exactly how much cash you have at a given point in time.Īccrual accounting on the other hand, is a method of accounting that documents transactions when they occur, even though the business owner hasn’t yet received the funds. Ultimately, most small businesses opt for the cash basis method because it’s easier to learn and manage. This income would remain off your records until the customer pays and the transaction clears. Say, however, that you waited until today to send out the wedding decorations invoice, and your customer has not yet paid. Essentially, it’s the same way we handle our personal finances.įor example, when a customer’s payment for the wedding decorations they ordered clears, you add it to your ledger. Here’s a bit more about each.Ĭash accounting records transactions once money has exchanged hands. Your first job as a new business owner, at least one new to the world of accounting, is to decide which method you will use. There are two primary types of ecommerce accounting: cash and accrual. Decide whether you’ll use the cash-basis or accrual method of accounting. Here’s how to ensure your business thrives. Specific bookkeeping considerations for Etsy sellersĪs an Etsy seller, you face a unique set of challenges when it comes to managing your finances. Preparing reports, statements, and models Reviewing financial statements prepared by a bookkeeper Some tasks that accountants typically perform include: If your bookkeeping is out of date, any accounting findings will be unreliable. For Etsy business owners who want the extra analysis to help inform business growth, it’s crucial to understand that the accuracy of your accounting analysis relies directly on how accurate your bookkeeping records are. Preparing balance sheets and profit and loss statementsĪccounting, on the other hand, looks at the bigger picture. Bookkeeping is the recording of a company’s financial transactions, while accounting analyzes and interprets those transactions.Ī few examples of common bookkeeping tasks include: If profits remain similar, how many months before you can purchase that new pottery wheel?Īlthough “bookkeeping” and “accounting” are frequently used interchangeably, they actually refer to two different functions. How much profit did your Etsy business earn last month? Which live selling event led to the most revenue? Which of your Etsy shop’s products was most popular this year? How much did each of your finished items cost? By using financial data, Etsy entrepreneurs like you can determine other important information, such as: Produce financial reports and make educated financial decisions.Īnd that’s not all. Spot trends and establish clear growth benchmarks. Provide the in-depth financial history needed to qualify for a loan. Make data-driven business decisions instead of relying on gut feelings.ĭetermine how to manage cash flow during challenging seasons.ĭetect fraud and other banking errors more easily. Staying on top of your books also enables you to: Your business’s health is directly related to how accurate and up-to-date your books are.įor example, keeping up with your books gives you a better handle on your cash flow, which is a major factor for 82% of small businesses that end up failing. How can bookkeeping help your Etsy business?
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