How to succeed with bookkeeping for a handmade crafts business

Many people make their own handmade crafts as a hobby. They might make jewellery, knit clothes or create art by painting or drawing. Some of those people even start businesses based on selling those crafts. Like any business, good bookkeeping is essential for the business to operate successfully.

This article will focus on showing you how to succeed with bookkeeping for a handmade crafts business. We’ll look at a variety of bookkeeping and accounting tips, such as:

• Record your expenses
• Budgeting is key
• Consider using an accountant
• Make bookkeeping easy with Countingup

Bookkeeping is vital for any small business. Selling handmade crafts is no different, as without well-organised financial information, you’ll struggle to run your business effectively. One of the most critical tasks that make up bookkeeping is recording all of your business expenses.

Since you’ll likely be making and shipping your products regularly to fulfil customer orders, there will be a lot of expenses to keep track of. Try to put a system in place for organising your costs to ensure they’re easy to access in the future. 

One of the best ways to do this is by using a business account to make any company transactions, as the account will record and store all your transactions (including expenses). One example of a good business account is Countingup, which has a ton of built-in accounting software to make bookkeeping simple.

The primary reason to track your expenses is to claim them back when filing taxes. For instance: if you earn £40,000 and claim £10,000 worth of expenses, you will only have to pay tax on £30,000 of your earnings. 

Claiming expenses can reduce your tax bill greatly, so remember to look into the range of business expenses you can claim while doing taxes. In addition, if you operate your company and make your crafts in your own home, remember that there are also expenses you can claim while working from home.

You may already be familiar with budgeting, as you’ll likely have put together a budget for starting your business. This is by no means the last budget you’ll make, though. When your company’s primary source of income is selling handmade crafts, it’s wise to create a budget either weekly or monthly. 

This frequent budgeting is smart because of the huge variety of expenses involved in running a crafts business. Some of the main ones include:

• The cost of materials for making crafts
• The cost of delivering your products
• The cost of packaging your products

Without a budget, you may spend too much on one of these expenses and not enough on the others. If you do, you’ll run into all sorts of problems, such as not being able to fulfil orders or create new stock.

It’s a good idea to consider the financial state of your whole business every time you create a budget, just in case you overspend and have to dip into funds that you’re planning to spend elsewhere. While budgeting is important for production, you also need to take into account the money you spend on marketing or operating expenses.

While recording your expenses is vital to ensure you don’t spend too much, recording your income is an equally important part of bookkeeping. Tracking sales and income helps you understand how popular particular crafts are. By comparing your current income to your income in previous months, you can also measure how successful your business is.

By tracking both your income and your expenses, you’ll be able to visualise your cash flow, which is how money moves into and out of your business. Having your cash flow provides you with an easy way to check your company’s health: if more money is coming in (via sales and investments) than is going out (via expenses), then your business is growing.

Sometimes it might be better to hire an accountant than to spend a lot of time learning to do it yourself. 

Although having the extra skill is handy, your time is immensely valuable, so hiring an accountant might actually be the best option despite the fees they charge. If you hire a chartered accountant, you’ll pay more than you would for most accountants, but they’re likely to do a far better job with your finances. 

That said, if you do some research on how much accountants charge for filing a tax return, you might be able to get away without paying too much.

If you do hire an accountant, another obstacle is sharing your documents with them. This can be a frustrating process if your financial data isn’t all in one place, but if you use Countingup, it becomes much easier.

With the Countingup app, you can share your accurate, real-time bookkeeping data with your accountant in seconds with the tap of a button. This way, you won’t have to worry about being chased for missing data, duplication errors, data lags or inaccuracies.

Selling handmade crafts is a tough job: as well as having the knowledge and talent necessary to make your own products, you’ll also need a keen understanding of business and financial management. If you find yourself struggling with the accounting tasks involved in running your company, consider using the Countingup app.

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

Click here to start your three-month free trial today.