What expenses should you track for your Craft business?
There are many expenses involved in running your own professional handmade business - we guide you though some of the most common ones.
An Expense is basically anything you spend in order to create a product that you sell. It is very worthwhile to track all of your expenses, not only for doing your accounts at tax time but also because it shows you your true profit margins on the things that you produce and sell.
Firstly, a tip is to keep receipts for everything you purchase - offline and online. For online purchases, either print a backup copy and file it with your paper receipts or create a special folder in your email program so you can quickly access these records if and when you need to.
Types of expenses you should be trying to keep records on:
This can include more than you think - not only the obvious like magazine and newspaper advertising, but also Google Adwords, ad spots on blogs, your website itself, online listing fees (such as on eBay or Etsy) Business cards, leaflets and brochures are also included in this category.
For a craft business, this will be one of your most important expenses. It's important to track exactly how much you spend on your raw materials as this can help you to set how much to charge for your finished goods. Dedicated craft business inventory software such as Craftybase is a great option for automatically tracking these expenses - it is designed specifically for businesses that produce handmade products.
This includes any machinery or equipment you use in order to create your products. Good examples are Sewing machines, Paint Brushes and knitting needles.
Fees & Charges:
Any fees or charges you have paid in order to sell your product - includes Show Fees, Consignment fees, Market Stall fees, banking account fees, PayPal transaction charges, online shopfront charges (Etsy, eBay)
This is any expense involved in running the office side of your business: pens, stationery, printer ink, letterhead, hang tags, postage and shipping.
Costs involved in getting you to and from shows, supply stores, business supply places like printers / accountants, potential client visits. This not only includes fuel, but can include meals and tolls.
Regular incremental payments for services involved in the running of your business. This can include trade magazine subscriptions and online software subscriptions.
Any liability / indemnity / casualty premiums you pay directly related to the running of your business.
Business use of home:
As many professional craftspeople work from home, this can be another important expense to track. Depending on the country you live in, you may be able to claim a percentage of the costs of running your home if you use a designated room for business purposes, so keep records of heating, lighting, electricity, phone and internet usage.
Legal and Professional Services:
The cost of drawing up accounts or contracts performed by other parties.
Another important one for businesses that rely on their equipment - you can normally claim any one-off repairs or regular maintenance of your equipment, so make sure you keep receipts for this work.
Business setup fees and any other costs involved in keeping your company legally registered. This can include business licences, occupancy permits and property taxes.
In addition to this list, there are many other expenses that can also be tracked depending on your business structure and if you currently hire extra people to help you run your company. It's a great idea to contact your tax authority to get a definitive list of all expenses you can claim for at tax time.