eBay Success Depends on Good Record Keeping

Record keeping is a critical part of any business, and a task most of us don't like. Without a clear picture of your income and expenses, it is impossible to monitor the financial health of your business and make sound decisions. Many small businesses fail because they choose to ignore or postpone the task of record keeping.

eBay is fun. We all love the shopping, and some of us even like listing and shipping. Keeping accurate and current financial records isn’t anyone’s favorite activity. But neglect this task and it will come back to haunt you. I am speaking from the heart and from experience when I say that if you want to create a home business that will take care of you in the future, you must put a record keeping system in place.

One of the most important reasons to keep thorough records is to enable you to monitor the financial health of your business. Records can help determine if your income is covering your expenses and leaving room for growth. It’s important to keep accurate financial information throughout the year so you’re not stuck with a nasty surprise at tax time. Money in your bank account does not equal success in all cases.

I can’t tell you how many times I have consulted with clients about growing or fine-tuning their business, and they do not know simple numbers like their monthly profit or the amount of money invested in inventory. If you are not keeping track of your numbers, this is a recipe for disaster later. And most importantly, sales does not equal profit. I am shocked at how many eBay sellers don't know what percent of their sales they are actually keeping. Those charts on eBay and Paypal are pretty, they don't account for expenses like office supplies or inventory costs.

You’ll also need financial records if you decide apply for a business loan. The bank will want to review your history to determine your ability to repay the loan. Poor records could result in being turned down for a loan or getting stuck with a higher interest rate.

Good records can also help make tax preparation smoother and less expensive. If you don’t keep track of expenses properly, you may miss out on deductions. CPAs charge by the hour. If your records are not organized, you will pay for more work because the CPA will need more time to sift through your documents to find information to complete your returns.

Staying organized saves time. If you don’t ever get behind, you won’t have to spend days getting caught up. Plus, you’ll be ready for any business opportunities that may pop up. To stay current, it’s important to have a good system in place.

If you are selling on eBay, you must report the income on your taxes. Use a system that keeps information accessible so you can quickly find what's needed to do your taxes, or what your CPA asks for.

I recommend the eBay and Amazon Esales Tracking Spreadsheet. It was developed by a bookkeeper has also been an eBay and Amazon seller for years. This will be my 5^th year using Vickie's spreadsheet and it does everything I need. Vickie’s customer service is unmatched. If you aren’t Excel savvy, she will help you get started. The spreadsheet works on both PCs and MACs and Vickie is always responsive to questions if you need help.

The regular cost of the spreadsheet is $29.97, but Vickie is offering a special 25% discount from January 7 – 10 for my readers. She is also including some freebies if you purchase during this time:
 

• Inventory to list form: jot down the highlights of your thrifting or garage sale-ing trips so you don’t forget the details
• Master password log: For those zillion passwords you have scattered all over the place!
• Master to do list: A great way to prioritize everything you need to do today or this week

Use code SWTAX25 for the 25% discount. The spreadsheet is an instant download. Vickie will email your bonuses shortly after your purchase.

Please don’t wait until April to start getting eBay financial information in order. Save time and frustration by starting now and tackle this project during the slow month of January. When April rolls around, you will be all set!

If You Are Earning Money on eBay - Listen Up!

This is not a "what to sell" post or a "hot discontinued item" post, but I recommend you read it anyway. It could save you a lot of time, money, frustration, and disappointment in the future.

If you are selling on eBay, and depend on the income, or ever want to rely on the income to prove you can afford a mortgage loan, start preparing now. If you have any plans to move, downsize, or rent, start getting your paperwork in order now. Even if you already have a CPA.

Here is the problem. If a CPA has been doing your taxes for you, that is great! A CPA is trained to make sure their clients pay the minimal amount of taxes. With self-employed people and entrepreneurs, their goal is to whittle down "adjusted gross income" so that taxes owed are minimized. This is what accountants are trained to do. Unfortunately, CPAs and mortgage lenders are looking at financial information from two different perspectives. The CPA is looking a how low he can get your income so taxes are minimized. The mortgage lender (or apartment leasing office) is looking at a person's income and ability to pay, which is the amount of income they have claimed and what they pay taxes on.  Usually, you can't have it both ways - if you are self-employed, you may have to strategically prepare tax returns so that you can qualify for a mortgage.

This is where worlds collide and it isn't pretty. Let's face it, self-employed people can look bad on paper. Because of all the deductions we can take, and how we pay expenses out of our business accounts, our taxable income is usually much lower than what we actually "take home." I have talked to several sellers lately who have run into the problem of not being able to prove their income to get a mortgage. They may be able to afford where they live now and have excellent credit. But after the housing crash in 2008, lenders look at self-employed people much differently - as a risker borrower. It is all about how the numbers line up on the Schedule K (if you are an S-Corp) and how much of a salary you take. Bottom line:

The mortgage process is designed for people with a regular W-2 income, not entrepreneurs. 

I am not a CPA or a tax professional, but I am telling you to consult one if you have any plans of moving in the next 12 months. Make sure your CPA knows your goal of getting a mortgage loan or renting a new place. If you aren't showing enough income on your tax returns, or taking an official salary, you may not be able to qualify for a mortgage or even a rental agreement. It is tough out there for single self-employed folks when eBay is the only source or income, or both spouses are self-employed. This post not meant to cause panic or alarm, but to inform so you can prepare.

Start looking into this now because you may have to make adjustments to show more income so you can qualify for what you want in the future. You may need to show fewer write-offs or take a larger salary to make the numbers work. Disbursements usually don't count - you need to show a salary.

If you don't have a CPA, now is the time to find one. Check around in your area for CPAs who offer free initial consultations.  Call the Chamber of Commerce or use our good friend, Google. This is a great time of year to start a relationship with a CPA - come January through April they will be slammed during tax season.

And if you aren't keeping records on your sales, you certainly should be. (I recommend this spreadsheet for eBay sellers.) Get your paperwork in order now. Taxes and accounting definitely aren't the fun part of eBay, but just grit your teeth and do it anyway. Your future self will thank you.

A few tips:

1. Keep good records. Record all inventory purchases, fees, and supply expenses. KNOW WHAT YOUR PROFIT IS AND HOW MUCH MONEY YOU ARE MAKING. (Yes, I am yelling!!)

2. Don't co-mingle personal and business money. Lenders don't like to see that.

3. Mortgage lenders will look at 2 years of tax returns - so make sure you have enough time to get the right documentation in order before you plan to move. (Talk to a CPA!)

4. Work on improving your credit score. Self-employed people have been stereo-typed to have lower credit scores than W-2 employees.

5. Start saving for your down payment. A larger down payment may help counterbalance any self-employment income issues.

6. Talk to a CPA and different mortgage lenders. Seek out lenders who work with entrepreneurs - they may have some workarounds or connections that will help you. Some lenders won't even work with self-employed people because of all the extra paperwork and hassle.

Here are some helpful resources if you are considering buying a house (that includes downsizing) if you are self-employed (even if one spouse is self-employed):

Self-Employed? Good Luck Getting a Mortgage

How to Qualify for a Mortgage When You are Self-Employed

Self-Employed? How to Get a Mortgage

Get Organized for 2014

It's January again, and time to talk about goals, plans, and getting organized for the new year. 

If you haven't taken the time to set up a book keeping system for your online business, January is the perfect time to start. Vickie Stewart, who teaches our Bookkeeping Basics class, offers an easy, user friendly book keeping spreadsheet to track your ecommerce sales and organize your inventory and expense information. I've been using the spreadsheet for 2 years and it is very handy and easy to use.

The workbook is set up for eBay and Amazon sales yet could be easily adapted for any sales channel. This bookkeeping solution features separate pages for:

- Inventory (FBA & On-Site)
- Monthly Sales Tabs
- Year-End Sales Totals - Both eBay/Amazon Tabs
- Combined Year-End Sales Tab
- Expenses Tab
- Profit Loss Tab
- Sales Goal Tracker
- Mileage Log

Vickie also has included 45 minutes of tutorial videos, so even an Excel novice can use this tool. The user-friendly tutorials are included when you purchase the product and each step or feature has its own 5 minute video, so if you get lost, you can easily find the instructions you need. It's like having your own Excel tutor right on your computer.

What's also great about this tool is that you only buy it once - this is not a monthly subscription. Once you have purchased the spreadsheet, you will also receive yearly updates as Vickie continues to fine-tune the product. The price is $29.97 , and Vickie is offering a 25% discount to  my readers. Just use discount code SWTAX25 to get the discount, good until January 31.

Click here to get the eSales spreadsheet now!