Reduce the burden of bookkeeping using TCommerce.
The most important aspect of becoming a business owner is learning how to properly track your financials. Once you've got a grip in your financials it helps you remain organized and are able to make more informed, effective decisions for your company.
This blog entry is made available through Veronica Wasek. Veronica is an experienced expert on accounting as well as bookkeeping. She's a certified advanced QuickBooks ProAdvisor, and is she is also the author of the 5 Minute Bookkeeping.
What is bookkeeping and why do I need to know?
Let's start at the beginning--bookkeeping is the process of recording your financial transactions, like income, expenses, and profits. This is a record of all money that moves in and out of your business.
There are three primary reasons you should to keep track of your books for ensuring that your finances are accurate, to understand the state of your business and keeping tax obligations in check.
Ensure your finances are up to date
The first thing to do is make sure that your financial statements are up to date, meaning there aren't any missing, duplicate or miscategorized the transactions. This is important to ensure that you're not losing cash or paying tax too much.
One of the best ways to guarantee accuracy is by reconciling your earnings with your "source of truth" that is your company's banking account and the credit card statement, in order to see if everything matches up. If, for instance, your course's sales were $500 in the past 30 days but you have only $400 into your bank account, there is an error of $100 that you must investigate. Common reasons behind the discrepancy include student refunds or chargebacks. The goal of investigating this discrepancy is to ensure that everything has been recorded in a correct manner and you aren't missing any funds.
TCommerce provides an easier method of reconciling your books!
Go to your dashboard, to download your Payouts reports and Order Transactions Report in one click. This Order Transactions Report shows you each of the students' individual payments that were received within a specific date. The Payouts Report is similar to an account statement from a bank, which keeps a log of all payouts that were successfully deposited into your bank account within a specific time frame. You can compare these two reports when reconciling your books.
Another exciting feature coming soon will be Quickbooks Online integration with . This will allow you to automatically import sales, fees, and refunds to Quickbooks.
Access your Payouts Report by heading to Market & Sell > Payouts in your admin dashboard. Select your date range and click "export CSV."
Access your Order Transactions report by going at Market & Sell > Orders on your admin dashboard.
Understand Business Health
It is possible to use the financial statements to ensure that your company is in good health and expanding in a steady manner. These metrics help determine if you're able for your expenditures as well as if you have enough liquidity in your bank should problems arise.
In order to understand the health of your business, you will want to constantly be aware of four main indicators: expenses, profit as well as income tax and cash flow.
- Expenses - the amount that you use for your business (marketing and camera equipment)
- Profit - Profit equals income minus expenses. This is how much you earn at back to the home.
- Taxes on income are the amount you pay on a yearly basis. It is necessary to put aside money to pay tax on income.
- Cash flow Cash flow - money in the bank to cover future expenses
Costs and profits are the main metrics you will monitor, as you need to ensure that your company is successful or is on its way to profitability. If you're constantly paying more than you earn (beyond the initial costs for starting) it is something you should be aware of.
"A business may be profitable however it could fail when there's insufficient cash flow to cover upcoming expenses and taxes on income. It is important to keep track of the cash flow in order to ensure we are able to pay for future expenses, pay ourselves and pay contractors or employees."
- Veronica Wasek
Veronica clarifies that a healthy business is not just one that's profitable but also one that has a steady money flow that is that are set aside for when problems arise, and for the payment of income taxes. So you must be aware of all 4 metrics to have an accurate and complete understanding of how your company is doing.
In the midst of these essential measurements, there are several other Key Performance Indicators that are important to monitor in order to understand exactly what's happening with your company. If, for instance, you've had fewer sales this month, you'll want to find out why. For instance, did you have fewer Order Bumps? Is your Affiliate program underperforming? This is a crucial question you should ask your self on a weekly or monthly basis in order to find the root of your problem and decide ways to fix them.
A few examples of KPIs you should monitor are:
- Sales by course
- Coupon codes for sale
- Order Bumps for sale
- Affiliate sales, and other affiliate sales.
Compliance with tax obligations
The last reason you need to do bookkeeping is for compliance purposes. A financial report is necessary for preparing income tax returns and sales tax statements so you can complete tax fillings. Although we don't have a comprehensive discussion regarding taxation in this article (that's an entire issue!) It's crucial that those who earn a certain amount of income pay taxes on their product sales.
Sales Tax is a tricky subject because it is contingent on where your business is based and where your students are located. If your business is based in Canada it will be subject to an income tax that is different from someone located on the USA. If your student is based in California, they will pay taxes that are different from those who lives in Texas. It's a bit confusing that's why the majority of Creators who process sufficient sales choose to employ an outside accountant. One of the most crucial lessons for artists is that once you start growing your revenue, you'll have keep track of where your customers are located and put aside the time needed to calculate accurately for taxes.
is building exciting tools that will help in meeting your tax obligations. The company is now able to gather information about your location at the time of checkout and calculate your tax liability with The Transactions Report. This report will include enriched transactions data for purchases, such as student location so you can properly track your tax liability for any specific area. If this report is made available and you want to access it, click the Transactions tab in Market & Sell in your admin dashboard to access the report.
A proper bookkeeping manner and good practices
After you've figured out what bookkeeping is and why it's important and necessary, let's explore some best practices and suggestions that you can begin exercising for a smooth accounting.
Veronica's 5 Step Monthly bookkeeping procedure
Set aside at minimum an hour each month to dig into your book collection. This ensures that you're on the right track and that you do not forget the most important work. Follow these five steps:
- Note all financial transactions
- Consolidate transactions to corporate bank accounts and credit card accounts
- Check what your transactions were categorize
- Update and modify when needed
- Restrict and prevent any changes to the books once they are completed
Consider the use of accounting software
Monitoring your expenses and income is a crucial aspect of accounting. If you are processing an quantity of sales, you may be able to benefit from accounting software. The most popular tools for accounting are Zero, Wave Accounting or QuickBooks Online. The project is currently in the process of the integration of QuickBooks Online with Payments. Through this integration, all of your payments and reports are automatically brought into Quickbooks.
Three additional guidelines for bookkeeping to integrate into your routine
- Separate personal and business banking credit card accounts are separate from personal accounts
- Scheduling the time in your calendar for working on your books
- simplify your bookkeeping processes with TCommerce and its integrated payment processor
"I cannot tell you how easy our bookkeeping became in managing our own academy after we started with Payments! We were using Stripe and we had installments that required quite a while to process with Stripe. It's easy to put the job !"
- Veronica Wasek
Use TCommerce to make your bookkeeping effortless
- Access your payouts, Orders and Transactions reports
- Taxes can be accurately charged by collecting location information of the student in the checkout
- Integrate to Quickbooks to ensure that your pay report will be automatically deposited into Quickbooks on a daily basis.
Do you need help the setup? Check out the Help Centre article.