Ultimate Guide to Bookkeeping for Resellers
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Are you ready to conquer the world of reselling? Don't let bookkeeping bring you down! We've got the ultimate guide to bookkeeping for resellers right here, ready to be your friendly companion on this journey. We'll delve into the intricacies of numbers and turn them into an exciting adventure, just like hunting for that next big item to resell.
What is Bookkeeping for Resellers?
Bookkeeping is the process of recording, organizing, and managing financial transactions. As a reseller, this means keeping track of all your sales, expenses, and profits. It may sound overwhelming, but having proper bookkeeping is crucial for the success of your business. Not only does it help you stay on top of your finances, but it also provides valuable insights into your business's performance.
Why is Bookkeeping Important for Resellers?
Aside from staying organized and informed about your financial situation, bookkeeping has several other benefits for resellers:
Tax Compliance: As a reseller, you are responsible for paying taxes on your business income. Proper bookkeeping ensures that you have accurate records of your sales and expenses, making tax season a breeze.
Business Growth: By tracking your profits and expenses, you can identify areas where you can cut costs or increase revenue, leading to overall business growth.
Financial Analysis: Bookkeeping allows you to create financial statements that provide an overview of your business's financial health. These statements can help you make informed decisions and set goals for your business.
Getting Started with Bookkeeping for Resellers
Now that you understand the importance of bookkeeping, let's dive into how to get started with it for your reselling business.
1. Choose an Inventory Method
In the reselling community, the terms cash inventory method and accrual inventory method get used frequently. While these aren't technically accounting terms, it's important to know what each means.
There are two basic methods to choose from:
Cash inventory method: With this method, you expense/deduct inventory when you buy it.
Accrual inventory method: With this method, you expense/deduct inventory when you sell it.
Most accountants will encourage you to use the accrual inventory method because it is more accurate. On the other hand, the cash inventory method has the advantage of being faster. If you’re not sure which method to adopt, the best thing to do would be to speak with an accountant.
If you're using the accrual inventory method, you'll need to track your inventory and provide three numbers on your tax form to calculate your cost of goods: beginning inventory balance, purchases during the year, and ending inventory balance. If you’re not sure how to track your inventory so that you can produce these numbers, you should look for a reseller spreadsheet or software like My Reseller Genie that will take care of the math and organization for you.
2. Keep Track of All Transactions
To have an accurate overview of your finances, you need to record all transactions related to your business, including purchases, sales, and expenses. This includes items you buy for resale as well as any fees associated with selling on platforms like eBay. It's essential to keep all receipts and invoices for these transactions.
3. Create a Bookkeeping System
Having a bookkeeping system in place will make it easier to keep your finances organized. This can be as simple as using an Excel spreadsheet or investing in an affordable accounting software like My Reseller Genie. Whichever method you choose, make sure to regularly update it with your financial transactions.
4. Keep Personal and Business Finances Separate
One common mistake among resellers is mixing personal and business finances. To avoid confusion and ensure accurate bookkeeping, it's crucial to keep these two separate. Consider opening a dedicated bank account and using a separate debit or credit card for business expenses.
5. Reconcile Your Accounts Regularly
Reconciliation involves comparing your records with your bank statement to ensure all transactions are accurately recorded. It's essential to do this regularly to catch any discrepancies and maintain the accuracy of your records.
6. Consult a Professional
If bookkeeping seems overwhelming, don't hesitate to seek help from a professional accountant or bookkeeper. They can guide you in proper bookkeeping methods and ensure your records are accurate. Accounting for resellers is not hard if you have a system!
How to track Ebay inventory
Yes, tracking eBay inventory is a crucial aspect of owning a reselling business. As you buy and sell items on eBay, it's essential to know what inventory and sales you have to accurately record your profits and expenses. This information can also help you make informed decisions about which items to restock or discontinue based on their performance.
Here are some tips to help you effectively record your eBay inventory:
Use Inventory Management Tools: There are several tools available, such as My Reseller Genie, that can help you manage your inventory.
Regularly Update Your Records: To maintain accurate records, make sure to update your inventory and sales regularly. This will not only help with bookkeeping but also ensure that you have an accurate understanding of your current inventory.
Remember, consistent and accurate bookkeeping is key to the success of any business, including reselling.
How to track Ebay sales
As a reseller, eBay is likely one of your primary selling platforms. To track your eBay sales for bookkeeping purposes, you can:
Export sales reports from eBay: This report includes all the necessary information like items sold, price, fees, and date of sale.
Use accounting software: Many accounting software options like My Reseller Genie have integrations with eBay, making it easy to import your sales data. This not only saves time but also reduces the risk of manual errors.
Frequently Asked Questions:
Is Quickbooks best for tracking sales for tax time?
Quickbooks is a great accounting software for most businesses, but it is not the best software for eBay business accounting.
My Reseller Genie is specifically designed for resellers and has features like inventory tracking and sales reporting that make it ideal for bookkeeping purposes. Not only can you print off a profit and loss statement at the end of the year for your accountant, but you can easily track business trends. You’ll also be able to see areas where you may be losing money.
You won't know if you are reaching your ultimate goals unless you have a system to track sales across all selling platforms. With the analytics in My Reseller Genie, you can make decisions based on actual sales, profit and expenses.
Can I deduct eBay fees from my taxes?
Yes, you can deduct eBay fees from your taxes as they are considered business expenses. However, it's essential to keep accurate records of these fees for proper bookkeeping and tax compliance purposes. So, be sure to track them regularly in your bookkeeping system.
How do I increase my average sale price?
There are multiple methods to do this, but the best one, in my opinion, is to educate yourself on items that sell for more than your current average sale price. This can be accomplished in many ways.
My favorite way is to watch or listen to YouTube resellers and study sold listings on whichever platform you are selling on. Keep in mind that raising your average sales price does not always mean that you are increasing your profit margin.
Which reselling platform is most profitable?
For most people, eBay will probably be most profitable because it has the largest buying audience, and almost anything can be sold there. However, it's always a good idea to diversify your selling platforms. Consider trying out other popular platforms like Poshmark or Mercari to reach different audiences and potentially increase profits. Additionally, each platform may have its own fee structure and requirements, so be sure to factor that in as well.
Bookkeeping Tips for Resellers
Keep all receipts and invoices: These are essential for record-keeping and can also be used as proof of expenses during tax season, and can be stored either digitally or physically. (Paul should we add in here that you can either store your receipts digitally or physically?)
Set aside money for taxes: It's crucial to set aside a portion of your profits for taxes to avoid any surprises come tax time. Make your tax return as easy to fill out as possible.
Record mileage: As a reseller, you likely spend a lot of time driving to thrift stores, garage sales, and post office runs. Be sure to track your mileage for potential tax deductions.
Stay organized: Develop a system for keeping track of all receipts, invoices, and financial records. This not only makes bookkeeping easier but also helps with overall business organization.
Regularly review your financial statements: Don't wait until tax time to review your finances. Regularly reviewing your profit and loss statements can help you make informed business decisions and identify areas for improvement.
Consult a professional: As mentioned earlier, don't be afraid to seek help from a professional accountant if it becomes overwhelming.
Conclusion
Reseller accounting is not that hard, especially if you have a great method or software to help you out. Knowing your numbers for tax purposes is great, but it's easier to run a business when you have a good system in place, whether that is a reseller spreadsheet or software like My Reseller Genie. Tracking inventory, expenses, sales and profit is extremely important for any business.
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