When I was a senior in high school we were allowed to take one class pass/fail. I chose math and thank goodness I did. I was really good at school. Straight A’s, Dean’s List, Phi Beta Kappa and all that, but math had started to be my downfall and it was about to get worse.
Every day my math teacher, Mr. Lishka, would put a quiz on our desks before we came into the room. Once the bell rang we had five minutes to complete the quiz. I would sit down and start working and just when I was figuring out the answer he would announce, “One more minute.” That would be it for me. My concentration was shot and I would give up.
I hated going to math class. I had loved math as a kid, but not any more.
By the spring I’d already been accepted into college and taking those quizzes became less important to me. I pretty much stopped trying. By the end of the year my grade was just one point above the failing mark (whew!).
The last week of school Mr. Lishka put his arm around me and said, “Abigail, you can’t do this at Johns Hopkins,” referring to my near failing grade. I turned to him and said, “Sir, I’m never going to take math again.” And I never did. My love of math was squashed. I went from being an enthusiastic kid in advanced math class, to an adult who, at age 39, still wakes up in a cold sweat worrying that I’ve accidentally registered for a college level calculus course and need to take the final exam. “One more minute.” Ahhhh!
My plan to never do math again has been totally foiled, though, because now I run a business and I do math every day. There’s sewing math, which is mostly geometry, and there’s financial math, like bookkeeping and figuring out costs and pricing. I’ve come back to my love of math.
For seven years I sold what I sewed just for fun. The money went toward buying more fabric and I seriously resisted doing the financial math. Sewing was my “hobby that made a little money” and my receipts got shoved into a manilla envelope until tax time came. I’d spend one terrible day going through it all, and never look back. Financial math spoiled my sewing happiness. It was just annoying.
Now I’m a math junkie. I do my business bookkeeping on Friday mornings and it’s the absolute best thing I do each week. Recording and analyzing the numbers forces me to face reality, motivates me to work harder, and encourages me to think creatively.
I wish I’d done my bookkeeping weekly when sewing was my hobby, and not just because I could have avoided that torturous tax prep day. At that time I did aspire to someday have a sewing business, but I lacked a real picture of what I was spending and earning all year so I had no way to know if it was even possible.
Here’s my method for weekly bookkeeping.
1. Set a schedule. For me Friday morning is for bookkeeping. That means my week runs Friday through Thursday. Each Friday I sit down and record everything from the prior Friday through Thursday.
2. Get a folder. My folder is green. One pocket is for expenses and the other is for revenue. I’m a fan of paper. Other people love paperless offices, but not me. I feel better with hard copies of things. Every time I get a receipt during the week I put it in the folder. When I get a check, I photocopy it and put it in the folder before depositing it. After it’s been recorded it moves into a manilla folder for safekeeping.
3. Be careful. I have a debit card for my business bank account and I’m super careful to charge only business things on it. If I’m at the grocery store and I need freezer paper for patterns, I charge that separately from the other groceries so that I can use the business debit card. PayPal is tricky. A designer recently told me that she uses her PayPal balance as secret slush fund for fabric buying. Don’t do that, or if you do, record it. I no longer use PayPal for anything personal because I don’t want to accidentally use my PayPal balance for new shoes. It’s too easy to make a mistake.
4. Get some software or a spreadsheet. I looked into software, but nothing seemed perfect for my needs right now. I’m happy with my Excel spreadsheet. It’s very simple and very manual. Works for me. It’s got categories for expenses and revenue, shipping, and where the purchase came from (Etsy, Craftsy, my shop, royalties, teaching, etc.). It’s a pivot table so it automatically adds stuff up. I hired someone through Elance to make it for me.
5. Do the work. It’s data entry and it’s boring, but not as boring as doing data entry for someone else’s company. This is yours. Own it. It takes me between 30-90 minutes, depending on how sales did that week. Here’s the process:
- I open the spreadsheet and open Etsy and then I record every sale from the week. Then I download a CSV from Etsy with all of the Direct Checkout fees and record those.
- I open Craftsy and record every sale from the week.
- I open Stripe and record all of the Direct Checkout fees from my online shop that lives here on my blog.
- I open WooCommerce here on my blog (that’s how I run my shop) and record every sale from the week.
- I open the green folder and record every receipt.
- I open PayPal and transfer the balance for the week to my bank account. Then I record every transaction fee.
Boring. Important. Until you can afford to hire someone, you gotta do it.
The fiscal year is broken up into quarters ending March, June, September, and December. At the end of each quarter, add things up. Figure out what you’d like to know and see if the numbers can answer your questions. Here are some good questions that might apply, although I’m sure you’ll come up with good ones on your own:
- How much are you paying in Etsy fees versus fees from your own shop and how much is each shop making?
- Which of your products is most lucrative and which is least?
- How much are you paying for online services like blog hosting or a shopping cart? Are you making the most of those things?
- How much are you spending on fabric and supplies? Should you set a budget for those things?
- Are you charging enough for shipping and handling to cover your true costs?
If you’re reporting every penny that comes in and goes out, the numbers will help you see what’s working for real. That being said, you certainly don’t have to obey them or let them control you. There are things that I do because I love to do them, even though they earn me no income (like the podcast, which costs me money every month). Knowing your financial truth doesn’t mean you have to change anything, but at least you know. Going forward, when you make a decision, you’re armed with full information and that’s worth a lot.
Doing the math each week gives me a powerful business tool. Mr. Lishka, if you’re out there, you didn’t succeed in making me avoid math forever. And you know what? Whatever you’re doing right now? One more minute.