PART 4: GETTING THE BEST RETURN ON INVESTMENT:
Record Keeping and Other Considerations

It is very feasible to start and run a successful business selling hand made products. This series of articles introduces you to the things you will need along the way as you develop your business financial management road-map, and seek to get your best return on investment (ROI).

Record Keeping and Other Considerations

d) ROI: Other Record Keeping

You want to keep all your receipts together for each calendar year. You do NOT want to keep all your receipts stored in a shoe box. File these, say in an accordion file, organized alphabetically by company.

If part of the transactions listed on any receipt are personal and some are business, then circle the business related ones and write something like “business” next to these.

If you did not get a receipt for something business related, write out your own receipt, with the date, purpose, description, and amount.

You must store these receipts (and your other business documentation) for 10 years. Some places list 7 years, but you will need to store these for 10 years.

Don’t rely on paying an accountant to sort through all your receipts in order to calculate your tax liabilities each year. The cost of this would be prohibitive. You yourself need to do that kind of leg-work, and being very organized will help you do this efficiently and effectively.

You probably will also be generating these kinds of forms and documents in the course of doing business, and you need to maintain files of back-up copies:

- Purchase orders

- Invoices

- Packing slips

- Order sheets / line forms

- Catalogs

- Checkbooks, and copies of checks written or check requisition forms with check numbers of checks written documented

- State, local and federal tax documents

- Leases / rental agreements for property and equipment

- Account numbers and agreements with each of your suppliers and creditors

- Travel logs

- General Ledger entry forms

TRAVEL LOG

All your business travel is deductible, but the IRS has different rules for how you handle various business expenses. So, you keep separate accounts of
— auto expenses (gas, depreciation, mileage, car maintenance and repairs);

NOTE: On your income taxes, you can use either a standard mileage rate or actual expenses allocated. You pick which method of expense tracking you want to use. You have to use the same method all year. You can, if you want, change the method from one year to the next.

— meals while traveling;
— lodging while traveling;

NOTE: Within any calendar year, you can only use one way to calculate these expenses. You can change from year to year. Either use Per diem (IRS maintains allowable food and lodging rates for every city in the US) or Actual expenses (whatever you spend).

- ticketed travel (plane, boat, railroad, taxi, limo, ferry);
— other travel expenses (newspaper, shoe-shine, gym).

NOTE: IRS RULE: You should be able to live your life on the road the same way you live your life at home. If you have a personal trainer come to your home 3 times a week, then you can have a personal trainer come to your hotel 3 times a week, and this would be a legitimate Travel-Other expense. If you don’t, it’s not. If you purchase the New York Times each day at home, you can purchase it while away, and declare this as a legitimate Travel-Other expense. If you don’t, it’s not.

Keep a travel log in all your cars, and record:
DATE, BEGIN MILEAGE, END MILEAGE, subtract to get TOTAL MILEAGE.
Write down the business purpose of each trip.

For example, if you’re in business selling beaded jewelry, you can deduct all your mileage for all your trips to any bead or craft store, any bead society meeting, any bead-related or jewelry-making classes, any trip to a museum to see jewelry on display, any trip to a store to do research on jewelry, check out the competition, mail bills at the post office, go to the bank to make a deposit, and the like.

BUSINESS CARDS

A must!

LOGO

This can simply be how you print the name of your business — font choice, layout, positioning of words. Or it can be a fancy image.

There are Logo-Maker apps online that you can try.

Once you get your logo, you will want to place it on all your forms, documents, marketing materials, and online webpages.

You will want to trademark your logo.

e) ROI: Employees and Independent Contractors

Sometimes you need to work with help from other people. You might hire part-time or full-time employees outright. You might pay someone on commission or per piece where that person works as an independent contractor rather than an employee. You might trade teaching someone some skills in exchange for some work, like hiring an unpaid intern or apprentice.

In these situations, you will need to anticipate if, after paying someone, — and when you have your own employees you also will be paying additional taxes, — you can still make a profit.

Some forms to pay attention to:

With hired employees:
forms W-4 (when hired)
forms W-2 and W-3 (annually)

With independent contractors:

forms W-9 (before contract work begins)
forms 1099-MISC and 1096 (annually)

f) ROI: Banking, Insurance and Credit Card Processing

BANKING

BANK ACCOUNT: It is better to have a separate bank account for your business than for personal. If you use a personal bank account for your business, it is a good idea to have your bank-checks printed up in the business-check size

If you have employees, it is useful, from a financial management standpoint, to have a separate business bank account that is dedicated to all payroll expenses (salaries and taxes).

Whether you are using a personal or business banking account, be sure to print your checks using the Business Check format. On your business checks, it is a good idea to have checks with your business name on it. You can either open a Business Checking Account, or have your business name printed on your Personal Checking Account checks. If you are a solo proprietorship, you would print your name on the checks, and under your name, you would print your doing business as (DBA) name, as in: DBA Retro Jewelry Designs. As a solo proprietor, your own name is your government-recognized business name.

INSURANCE

At some point, you will need to purchase business insurance to cover liability and theft or loss of property (inventory and equipment) issues and medical issues (you or an employee getting hurt in the context of doing the job).

In most places, running a business out of your home violates local zoning codes. You may not qualify for a company’s business insurance package if you are violating these laws.

REMEMBER: When working with any insurance agent, that agent is professionally obligated to report any violation of the law, including these zoning laws, to the authorities. This is true, even if your insurance agent is your sister!

So, when you discuss insurance with your insurance agent, you will need to ask your insurance agent “What If?” questions rather than indicate you already have or absolutely intend to locate a business in your home. “What If, I were to start a business out of my home?”

USE OF A CREDIT CARD: It is a better idea to use a separate credit card for your business than for your personal uses. If you do use one card for both personal and business, be sure to mark all original charged invoices as to which use they refer to — “personal” or “business”.

CREDIT CARD PROCESSING

Whatever location your business is in — home, storefront, craftshow — you will need to be able to take credit cards. Very few customers use cash nowadays.
You will need to be able to accept a lot of different credit cards: Visa, MasterCard, Discover, American Express. Ideally, you want to use a processing company that lets you accept all these cards.

You will need to be able to swipe a card, insert a card to have its chip read, as well as manually enter a card number without the card present. You might need to be able to let someone touch their phone to your credit card machine to do the transaction.

You may want to open a credit card processing merchant account. Or you might use a company that doesn’t require you having your own merchant account. In this case, you would be using that company’s shared account. Some prominent companies which do shared accounts include PayPal and Square and GoPayment and Stripe. With the internet, competition for credit card services has gotten so fierce, that many of the rates and combined costs have been converging. Using a company with shared accounts will reduce the various certification and reporting requirements associated with having you own account.

Check your options online and do some serious comparisons here. Comparisons will not be straightforward because different companies which offer credit card processing services make their money in different ways. They will be inexpensive on some things, and more expensive on others. Some companies make money by leasing equipment. Others by charging you a fee for each sale (per transaction fee). Others by charging you a rate per dollar volume of each sale (discount rate).

Sometimes you can get used/rebuilt equipment very cheaply on line. But how cards are processed can change frequently, sometimes necessitating the purchasing of new equipment.

If you are locked into a multi-year lease on equipment or on credit card processing through a particular company, you will be liable for the expense through the end of the contract, even if you close your business before then. No-contract options are very appealing. One-year contracts are OK. Three-year contracts start to get risky, but may be an appealing option, given their whole package.

It is a good idea to check whether the credit card processing company has credit card scanning attachments that connect to your phone or tablet or operate with Wi-Fi. This is especially important if you are doing sales off site, like at a craft show.

Data systems are in place. Procedures are in place. Basic business relationships are in place. Now you need to create mechanisms to secure all this, that is, to secure the in-flows and out-flows of money so that you are taking the risks you want to take and achieving the rewards you believe you should get in return. These mechanisms include formal and informal arrangements and contracts, such as getting terms, getting paid, and crowd funding your business.

Continue with this series,

Financial management includes all the things you need to do in order to maximize your Return On Investment (ROI). It mostly involves a system of data collection, monitoring and analysis methods employed by any successful business. This system relates risks to rewards. Activities in this kind of system include things such as general accounting and bookkeeping, inventory management, and record keeping. These include things you do to establish and maintain formal relationships with employees, independent contractors and suppliers. These include things you do to secure your money, such as with banks, financial institutions, and even such things as crowd-funding online. This is a lot of numbers and activities, and often, when we look at why people fail in business, it is often because of a generalized fear of getting control over all this. Successful business people and successful businesses need to foster a culture which promotes a growth mindset. Simply this is a culture where you have permission and encouragement and confidence to take risks.

GETTING THE BEST RETURN ON INVESTMENT (ROI)

PART 1: Finding That Sweet Spot Between Risk and Reward

PART 2: How You Are Going To Control The Flow Of Money

PART 3: Maintaining, Tracking and Controlling Your Inventory

PART 4: Record Keeping and Other Considerations

PART 5: Getting Terms, Getting Paid, Getting Crowd Funding

PART 6: Maintaining A Growth Mind-Set

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FOOTNOTES

Campbell, Casandra. What Is Inventory Management? How To Track Stock For Your Ecommerce Business, Inventory Management, 6/19/20.
As referenced in:
Inventory Management

Caramela, Sammi, 10 Essential Tips For Effective Inventory Management, Business News Daily, 4/15/2020.
As referenced in:
https://www.businessnewsdaily.com/10613-effective-inventory-management.html

Dweck, Carol. Mindset: The New Psychology of Success, 2006

Fundbox.com. Trade Credit: Everything you need to know about net terms for your business. n.d.
As referenced in:
https://fundbox.com/resources/guides/trade-credit/

Shah, Vyom. Crowdfunding the Jewelry business, 11/27/14.
As reference in:
https://betterdiamondinitiative.org/crowdfunding-the-jewelry-business/

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Other Articles of Interest by Warren Feld:

Naming Your Business

The Importance of Self-Promotion: Don’t Be Shy

Are You Prepared For When The Reporter Comes A-Calling?

A Fool-Proof Formula For Pricing And Selling Your Jewelry

Designer Connect Profile: Tony Perrin, Jewelry Designer

My Aunt Gert: Illustrating Some Lessons In Business Smarts

Copyrighting Your Pieces: Let’s Not Confuse The Moral With The Legal Issues

Naming Your Business / Naming Your Jewelry

Jewelry Making Materials: Knowing What To Do

To What Extent Should Business Concerns Influence Artistic and Jewelry Design Choices

Getting Started In Business: What You Do First To Make It Official

So You Want To Do Craft Shows: Lesson 4: Set Realistic Goals

The Competition: Underestimate Them At Your Peril!

When Relying On Other People To Sell Your Jewelry

Component Design System: Building Efficiency As Well As Effectiveness Into Your Jewelry Designs

The 5 Reasons Jewelry Designers Fail At Business

_________________________________

I hope you found this article useful.

Also, check out my website (www.warrenfeldjewelry.com).

Enroll in my jewelry design and business of craft video tutorials online.

Add your name to my email list.

Visit Land of Odds online (https://www.landofodds.com)for all your jewelry making supplies.

Subscribe to my Learn To Bead blog (https://blog.landofodds.com).

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SO YOU WANT TO BE A JEWELRY DESIGNER
Merging Your Voice With Form

588pp, many images and diagrams Ebook or Print

PEARL KNOTTING…Warren’s Way
Easy. Simple. No tools. Anyone Can Do!

184pp, many images and diagrams Ebook or Print

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Beading and jewelry making have been wonderful adventures, from custom work, production work, and teaching. *Design is about the ability to make smart choices.

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Warren Feld

Warren Feld

Beading and jewelry making have been wonderful adventures, from custom work, production work, and teaching. *Design is about the ability to make smart choices.

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