When you first start out you may opt to use a simple spreadsheet to manage your books but as you grow you’ll want to consider more advanced methods like QuickBooks or Tally. As you keep growing, it’s good to continually reassess the amount of time you’re spending on your books, and how much that time is costing your business. The right bookkeeping solution means you can invest more time in the business with bookkeeping no longer on your plate, and potentially save the business money. Win-win!

Improving your store’s gross margin is the first step towards earning more income overall. In order to calculate gross margin, you need to know the costs incurred to produce your product. To understand this better, let’s quickly define both Cost of Goods Sold (COGS) and gross margin.

Cost of Goods Sold (COGS): These are the direct costs incurred in producing products sold by a company. This includes both materials and direct labor costs.

Gross Margin: This number represents the total sales revenue that’s kept after the business incurs all direct costs to produce the product or service.

Here’s how you can go about calculating gross margin:

Gross Margin (%) = (Revenue – COGS) / Revenue

The difference between how much you sell a product for, and how much the business actually takes home at the end of the day is what truly determines your ability to keep the doors open.

Tax obligations vary depending on the legal structure of the business. If you’re self-employed (sole proprietorship, LLP, partnership), you’ll claim business income on your personal tax return. Corporations, on the other hand, are separate tax entities and are taxed independently from owners. Your income from the corporation is taxed as an employee.

Self-employed people need to withhold taxes from their income, and remit these to the government in lieu of the withholding that an employer would normally conduct..

The world of E Commerce has shaken up sales tax regulations and they are admittedly a bit confusing due to location issues. When a customer walks into a brick and mortar retail shop, they pay the sales tax of whatever state or province they make the purchase in, no matter if they live in that city, or they’re visiting from across the world. However, when you sell online, you’re often selling to customers who live in different states/provinces, and even countries.

Selling to international customers can be easier than domestic sales because you often don’t need to charge sales tax when selling to out-of-country customers. However, this can get a bit complicated depending on the state you live in, so check in with your accountant for detailed information about your specific state’s regulations regarding international sales tax.

When sales start rolling in, you’ll need a way to accept the payments.

Depending on your business model, you may be planning to purchase and import goods from other countries to sell in your store. When importing products, you’ll likely be subject to taxes and duties.

As a new online store owner, you’ll likely be a one-person show. However, maybe you’ll hire a part-time employee to help you out, or a freelancer to design your logo. Right away, you need to establish whether that individual is or For employees, you’ll need to decide on a payroll schedule and ensure that you’re withholding the correct taxes; there are lots of that can help with this. For independent contractors, be sure to track how much you’re paying each person. American business owners may be required to file 1099s for each contractor at year end (you’ll also need to keep their name and address on file for this!).

Before we jump into establishing a bookkeeping system, it’s helpful to understand exactly what bookkeeping is, and how it differs from accounting. Bookkeeping is the day-to-day process of recording transactions, categorizing them, and reconciling bank statements.

Accounting is a high level process that looks at business progress and makes sense of the data compiled by the bookkeeper by building financial statements.

As a new business owner, you’ll need to determine which bookkeeping method to use:When your business is big enough you can opt to hire an in-house bookkeeper and/or accountant.

With so many options out there, you’re sure to find a bookkeeping solution that will suit your needs.

Business owners need to determine whether they’ll use the cash or accrual method of accounting. Let’s take a look at the difference between the two methods here:

Cash Method: Revenues and expenses are recognized at the time they are actually received or paid.

Accrual Method: Revenues and expenses are recognized when the transaction occurs (even if the cash isn’t in or out of the bank yet) and requires tracking receivables and payables.

Technically you are required to use the accrual method; but to simplify things, you can use the cash method throughout the year and then make a single adjusting entry at year end to account for outstanding receivables and payables for tax purposes.

The foundation of solid business record keeping is learning to track your expenses effectively. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return.

Right from the beginning, you should establish a system for organizing receipts and other important records.

There are five types of receipts that you should pay extra attention to:

Meals and Entertainment: Conducting a business meeting in a cafe or restaurant is a great option, just be sure to document it well. On the back of the receipt, record who attended and the purpose of the meal or outing.

Out of Town Business Travel: The IRS and CRA are wary of people claiming personal activities as business expenses. Thankfully, your receipts also provide a paper trail of your business activities while away.

Vehicle Related Expenses: Record where, when, and why you used the vehicle for business, and then apply the percentage of use to vehicle related expenses.

Receipts for Gifts: For gifts like tickets to a concert, it matters whether the gift giver goes to the event with the recipient. If they do, then the expense would be categorized as entertainment, rather than a gift. Note these details on the receipt.

Home Office Receipts: Similar to the vehicle expenses, you need to calculate what percentage of your home is used for business and then apply that percentage to home related expenses.

Starting your business at home is a great way to keep overhead low, plus you’ll qualify for some unique tax breaks. You’re able to deduct the portion of your home that’s used for business, as well as your internet connection, cell phone, and transportation to and from work sites and for business errands. Any expense that’s used partly for personal life and partly for business must reflect the mixed use. For instance, if you have one cell phone, you can deduct the percentage you use the device for business. Gas mileage costs are 100% deductible, just be sure to hold on to all records and keep a log of your business miles (where you’re going and the purpose of the trip).

After you’ve legally registered your business, you’ll need somewhere to stash your business income. Having a separate bank account keeps records distinct and will make life easier come tax time. Note that LLCs, partnerships, and corporations are legally required to have a separate bank account for business. Sole proprietors don’t legally need a separate account, but it’s definitely recommended.

Start by opening up a business checking account, and then any savings accounts that will help you organize funds and plan for taxes. For instance, set up a savings account and squirrel away a percentage of each payment as your self-employed tax withholding. Next you’ll want to consider a business credit card to start building business credit. Corporations and LLCs are required to use a separate credit card to avoid commingling personal and business assets.

Before you talk to a bank about opening an account, do your homework. Shop around for business accounts and compare fee structures. Most business checking accounts have fees that are higher than personal banking, so pay close attention to what you’ll owe.

In order to open a business bank account, you’re required to have a business name, and usually be registered with your state or province. Check with the individual bank for what documents to bring to the appointment.