What, then, do you do with all of those facts and figures when you need to calculate your taxes For many people, the best alternative is simply to push a few buttons, choose a few menu options, and let an accounting program do the heavy lifting. Accounting software can definitely make that part of your financial life easier. A good software package can help save time when it comes to accounting and tax preparation for small businesses. All let you record income and expenses and prepare business reports. QuickBooks by Intuit is also highly recommended by many accountants and small business owners.
Connect to the Quick Books Online Edition Web site httpquickbooks intuitcomqbcomjhtmlskinsprodovwonlinejhtml
The next page gives you the option to use fictional data provided by QuickBooks or enter your own financial data. For this example, click Use Your Own Financial Data. 5. Check the button next to I am new to QuickBooks Online Services. Fill out the form that asks for you to create a username and password. Then click Start a Brand New Company. 10. On the next page, click Proceed to QuickBooks Online Trial Edition. 12. If an alert dialog box appears asking if you want to download files, click Yes. You need the files to run QuickBooks Online Trial Edition. When the files have been downloaded, your home page on the QuickBooks Online Edition Web site appears (see Figure 17-2). QuickBooks Online Edition or any online accounting service works best if you have a broadband connection and are connected to the Internet all the time. You also need to realize that, when you use an online service to keep your financial records, you put a big level of trust in the Web site that you use. After all,...
Keeping accurate records of inventory costs, selling prices, shipping and handling, overhead, and other associated costs is the foundation to satisfying government reporting requirements, as well as keeping on top of the financial health of your business. Some accounting programs (such as Intuit's QuickBooks Simple Start Basic Pro Premium series) do extremely well at the business of accounting, but aren't typically geared toward the business of listing items for sale on eBay. Although you may find you can force one to do this, it's best to look at these programs as part of an overall suite of tools you might employ and not the sole solution.
QuickBooks offers several versions, from basic to enterprise solutions tailored to different types of businesses. QuickBooks Simple Start and QuickBooks Pro have a few significant differences. QuickBooks Pro adds job costing and expensing features, payroll, and the ability to keep track of your inventory through your sales receipts and purchases (making it a sound upgrade for eBay sellers). QuickBooks Simple Start does a darn good job too, so check out the comparison at quickbooks.intuit.com and see which version is best for you. I use (and highly recommend) QuickBooks Pro, so that's the version I describe in the rest of this section. Stephen L. Nelson wrote QuickBooks 2007 For Dummies (published by Wiley). His book is amazingly easy to understand. I swear that neither Steve nor my publisher gave me a nickel for recommending his book. (Heck, I even had to pay for my copy.) I recommend it simply because it answers in plain English just about any question you'll have about using the...
QuickBooks offers several versions, from basic to enterprise solutions tailored to different types of businesses. QuickBooks Basic and QuickBooks Pro have a few significant differences. QuickBooks Pro adds job costing and expensing features and the ability to design your own forms. QuickBooks Basic does a very good job too, so check out the comparison at www.quickbooks.co.uk and see which version is best for you. We use (and highly recommend) QuickBooks Pro, so we describe this version in the rest of this section. QuickBooks 2005 For Dummies by Stephen L. Nelson (Wiley) is amazingly easy to understand. This book answers - in plain English - just about any question you'll have about using the program for your bookkeeping needs. Spend the money and get the book. Any money spent on increasing your knowledge is money well spent (and is a tax write-off). We update our QuickBooks software yearly, and every year it takes us less time to perform our bookkeeping tasks (because of product...
If you want to handle everything on the Web, use QuickBooks online service. The online QuickBooks program offers fewer features than the Pro version, but if your accounting needs are simple, it may be right for you. Before you decide, however, consider that while your accounting needs may be simple now, they may not be so simple later. Intuit charges from 19.95 a month for the service, which is comparable to buying the QuickBooks Pro version but at least you can continue to use purchased software for more than one year. The online version also requires you to have a broadband connection to the Internet so that you're always online (dial-up connections need not apply). The online edition doesn't include integrated payroll, purchase orders, online banking, and bill payments.
The first thing you need to do is organize finances. Put all your expenses in one folder and sales information in another, and then you can proceed with the QuickBooks setup interview. The interview is designed to give those with accounting-phobia and those using a bookkeeping program for the first time a comfort level. QuickBooks asks you questions about your business and you fill in the very intuitive form. If you mess things up, you can always use the back arrow and change what you've input. If you need help, simply click the Help button and the program will answer many of your questions. Hey, if worse comes to worst, you can always delete the file from the QuickBooks directory and start over. If you're new to bookkeeping, you may want to go through the QuickBooks startup interview step by step with a tutor at your side. For more details, remember to check out QuickBooks 2007 For Dummies this book can teach you almost everything you need to know about QuickBooks. No, no, I'm not...
Using the Accounting Assistant, you can easily download eBay and PayPal transaction data from eBay tools, such as Selling Manager and Blackthorne, directly to a QuickBooks account that you have set up for your eBay business. Figure 3-3 Choose a download method to start importing eBay data into a QuickBooks account. Figure 3-3 Choose a download method to start importing eBay data into a QuickBooks account.
You may not need all these categories, and you can always add more later. Table 16-1 presents a chart of accounts written by an accountant for an eBay.co.uk business. Figure 16-7 shows a customised chart of accounts. For your accountant's use For your accountant's use Fees paid to a bookkeeper or accountant
QuickBooks doesn't offer an online sales business choice, so Retail General is the closest to what you need (see Figure 16-4). With the chart of accounts that we feature in the following section, you can make the appropriate changes to your accounts to adapt to your eBay business. 5. When QuickBooks asks whether you want to use its chosen chart of accounts, choose Yes. QuickBooks chart of accounts. QuickBooks chart of accounts. 6. Answer some more general questions, which we're sure you can handle with the aid of the incredibly intuitive QuickBooks help area.
After you've finished the setup and have successfully set yourself up in QuickBooks, the program presents a chart of accounts. Think of the chart of accounts as an organization system, such as file folders. It keeps all related data in the proper area. When you write a check to pay a bill, it deducts the amount from your checking account, reduces your accounts payable, and perhaps increases your asset or expense accounts. An editable chart of accounts appears. Because QuickBooks doesn't assign account numbers as a default, you'll need to edit the chart to create them. 4. Go through your QuickBooks chart of accounts and add any missing categories. For your accountant's use For your accountant's use
PayPal allows you to download your sales data into a format compatible with QuickBooks, a highly respected and popular bookkeeping program. You can also choose to download your data to an Excel spreadsheet. PayPal reports are chock-full of intensely detailed information about your sales and deposits. Putting this information in a standard accounting software program on a regular basis makes your year-end calculations easier to bear. (In Chapter 16, I detail what else you might need for this task.)
Accounting programs are among the most highly competitive types of software on the market today. Each year, it seems, Microsoft, Intuit, and MYOB come out with new, souped-up editions of their software, each designed to have more features than the last. On top of that, most of the products come in several versions, each with a different set of features. Which program is right for you Keep in mind that you're not simply trying to balance your checkbook, but you need to track accounts receivable and possibly employee salaries and payroll taxes. It's a good idea to pick the version of an accounting program that enables you to track business finances. Table 17-2 provides you with some features to compare. QuickBooks Basic http www.quickbooks.com Accounting Software Features Since I find the prospect of doing my own accounting downright intimidating, I don't use accounting software myself. The only program that doesn't scare me half to death is a simple shareware product by OWL Software...
PayPal allows you to download your sales data into a format compatible with QuickBooks, a highly respected and popular bookkeeping program. You can also choose to download your data in Excel spreadsheet format (the downloads also work in Microsoft Works). PayPal reports are full of detailed information about your sales and deposits. Putting this information in a standard accounting software program on a regular basis makes your year-end calculations easier to bear. (In Chapter 16, we detail what else you may need for this task.)
In addition to purchasing and installing individual software programs, many of the commercial accounting programs have an online version. A site like QuickBooks Online Edition enables you to keep all of your books online. Although it costs 19.95 per month for this service, the advantage is that you don't have to download new versions of the software as they become available and accounting programs are so highly competitive that new versions tend to appear virtually every year. You can try out the service for 30 days before you actually commit to buying it. Just follow these steps
If you acquire more items, break some, lose them in your inventory count (which means your inventory system needs a second look or someone is stealing from you), or otherwise need to adjust your quantity, it's simply a matter of choosing the product and changing the number. (Unlike many accounting programs, where there are typically auditing safeguards to prevent adjustments after the fact.). Here's how it's done in Selling Manager Pro
Ensure you download data from online auction-management programs to your local system for archiving before the information is removed from the service and you can no longer access it. Most programs allow you to download the data in a format that can be read by spreadsheet programs, such as Microsoft Excel and Intuit QuickBooks accounting programs.
Understanding first things first Bookkeeping basics Saving your records to save your bacon Finding bookkeeping software Using QuickBooks for your bookkeeping needs Once I actually get into the task, I must confess that I enjoy posting my expenses and sales. It gives me the opportunity to know exactly where my business is at any given moment. Of course, I'm not using a pencil-and-paper ledger system I use a software program that's easy enough. In this chapter, I give you the lowdown on the basics of bookkeeping, emphasize the importance of keeping records in case Uncle Sam comes calling, and explain why using QuickBooks is the smart software choice. Keep reading This chapter is required.
Although posting bookkeeping can be boring, clicking a button to generate your tax information is a lot easier than manually going over pages of sales information on a pad of paper. That's why I like to use a software program, particularly QuickBooks (more about that in the section titled QuickBooks Making Bookkeeping Uncomplicated ).
Many other tools are available, provided by companies other than eBay, and are designed to help you manage your eBay business in many different ways. We recently found 85 different tools. Some tools attempt to do everything, while others specialize in a certain area, such as inventory management. Some integrate with QuickBooks, while some are adapted for Great Plains or Microsoft Office.
After you're up and running with your eBay business, you can look forward to having lots of reports to evaluate. Of course, you get a plethora of reports from PayPal, eBay, and so on, but the most important reports are those you generate from your bookkeeping program (software such as QuickBooks). I use the QuickBooks software package to manage my business records, and it keeps several common reports (Balance Sheet, Accounts Payable, P&L, and more) in an easily assessable area. If you check out the reports tab of your bookkeeping program, I bet you'll find similar items. Before your eyes glaze over, though, check out this technique for straightforward descriptions of these reports and the information they provide. 1 Accumulated Depreciation This is deprecation on your assets, either produced by your accounting program or given to you by your accountant. When bills come in, post them in your accounting program. This will generate the Accounts Payable report. Accounts payable is the...
Understanding first things first Bookkeeping basics Saving your records to save your bacon Finding bookkeeping software Using QuickBooks for your bookkeeping needs Once you actually get into the task, you may enjoy posting your expenses and sales. Doing so gives you the opportunity to know exactly where your business is at any given moment. Using an easy software program increases the likelihood of your enjoying the bookkeeping process. In this chapter, we give you the low-down on the basics of bookkeeping, emphasise the importance of keeping records in case HM Revenue and Customs (HMRC) come calling, and explain why using QuickBooks is the smart software choice. This chapter is required reading.
When we say that you must hire a professional to prepare your taxes, we mean an accredited chartered accountant - they're a valuable addition to your business arsenal. Although the people at your local 'We Do Your Taxes in a Hurry Shop' may be well meaning and pleasant, they may have completed only a short course in the current tax laws. Doing so does not make these people tax professionals. When business taxes are at stake, a professional with whom you have a standing relationship is the best choice. If you don't know a professional accountant, ask around or contact your local Chamber of Commerce or a respectable organisation like the Institute of Chartered Accountants (www.icaew.co.uk ) or the Association of Chartered Certified Accountants (www.acca global.com ). Posting bookkeeping can be boring. At the end of the year when a professional is doing your taxes, however, you'll be a lot happier - and your tax preparation will cost you less - if you've posted your information cleanly...
More information on LLCs can be found on the Web site of my friend, Seattle accountant Stephen L. Nelson, CPA. He's the author of the bestselling books QuickBooks For Dummies and Quicken For Dummies. He also publishes Do-It-Yourself Limited Liability Company LLC Formation Kits. Check out his informative (state-by-state) site at www.llcsexplained.com.
Do your eyes glaze over when you see the terms cash-basis and accrual-basis They're just two different ways of describing when your business was paid. Chances are you'll simply use the cash-basis method, but it's good to know that the two options exist, if only so you can discuss them in an informed way with your accountant
All of the work required to keep your books, collect taxes, and prepare your taxes pays off at the moment when you add up your deductions. You can reduce your tax payments substantially by taking all of the deductions for which you are eligible (check with your accountant to make sure which ones qualify as deductions). These include the computer equipment you use to prepare your auction sales, the spaces where you do your computer work and store your inventory, and the fees associated with going online and completing transactions.
Speak with an accountant or attorney to determine how to set up your business. Will it be a sole proprietorship, corporation, or LLC (limited liability corporation) The majority of people starting out selling on eBay run it as a sole proprietorship. However, you should speak to an expert about your personal situation. My accountant has advised me to set up a completely separate checking account for the business. He wants me to pay for all of my eBay expenses through this account and keep very good, separate records. Again, I recommend that you speak to your accountant about how he or she will recommend setting this up for you. You might want to consult The Unofficial Guide to Starting a Small Business, 2nd ed. (Wiley Publishing, 2004).
On the other hand, you may be the ultimate do-it-yourselfer. Chances are, you won't have to enroll in a single business class. The following Web sites can give you the free instruction and advice that can make you into your own accountant 17 Where better to go to find accounting help than on eBay itself Actually, you won't find accountants on eBay, but on its professional service partner, eLance. Just go to http elance.ebay.com, and click Taxes. When I visited, a total of 141 tax preparers were listed (see Figure 17-1). You post your project and get these tax preparers to bid on your job. (See Chapter 13 for more information on how eLance works.) Get accountants to bid on your own tax preparation through eLance. Get accountants to bid on your own tax preparation through eLance.
While it's possible to just go online and start selling on eBay, if you're running a business you probably have to register with your local government. A good attorney or accountant can fill you in on what specifically you need to do where you live, as can the staff at your county clerk's office or chamber of commerce.
I want to remind you that I am not a lawyer or an accountant. The facts I give you in this chapter are from what I've learned over the years. When you begin a formal business, it's best to involve an attorney and an Enrolled Agent or a CPA. At the very least, visit www.nolo.com, a great Web site that offers some excellent business startup advice and forms.
Savvy eBay sellers have different methods of handling inventory. They use everything from spiral-bound notebooks to sophisticated software programs. Although computerized inventory tracking can simplify this task, starting with a plain ol' handwritten ledger is fine, too. Choose whichever works best for you, but keep in mind that as your eBay business grows, a software program that tracks inventory for you may become necessary. If you use QuickBooks for your bookkeeping, this all-in-one software will also keep track of your inventory (every time you post your purchases and sales). Ledger systems wouldn't work for a company with a warehouse full of stock, but will work nicely in a beginning eBay sales environment. Many sellers tape sheets of paper to their boxes to identify them by number, and use that as a reference to a simple Excel spreadsheet for selling purposes. Excel spreadsheets are perfect for keeping track of your sales as well, but if you're using a management service or...
Keeping accurate records of your inventory costs, selling prices, shipping and handling, overhead, and associated costs is the foundation to satisfying government reporting requirements, as well as to keeping on top of the financial health of your business. You can get professional help to set up your accounts, use an accounting program (a popular small-business accounting software is Intuit's QuickBooks Basic Pro Premier www.intuit.com), use eBay and third-party tools tailored to selling on eBay, or set up your own spreadsheets, either paper-based or using a program such as Microsoft Excel.
Many Web ecommerce programs provide a record of all the orders. If you do not have a separate accounting system to handle orders, this can be very handy. Even if you have a separate accounting system to handle orders, you can use the accounting capabilities of your Web ecommerce software for interim accounting. Some ecommerce programs will plug nicely into popular accounting software, and you will be able to handle orders seamlessly. For instance, modStop (http modstop.com) sells a module for Miva Merchant that enables it to pass order information to QuickBooks (http www.quicken.com).
Brick-and-mortar businesses receive invoices for their income. As an eBay businessperson, you're likely to get income from any number of sources personal checks, PayPal transfers, or direct deposits to your bank account from credit card companies. This is probably the most enjoyable thing you can record in your accounting software or booklet.
We handle our inventory on our desktop through QuickBooks. When we buy merchandise to sell and post the bill to QuickBooks, it automatically puts the merchandise into inventory. When we input our sale, QuickBooks deducts the items sold from the standing inventory. We can print a status report whenever we want to see how much merchandise we have left - or have to order.
Most of these inventory systems wouldn't work for a company with a warehouse full of stock but will work nicely in an eBay sales environment. Many sellers tape sheets of paper to their boxes to identify them by number, and use that as a reference to a simple Excel spreadsheet for selling purposes. Excel spreadsheets are perfect for keeping track of your auctions as well, but if you're using a management service or software, you don't need both for physical inventory. After you're running a full-time business, however, you have to keep the tax inspectors happy with pounds and pence accounting of your inventory, so keep your inventory records in a standardised program such as QuickBooks (discussed in Chapter 16). In Chapter 8, we detail a variety of auction management software and Web sites, many of which include physical inventory tracking features.
In a sole proprietorship, you're the only boss. You make all the decisions and you get all the benefits. On the other hand, you take on all the problems that arise, too. This is the simplest and least expensive type of business because you can run it yourself. You don't need an accountant or lawyer to help you form the business (though it helps), and you certainly don't have to answer to partners or stockholders. To declare a sole proprietorship, you may have to file an application check with your local county clerk.
Suppose you hire your cousin to handle shipping and packing and a neighbor to create auction listings. Your accountant is likely to bring up the question of how you pay such employees. You have two options You can treat them either as full-time employees or as independent contractors. The IRS uses a stringent series of guidelines (see Publication 15A, to determine whether your helper is a contractor or a full-time employee. Hiring independent contractors rather than salaried workers is far simpler for you You don't have to pay benefits to independent contractors, and you don't have to withhold federal and state taxes. Just be sure to get invoices from any independent contractor who works for you. If you have full-time employees whom you pay an hourly wage, things get more complicated, and you had best consult an accountant to help you set up the salary payments.
Of course, when you collect sales tax from a customer, you also have to report and forward that tax to your state government. This procedure varies from state to state, so you'll have to check with your local authorities (or your accountant) to get the proper details. You can also find this information online check out the list compiled by the Multistate Tax Commission (www.mtc.gov txpyrsvs actualpage.htm).
As a corporation, several ways exist to avoid a big tax bill - investing profits back in to the business is one of them. If your business gets so big that tax becomes an issue (congratulations ), you almost certainly need an accountant to deal with your company finances. For a quick guide to tax liabilities, however, see Table 15.1.
No rule says you can't sell your services on eBay. However, this is a tough sell. Suppose you're an accountant seeking to pick up new tax clients. What do you sell If you sell your services at a 30 percent savings from your usual fee of 120 per hour, you might find that you won't get much interest. Try a workable strategy. Offer a package of services at a reasonable price. For instance, you might offer to do a complete tax return for a 550 fee. For someone with a complex tax situation, that might look like a bargain (i.e., the kind of client you want to have for the long term). You might work inexpensively this year, but next year you can charge your regular fee. However, if that fee looks too expensive to someone, they probably don't need your services and will always be happy having their tax return prepared by H&R Block at a lower cost.