Business finances are not always the most enjoyable business activity if you are a creative person, but making sure you know your financial numbers is vital to run a successful, and profitable, Etsy shop. So here is a series of posts to help any Etsy seller get on top of their Etsy financials so they can work out their Etsy earnings and the Etsy seller fees they will be charged.
- How much does Etsy cost?
- What do Etsy’s revenue figures mean?
- How to know if you are really making a profit on Etsy
- How to make Bookkeeping easy for your Etsy shop
In this post, I explain how all the Etsy Sales and Fees figures are calculated and finally how to do your bookkeeping as an Etsy seller.
If you have read any of my other posts, you will know by now that I am a lover of a great spreadsheet. But I can’t stress enough that you have to keep accurate and timely financial records when running a business, that means your Etsy shop. Only then can you make educated decisions that will help grow your business.
Knowing whether your expenses are higher than you thought, what area of revenue is performing the best, or if one function of your business costs you more than another are all questions you need to be able to quickly get a handle on.
Reliable financial data will reveal patterns that aid decision making. When you can make informed decisions, you can save money and increase revenue!
That sounds like a recipe for success to me!
Fundamentally, you determine your profit by subtracting your business expenses from your revenue. Simple right!
Well yes, but what you include in your revenue and expenses is where the devil is in the detail.
Why do I need to do bookkeeping?
When you first start your Etsy shop, you should have something in place that records your income and expenses. This could be a spreadsheet, an online tool or go old school with a paper and pen. Assign each transaction a category, such as Etsy Sales, Materials or Office, for easy sorting and summarising at the end of the year.
By setting up your bookkeeping system in the early days of your Etsy shop, you will save time and stress at tax time.
What do I need to record from my Etsy shop in bookkeeping?
As an Etsy seller, you might think that the amount paid into your bank from Etsy is your Etsy income and that is all you need to record. Unfortunately, that number is net of a lot of fees, so from a tax and business perspective, it is not the full picture for your income!
You need to know the total fees and taxes so that you can get a gross sales figure. This will help you come tax time and will help make reliable decisions for your business based on real numbers.
Unfortunately, Etsy does not make it easy for you to get the figures you need. However, they do provide sellers with monthly reports that you can download. From there, you can extract and extrapolate the information to get the information you need.
The best thing to do if you want to get serious about your accounts is to use the monthly report information they provide. Use it to record all your sales and fee information every month. Keeping track monthly will give you a good insight on how your business is growing rather than waiting until the end of the year.
What information do I need from Etsy?
To get your records on track, you are going to download 2 monthly spreadsheets from Etsy.
The first is the Orders CSS file and is found here Shop Manager->Settings->Options->Download Data.
From the EtsySoldOrders file, you need to find the total of your Shipping income (column V). This column is the amount you charged your customer for shipping.
You also need a total of the Sales Tax you have paid. This is in the Sales Tax (column W). But, there is a caveat on this. The Sales Tax is a minefield in itself, and new US state laws are being added to all the time. It’s worth checking out each state tax rules here.
For now, we will keep it simple and assume you only need to know the sales tax for the country or state you live in (if you are based in the US). So work out the total for all orders in your state or country.
The second download is the Monthly Etsy Statement found here: Shop Manager->Finances->Payment Account.
For the Monthly Etsy statement, when you open the file order the rows by the Type column. Calculate the subtotal of the Amount, Fees & Taxes and Net columns for each of the different types in the file. Here’s a quick video to show you how.
Once done you should have subtotals from each of the columns for the following (depending on your type of shop or location you may not have all these, or you may have some extra ones that are similar):
- Deposit
- Listing
- Marketing
- Refund
- Sale
- Shipping
- Subscription
- Transaction
- VAT (or some other form of tax)
The calculations
Ignore whether the numbers are positive or negative for the calculations, just use the number.
For the Refund value you need to do the following calculation
Gross Refunds = Refund (Net) + Refund (Fees & Taxes).
Similarly, for the Sale value, you need to do the following calculation
Gross Sales = Sale (Net) + Sale (Fees & Taxes).
Also for Sale and Refunds, the Fees & Taxes is actually the Order Processing fee. Make sure you get an Order Processing total that includes both types.
You then need to do the following calculations using the values you worked out above:
Net Sales = Gross Sales – Shipping – Sales Tax
Total Etsy Revenue = Net Sales + Shipping – Gross Refund
Total Etsy Expenses = Order Processing + Listing + Marketing + Shipping + Subscription + Transaction + VAT
Etsy Profit = Total Etsy Revenue – Total Etsy Expenses
What about expenses external to your Etsy shop?
Having found out all of your expenses from Etsy, you also need to know all other costs. These are the expenses you rack up to create your products.
These include your raw materials, tools, etc., that you need to keep your business going. Check your own countries tax rules to make sure you are claiming everything you can, you may be surprised at what you can claim back.
Calculate the total of these other expenses every month.
What about other income external to your Etsy shop?
You may be selling your product in other ways too. Or maybe you have a blog with affiliate income. There are all sorts of ways that you could be bringing extra income into your business, so make sure you capture it.
Calculate the total of this other income every month.
What is my profit?
Now you have all the figures, your total profit can now be calculated as follows:
Total Profit = Etsy Profit + Total Other Income – Total Other Expenses.
There you go, it’s as simple as that!!
Are you making as much profit as you thought were?
If doing all these calculations every month seems like a chore, why not take a look last our Etsy Seller profit plan. In our profit plan, it works out the totals for each county and state, so that once you know each state’s rules, you can easily see if you have paid sax or need to pay any.
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