End of Year Accounting

I really want to write the post that shows how much I've accomplished this year and talks about some goals for the coming year, but I can't really do that without a detailed understanding of what actually happened this year.

This is the time when we tend to look back and see what the previous year has brought us. In a business, it's also time to see just how it was brought and how it can be brought even better next year.

It's time for accounting!

I've been at it for a number of days now, and I think this is the last day of it. Here's the process that I go through to close out my books for the year. Much of this stuff should have been done earlier, but at least it's done now.

First, I snapped digital photos of each receipt using a system called Lemon. It does optical character recognition and enters the information from the receipt into a digital report. It's pretty magical, really! I then do some aerobics to get that report into QuickBooks. Yes, using Lemon adds an extra step, but it gives me a digital photo of each receipt on my desktop so I can pull it up to answer any questions without wading through the paper receipts again.

Then, it was time to enter actual invoices for every sale. Thankfully, I record all sales through a point-of-sale app called RingItUp, so I just had to create a detailed report of sales and wade though, entering them by hand, and generating an accurate payment record for each one. Then, I recorded the deposits of those payments and entered a record for the merchant fees taken out of each deposit.

If there are any questions (as there always are), I have the stacks of credit card settlement slips on hand.

Then, I had to account for the Kickstarter fundraiser, even recording the fees charged by Kickstarter and Amazon. To do this, I just pulled up the database that I created in Bento from the backer report generated at the end of the project. It tells me who donated how much, what they wanted for a reward, what they got, and when it was shipped.

Each donation got recorded as a "credit memo" when the project was funded. Fees were taken out on the day that the money was deposited to my account. Then, I went through my fulfillment records and entered invoices on the shipment date, applying the appropriate credit memo to each one. And, just like that, the whole affair was reduced to a series of straightforward sales as far as the IRS is concerned. No "gift tax" or other such nonsense for me this year.

Of course, there were questions about shipment dates for particular recipients. Those were easily solved with this stack of USPS label records and customs declarations.

And finally, after everything was entered, it was time to reconcile from bank statements. This is the last chance to catch any mistakes, and catch them I did! There were a couple of loopholes where people were buying things without a sale being recorded, paying partially with gift certificates, and other minutiae. I got them all wrangled and created new operating procedures for next year that will prevent this stuff from happening again.

I used the cash section of the Lemon report as my Petty Cash account statement. I couldn't believe it when it actually reconciled! I guess my little slips of paper for every financial transaction are the way to go.

I then went through the whole year and correlated income and expenses to specific sales venues. (Using classes) This tells me in one report how profitable each sales venue is and gives me a baseline for assessing new sales efforts.

The last thing I have left to do is to record inventory creation and reconcile it against my inventory records. By using the manufacturing version of QuickBooks, I can actually track the yarn (raw materials inventory) converting into garments (assembly inventory). I'll have to account for items traded away at shows as an advertising expense. And, I think that's it! Then, it'll be time for the exciting analysis! It's that analysis that will let me write the "what I did with 2011" blog post.