A seller who’s brand new to the biz or even an old pro in the crafting world will occasionally run into a financial term they don’t know. It’s nothing to be ashamed of; there are so many and we don’t all have accounting degrees! Here’s a quick list of some of the more common financial terms you may encounter during your time as a craft seller.
Revenue: This is all the money you earn before taking anything else into account. This money can come from sales of your stuff, investments, or even donations to your company.
Expenses: That $30 for yarn? The shipping costs that seemed to go up last month? The gas it cost to drive down to the post office four times a week? Those are all expenses – anything it cost you to run your business. They fall in two categories, direct and overhead costs:
- Direct Costs: Anything that you paid out to physically make and deliver your product to a customer. Includes material and shipping expenses like boxes and stamps.
- Overhead Costs: This covers all the other expenses you pay to run your business, like paying employees and making sure you have electricity powering your office.
Net Profit: This is how much money you’ve actually made after you’ve deducted your expenses. You also subtract any returns you had that otherwise wouldn’t be on your sales sheet. The remainder is the total amount you’ve ACTUALLY made. It sometimes helps to think of net profit in visual terms – as the actual money you’ve caught in your net and get to keep.
Financial Statement: This is a complete breakdown of everything going on financially with your company. It covers how sales are going, how much you paid for various expenses, among other things like:
- Assets: An asset is anything your company (or you) own that adds value. This could be computer equipment, a sewing machine, or even your car if you mainly use it for your business.
- Liability: If you took out any loans or otherwise owe money, it’s counted on your financial statement as liability.
Financial statements are great for you to keep track of exactly how well your craft business is doing. You may think you can keep it all in your head or on separate sheets, but in the middle of making items and selling some information can definitely be lost.
Also, if you have investors or interested companies looking at you in the future, you’ll want to present an accurate view of your growth. Financial statements are the best way to do that as they cover everything financial involved with your craft store.
Have you run into any other flabbergasting financial terms during your time as an online seller? Let us know in the comments and we’ll play Webster’s Dictionary for you!
This guest post was brought to you by Outright.com, the simplest way to manage your small business finances online!
Main image courtesy of 401K
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