Running a successful shop is about more than just creating great products. Not only do you have to focus on creating and delivering great items, you have the financial side of your business to worry about as well. One of the most important things to keep in mind is how your money is being spent. If you aren’t tracking your business expenses, you could be spending money unnecessarily and even putting your long-term finances at risk. Here are a few tips to keep in mind regarding your business expenses:
Test Out Different Methods
Not every tracking system is going to work for everyone. If you are a shop owner that creates a lot of items from material and products that you purchase online, having a digital expense tracking system may be right for you. On the other hand, if a lot of your expenses are incurred when you shop locally and you are constantly on the go, keeping a physical ledger you can quickly jot down expenses in may be right for you.
The important thing is to find a system that you are comfortable with; that you can consistently update. If your business expense method is tedious or easy to forget about, you may struggle to keep up-to-date with all of your expenses.
Start Focusing on the Real Costs of Your Items
In addition to keeping track of your overall expenses, it is also important that you take the time to determine the expenses per item. By determining the cost of your inventory per item you will be able to see which items are working for you and which aren’t.
The easiest way to do this is to start out by tracking your total business expenses for materials, labor, and anything else, then break those expenses down to determine the exact cost of each item that you are creating for your shop. This will allow you to see which items cost you the most to create and how much profit they bring.
Don’t Forget to Track Your Time
One of the expenses that often gets overlooked is the actual time that it takes to create an item. Even if the financial cost of one item in your shop is cheaper than another, if it takes twice as much time to create, it may actually be worth less. Determining the time it takes to create an item along with any materials can also help you determine if outsourcing labor, such as finding a seamstress, is a better option than spending the time yourself.