You most likely don’t think about preparing invoices, fulfilling tax responsibilities, or managing cash flow as a jewelry business owner because only accountants can accomplish that. If you are still the owner of a small company (earning an average of $70,300 per year), you can do it yourself.
Since the numbers become larger, medium- to large-sized jewelry firms will require the services of an accounting firm, as doing bookkeeping yourself would be time-consuming.
According to 2011 research, the fundamental advantages of accounting for jewelry firms outweighed the costs by a margin of more than 30 to 1. In terms of efficiency, cost savings, and accuracy, this study emphasized the necessity of effective accounting methods for jewelry businesses.
In this article, we’ll go through every single option you have as a jewelry business owner, with average costs for each option.
What is accounting for jewelry businesses?
Accounting is the discipline of recording and summarizing financial data in order to maintain a healthy financial position and comply with GAAP guidelines. It includes Bookkeeping, tax preparation, ensuring the accuracy of financial statements, and reporting.
While most small business owners are proficient in bookkeeping and accounting, they lack a thorough grasp of financial ideas and processes. Without a fundamental understanding of accounting concepts, it is difficult to make financial decisions.
As a result, financial literacy may assist business owners in managing their money, recording transactions, and meeting tax requirements.
How to carry out jewelry accounting in 6 steps
We’ll go through each step, so you can learn the fundamental accounting practices required to effectively manage your finances.
Choose the most suitable accounting software
It is a tool that assists business owners and accountants in recording transactions, processing invoices and bills, creating an accounting chart of accounts, producing monthly financial statements, and more. Normally, this extends beyond the fundamentals, but some businesses just need the basics.
According to studies, businesses that use accounting software are more lucrative and have better cash flow. It was also discovered that it saves 34% of the time on accounting duties.
Our specialists discovered that the following alternatives meet the demands of jewelry store owners:
Make entries in your software
The first step after purchasing accounting software is to record every business transaction and income. Based on your input, it computes profit and generates financial statements.
For example, to save time recording the same amount every month, you’ll need to record rent and salary as recurring costs. To record income, you’ll also need to produce an invoice for each client.
The accounting software then displays a chart of accounts to provide you with an overview of your company’s financial situation. It appears as follows:
Record every transaction as soon as it’s done to ensure the accuracy of the records.
Keep track of the cost of goods sold (COGS)
Cost of goods sold (COGS) is a metric used to determine the entire cost of inventories sold by a business. It calculates real expenses to offer a more accurate assessment of a company’s financial performance.
Beginning Inventory + Purchases – Ending Inventory = Cost of Goods Sold is the formula for cost of goods sold.
When you add products/services to the accounting system, it calculates COGS based on the invoices you make.
It would be great if you calculated the COGS of the jewelry service based on the package, by including wages and other expenditures.
Make a chart of accounts for proper bookkeeping
The chart of accounts is the account that the business utilizes to record financial information in an understandable manner. It aids in the calculation of profit and loss statements and the reporting of financial status.
A jewelry company’s chart of accounts would normally comprise accounts for revenue, costs of products sold, operational expenditures, assets, liabilities, and equity.
Accounts in each category include the following:
- Revenue: jewelry services revenue, rental income, etc.
- Costs of Goods Sold: jewelry supplies, labor costs, etc.
- Operating Expenses: Advertising, rent, utilities, etc.
- Assets: Cash, accounts receivable, inventory, etc.
- Liabilities: Accounts payable, loans, etc. Equity: Retained earnings, capital contributions, etc.
Automate the accounting process to save time
Automation of the accounting process refers to the use of software to speed up manual tasks. This involves activities including budgeting, payroll, invoicing, and financial reconciliation.
According to research by Zapier, organizations may save an average of 4.8 hours per week by automating the accounting process. Companies may save the time it would take to handle bills manually by up to 50% with automated invoice processing software.
To establish processes, you ought to pick an all-in-one accounting program. The procedure will then start when you create automated triggers.
Hire an accountant
In the long term, hiring an accountant may be a terrific way to save time and money. An accountant may assist you in adhering to tax regulations, maximizing tax advantages, and concentrating more on managing the firm.
An accountant may also assist you in avoiding errors and penalties, which can ultimately save you money.
It’s recommended for jewelry business owners to use an accountant if they don’t have time for accounting tasks and to ensure books’ accuracy.
Best accounting agencies for jewelry businesses
Hiring an accounting agency would be a superior option for medium to large-size jewelry businesses. Here are some great agencies to consider:
1-800 Accounting Agency
1-800Accountant is an accounting agency based in New York. 1-800Accountant specializes in working with small businesses. It offers services starting from $0 to $375/month, which is quite affordable.
It has a 4.7-star rating on Trustpilot, a 4.2-star rating on Google my business, and a 3.5-star rating on Books time.
Accotax Accounting Agency
Accotax is an accounting agency based in London that works internationally with small businesses, partnerships, and other business types. Accotax’s pricing is perfect for startups and self-employed as it ranges from $265 to $600/month on average.
It has a 4.9-star rating on Google My Business, a 4.7-star rating on Facebook, and a 4.9-star rating on Trust Index.
CSI Accounting Agency
CSI Accounting is an accounting agency that was founded in the early 1960s by Al Clausnitzer, specializing in bookkeeping, consulting, and tax services for small businesses. It works with small or medium-sized businesses.
It has a 4.9-star rating on Google My Business, 4.6 on Facebook, and a 4.5-star rating on Yelp.
Best 5 Accounting Tips For jewelry Businesses
1-Use accrual-based accounting to record transactions
2-Understand basic tax requirements
3-Keep your business bills
4-Reconcile your transactions
5-Create a business bank account
Record transactions using accrual-based accounting
By recording income and costs as they happen rather than as money is transferred, accrual-based accounting gives a more realistic picture of the financial performance. Regardless of whether money has changed hands, transactions are recorded as soon as they occur under accrual-based accounting.
For instance, even if no money was spent at the time, the expenditure would still be recorded right away if you purchased advertising on credit with a 30-day payment term.
Another benefit to accrual-based accounting is its ability to help identify trends in income and expenses across different periods, so businesses can plan accordingly with realistic expectations regarding their expected costs and profits.
Additionally, it ensures compliance with Generally Accepted Accounting Principles (GAAP), which are important standards used throughout the world’s economy.
Understand basic tax requirements
Once you are aware of the form(s) that must be filled out, take into account any potential credits or deductions that might lower the total amount of taxes due. Businesses use documents like the 990T and 1120S (for S-corporations) (for tax-exempt organizations).
Mortgage interest payments, charity contributions, medical costs, state and local income taxes paid throughout the year, student loan interest payments, etc. are examples of common deductions. Child care expenses, the earned income credit, etc. are examples of popular credits.
Additionally, ensure that all pertinent data is fully recorded, including self-employment income, dividends from investments, capital gains from equities, and profits and losses from mutual funds.
It’s crucial to remember all sources of taxable income since failing to do so might lead to underpayment penalties if the IRS discovers it during an audit.
Finally, keep in mind that each state has its unique set of tax laws, so be sure to take them into consideration before submitting returns by the end of April deadline!
Keep your business bills
Keeping track of all the bills you receive can be a daunting task, but having an efficient system in place for managing them is essential for keeping your business running smoothly.
One way to keep up with incoming bills is by setting up an online payment system that allows you to pay them quickly and easily. Melio is a good example of such a system.
This will help ensure that payments are made on time and help reduce any potential late fees or interest charges from piling up over time.
You can also set reminders, so you don’t forget when they’re due, which will save time and money in the long run. Additionally, automating payments means fewer paper statements coming through the mail each month – which helps streamline operations while reducing clutter at home or office!
Reconcile your transactions
You can ensure that all of the financial records in your accounting system are correct and current by reconciling. It also enables you to spot any inconsistencies or mistakes so they may be swiftly fixed before they cause issues later on.
Gathering all pertinent records, such as bank statements, invoices, and receipts for each transaction under consideration is the first stage in reconciliation. This will offer specific reference points if necessary later on, ensuring precision throughout the procedure.
The next step would be to enter each transaction into the online banking portion of the accounting software, which permits direct downloads from bank accounts for quick access & evaluation. Then cross-checking those entries with the information on related paper trail paperwork, such as invoices and receipts.
If not, then there must still be some type of inconsistency somewhere that has to be looked into further until the problem has been fully remedied.
Create a business bank account
Creating a company bank account is crucial for managing your funds as a business owner. Keeping track of your income and spending and making sure that your taxes are being paid correctly are both made easier by having a separate, structured bank account.
In the event that the business’s finances were to suffer, it also shields the owner from personal accountability.
It’s simple to open a business bank account, but there are a few crucial measures to take into mind first:
1. Choose whether your company will be a corporation, partnership, or single proprietorship because this will effect how you create the account.
2. Compare several banks to find out which one best suits your needs.
3. Compile all required paperwork, such as articles of incorporation or DBA forms and identification documents.
4. Deposit money into the new accounts to enable rapid activation.
It is not necessary to spend a lot of time or money setting up a dedicated banking solution for small businesses, but having one will give you peace of mind knowing that all money related to operations is tracked effectively without being mixed with personal assets, preventing potential legal problems when filing taxes.
Accounting for jewelry business owners FAQ
How frequently should I check my books and financial records to ensure their accuracy and correctness?
You should evaluate your financial documents at least once a month. This covers all financial and tax-related papers, such as income statements, balance sheets, cash flow statements, and others. In order for transactions to display appropriately in reports like profit and loss statements or accounts receivable and payable summaries, it is also crucial to ensure that all transactions have been accurately documented.
If your company offers new services or if specific components of it change quickly, you might need to do evaluations more frequently.
Weekly reviews may be required for higher accuracy when tracking changes over time throughout the year if there are significant monthly revenue differences (such as seasonality).
What taxes must I pay in order to operate my jewelry business?
For your business, you’ll have to pay sales taxes, employer payroll taxes, etc. Always seek the advice of an accountant, who may clarify any special requirements depending on state legislation.
Overall, effective bookkeeping procedures necessitate ongoing oversight, which keeps organisations in compliance with laws and records key performance indicators throughout time.