Most people that start a home bakery – or any home-based business, for that matter – don’t do so just to get the chance to do some small business accounting.
No, most home bakery operations start with folks that are particularly passionate about baking. Not the kind of people that want to crunch all sorts of numbers, manage cash flow, and deal with taxes.
Unfortunately, as a home bakery owner, it’s not all about baking. Understanding and tracking your finances is imperative if you want a successful and thriving business. The sooner you square this away, the better off you will be, and that’s why I put together this guide.
I wish I had taken all the advice below when I started my bakery. It took me a while to formally and consistently set up systems to track my sales and expenses. I had a general sense of it, but that’s not the best way to run a business.
Let me say up front; I am not an accountant. I’m giving you information based on my personal experience as a home bakery and retail bakeshop owner. I always suggest getting qualified professional advice when it comes to legal or financial matters. Each individual’s situation is unique. For this post’s purposes, I will assume you have a business structure and determined how you will be accepting payments.
Open a Separate Business Bank Account
Right out of the gate, you’re going to want to have a separate bank account opened up for all your business needs.
A lot of people (especially first-time business owners) mix their business income with their personal bank account, creating a stressful and chaos when it comes time to nasty little knot that has to be untied by an accountant to make sure that the IRS isn’t after you later down the line.
Get a separate bank account (checking account) for your business – dedicated only to your home bakery – and tracking finances become easier.
Square Away Your Tax Stuff Before Money Starts Coming In
If you haven’t discussed your finances when you set up your business structure, you’re going to want to sit down with a certified public accountant (CPA) to help you set up your books – even before you have any money coming in.
By getting your system set up early on in your business (even before your first customer), you can eliminate a lot of stress and future headaches.
Get A Business Credit Card
Business credit cards aren’t just an easy way to keep things organized but also help to streamline your overall finances later down the line too.
You won’t have to run around to find invoices, receipts, and records when you keep everything confined to one or two business cards. You’ll have all expenses right there in front of you, ready to rock and roll – and that keeps things nice and tidy.
Combine that with some of the great rewards top-tier business credit cards provide (the kinds of rewards you might have never been able to unlock with traditional consumer credit cards), and this is a bit of a no-brainer.
Be thoughtful about charging business items to credit cards and only buy what you need to improve your business. It’s an easy trap to start charging stuff you plan or hope to use in the future when “the business booms.” Start lean and find creative solutions before you start buying up a storm.
Build a Record Keeping System That Works for You (And Your Accountant)
Every small business owner likes to keep their records in a bit of a different way than anyone else, and the same is likely true for you.
It’s not necessarily super crucial that you stick to a rigid organizational structure outlined by someone else (anyone else), so much as that you stick to some kind of record-keeping system – one optimized for your home bakery.
Whether you avoid paper and want everything digital or prefer physical files and folders, you need a system that works for you and allows easy access.
It’s always a good idea to run the system by your accountant, though.
It’s beneficial to know in advance what you need to provide your CPA when the time comes. They’re the ones that are going to have to sift through your records to find the information they need to help you file accurate taxes.
Schedule Time in Your Calendar to Regularly Review Your Numbers
The most successful small business owners and entrepreneurs carve out time in their schedule to review their business and financials and track their progress towards achieving their goals.
It’s never a bad idea to set aside an hour or two every couple of weeks (maybe every other Sunday evening, for example) just to have a close look at how things are going.
Consistently tracking and reviewing your numbers keeps your finger on your business’s pulse. It lets you know where you need to focus your attention, and it helps you better plan the way to achieve your goals – or to set new ones after you accomplish your old ones!
Leverage Apps to Make Managing Your Business Financials Easier
Finally, it’s a good idea to take advantage of powerful apps, software, and automated systems to make managing your business financials easier. Perhaps your CPA has recommendations given their continuous work with small businesses.
There are some great tools out there (a whole bunch of them free of charge or close to it) that can do the bulk of the heavy lifting for tracking and organizing your home bakery financials for you.
Lean on and leverage those apps and services as much as possible. They’ll make life much easier for sure!
As a home bakery business owner, you’re going to have a lot to juggle – and truth be told, managing your books isn’t ever as much fun as actually getting down to the business of baking. Shocking, but true!
Use the tips and tricks above to streamline and simplify the financial side of your business, though, and you’ll be able to spend a lot more time in your kitchen and a lot less time in your books.
RELATED: How Do Bakers Keep Track of Orders and Due Dates
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