Hello everyone and thanks for joining us today. My name is Phyllis Wischer and I am the Lead Business Coach at SageFire, Inc. - the creators of KeepMore.net. I am a Public Accountant with over 20 years experience in helping thousands of small business owners with their bookkeeping, accounting, payroll and tax needs.

SageFire is a Certified Solution Provider specializing in helping small business owners' track their business financial activity using our online accounting, contact management and document storage solution. Our solution, KeepMore.net makes it simple for you track your business while maximizing your tax benefits.

I am a passionate advocate of small business in America. My direction in life, and for KeepMore.net, is guided by what makes small business successful. Having owned my own accounting and tax practice for over 20 years, I can speak from experience when I say the majority of small business owners panic when they hear the words "accounting" or "bookkeeping".

My goal today is to help you, the eBay business owner, understand how accounting/bookkeeping works and why it is so painful to do. Going forward I will just use the term accounting.

In order to better understand the entire accounting function, I have broken down the subject matter into various important topics which are listed below.

• Why you need to do it


• Three types of accounting methods


• Two types of accounting programs


• The basics of accounting


• What causes the 'pain'


• An easy prescription for your 'pain'

First, to be a successful business owner (and I would hope that is your goal), you need to know if you are, in fact, successful. Many small business owners think that cash in the bank at the end of each month means they have made a profit for that month. But, what if you purchased items using personal funds, or borrowed money to cover expenses? Failure to record these transactions correctly can distort your true profit. Only by accurately recording income and expenses related directly to your business can you know your true profitability.

Once you have recorded all your income and expenses correctly, then, and only then, can you analyze your profit to determine 1) the success of your business, and 2) assist you in making good business decisions. To help you with the decision making process, you should use some type of accounting program, like KeepMore.net. When you have a clear picture of your businesses profitability, you can make better business decisions. Do you need to spend more money in an area that will generate more profits to you? Or, do you need to cut spending money in an area that is not generating enough profit? Remember, true success is measured by the profit you make.

Remember, as a small business owner, you know what income you are generating and you know what expenses you are paying. Using an accounting program like KeepMore.net will allow you to see your profitability and know exactly how much income you are generating and exactly how much money you are spending on business expenses. You will be able to make better business decisions and save valuable tax dollars by accurately tracking all your business income and expenses. KeepMore.net will even help you know what is deductible and where to deduct it.

But I want to make this easy for you! Ask yourself, "Do I have an average annual gross receipt from sales of $1 million or less?"

• "YES" - then you can use the Cash Method of accounting. You can record all purchases as 'Cost of Goods Sold'. There is only one adjustment you will need to make at the end of the year. You must deduct from your 'Cost of Goods Sold' the cost of items not sold and at the end of your business year (example - December 31st).


• Remember to add back at the beginning of the new year the 'Cost of Goods Sold' that was deducted at the end of the last year.


• "NO" - then you must use the Accrual Method of accounting; and I might add congratulations on building such a successful business.

As always, I recommend that you visit with your tax advisor before making the final decision of which method of accounting you should use for your business.

As stated above, you must know your business profitability (or net income from business operations) in order to make good business decision and to determine your correct tax liability from the operations of your business. But how is your business profit determined? The formula looks like this.

• Plus - Income


• Minus - Cost of Goods Sold


• Minus - Business Expenses


• Equals = Net Income/Loss from Business Operations


• Plus - Other Income (example - Interest Income)


• Minus - Other Expenses (example - Penalties)

We could spend hours getting a better understanding of how you should record your eBay accounting transactions; however, since we only have one hour to discuss this important function, I have prepared a more complete discussion outline on the formula above along with some good resources. Just email me at phyllis@sagefire.com to request your copy of 'Recording Your Business Transactions'