When you start a business project, one of the key points is the economy and the expenses. I know, that we are lazy when we have to calculate them, add them, subtract them… and re-calculate them. But far from being an accounting obligation, “making numbers” is a basic tool that will help you in your day to day. Therefore, today we want to show you a quick guide on how to calculate the expenses of a craft business.

Tips to calculate the expenses of your craft business

The first step: the attitude

Yes, as you read it. I know some artisans who, overwhelmed by their own work, leave aside the most formal part of their business: accounting and taxation. The lack of interest is usually the beginning of endless headaches. In fact, I can affirm that it has meant the cessation of some business in more than one case. For this reason, it is important that you give the numbers the attention they deserve. In many cases, part of this activity can be outsourced. In fact, it is more than recommended. The help of a specialized professional or a manager can free us from many mistakes and will save us a lot of time.

Expenses vs investment

With the idea that numbers are your friends, the next step is to be clear about a previous differentiation: expenses are not the same as investments. While an expense should help you develop your activity and achieve your goals, an investment will help you multiply the benefits. This does not have to be translated only in money. For example, hiring a tax advisor may seem like an expense at first but it will mean an investment that will benefit you in peace and time.

On the other hand, any investment involves some risk since you work based on a future perspective. Nobody assures you that you recover, although the experience and being well informed can help you a lot. Therefore, it is important that you differentiate between expenses and investment also at the level of savings. Set aside separate items for each field, although if you are starting everything seems the same

cajas de cuentas gastos para negocios handmade

Expenditure recording

If you are an artisan or maker of products, your expenses should be differentiated into two large blocks: yours and those of your company. In many cases, the craftsman himself is the main or only worker of the company, so your expenses can directly affect the business. To illustrate better the separation of the “personal” and the “business”, we show you this scheme:

 I have, as a private person:

  • Fixed expenses: residential (rent, mortgage, …), supplies (water, gas, electricity, telephone, …), food and drinks, education (your own or your children’s), insurance, savings, pension plan, taxes, bank loans , transportation (daily use), etc.
  • Variable expenses: travel, leisure activities, restaurants, media (newspapers, magazines, payment channels, …), vacations, gifts to relatives, friends, etc.

 

My business

  • Fixed expenses: space (mortgage, rent, …), space maintenance (renovations), supplies (water, gas, electricity, telephone, …), insurance, savings for future expenses / investment, taxes on your activity, promotion and advertising, credits, workers’ salary (if you have), web maintenance, office supplies, professional training, etc.
  • Variable expenses (if you offer services): planting and design of the service, corrections (time), preparation of the delivery (formats), others.
  • Variable expenses (if you offer products): raw material (wood, clay, paint, …), tools, packaging, transport (logistics), etc.

 

Final calculation: how many expenses does your business have?

Once the distribution is made, we add the amounts and divide them for the period we want. The most advisable is to do it for 12, so you’ll see the expenses you have each month. In another way, you will see what you must earn each month to cover all expenses.

Once the distribution is made, we add the amounts and divide them for the period we want. The most advisable is to do it for 12, so you’ll see the expenses you have each month. In another way, you will see what you must earn each month to cover all expenses.

regla de cuentas empresa artesanal

We hope we have helped you identify the expenses of your craft or handmade business. And if you have any questions, do not forget to leave your comment;)

See you in the next post!