In November 2018 Etsy created a new Etsy payment account and eliminated the separate Etsy bill. Now all Etsy fees are deducted from Etsy sales before the remaining money is deposited into your bank account. In light of these changes, the process for recording Etsy deposits and Etsy fees in QuickBooks Simple Start has changed. Let me show you exactly what to do now.
Why QuickBooks Simple Start?
This post explains how to record your Etsy deposits properly in QuickBooks Simple Start, which begs the question, why QuickBooks Simple Start? I have experimented with many different accounting and bookkeeping programs, and I still feel strongly that QuickBooks Simple Start is the way to go for your bookkeeping needs, whatever your small business. QuickBooks is true accounting software but it is also easy to use. Take a look at my analysis of QuickBooks Simple Start compared to other popular options for your Etsy shop bookkeeping needs.
What changed on Etsy?
In the past, Etsy segregated the amount you earned (your Shop Payment Account) from the amount you owed Etsy (the Etsy Bill). Your shop payment account deposited into your bank account your gross sales + shipping income + sales tax collected – card processing fee.
The Etsy bill was charged to your credit card or bank account monthly, and included your listing fees, your transaction fees, your advertising fees, and the cost of any shipping labels you printed through Etsy.
In QuickBooks, these separate transactions were handled by adding your Etsy deposit as Etsy Income on the bank feed, recording a monthly adjusting journal entry to break out shipping income, sales tax, and the card processing fee, and splitting your Etsy bill into its various categories. If you need to reference this old method you will find the Etsy bill split here.
Now, the Etsy bill is gone. No more monthly Etsy bill charge. Those expenses that were on the Etsy bill are coming out of your shop payment account in real time. So your deposit is net all fees.
What does this mean for your bookkeeping?
I’m sure some Etsy business owners will simply just record their Etsy deposit to their Etsy Income account and call it a day, but that number is net of a lot of fees! We need to break out those fees and gross up our sales number so we have accurate financial records come tax time, and so that we can make solid decisions for our business based on real numbers each month.
Unfortunately, Etsy does not provide a report that outlines what sales and fees are included in each deposit. However, they do provide sellers with monthly reports. We are going to use the monthly report information they provide to record all of our sales and fee information on a monthly basis. This is fast, easy, and accurate.
How do we accomplish this? First, we are going to treat Etsy like a bank account. After all, they do hold onto your money for a while before they deposit to your bank account. After that, we need to post one simple journal entry at the end of each month will allow us to properly record the information from the new Etsy payment account. And I promise it really is simple! Spend less than 10 minutes each month and make one simple journal entry. Watch the video below to see exactly how this is done!
Any questions? Leave your questions in the comment section of the YouTube video on YouTube.
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