How to manage your accounts as an eBay seller - the guide for everyone who hates numbers but loves selling on eBay

You have now made your first sale! Brilliant. Well done. It is a great feeling. When the notification hits your phone for the first time.

So now that you have made sales, the money should soon be hitting your account. 

Either via eBays managed payments or via PayPal. Either way, you are now going to have to manage your money, if you are going to turn this into a business. 

However, if you are going to be using eBay to declutter and give yourself a few extra quid just go ahead and buy something nice for yourself and go out for a nice slap-up meal. 

However, make sure to keep some behind to pay for any eBay fees.

We are assuming that you have now caught the "eBay" bug and will be looking to continue along your own eBay journey.

So for us to continue along this path and to ensure that you are going to manage your money from here on in.

We have created a spreadsheet to help you track those profits and losses. It has been specifically designed with eBay sellers in mind.

The first thing we have to understand is the difference between some key concepts.

Key Accounting Concepts

Revenue. Profit. Cashflow. Re-Investment. Drawings. Costs of Sale.

These concepts will help you manage your money from the eBay business.

Please do not fall asleep, it is interesting. Honest.

Revenue/Sales

This is the total income of the business. This is the total of all the sales and income in any given accounting period.

For example, if in March you made 10 sales of £10, your revenue/total sales for March would be £100.

Profit 

This is all the money left after you have spent money on product, shipping, packaging materials, eBay fees and banking fees. This is the money you could theoretically withdraw from the business. Essentially Profit is Sales minus costs.

For example, if you made 10 sales of £10 your revenue would be £100. 

However, if you paid £2 per item. The profit would be £80.

£10 sale minus £2 =profit per sale of £8 multiplied by 10 = £80.

Cashflow 

This is the money that comes into and out of your business. This is the money that comes into your bank account and the money that comes out of your bank account. Managing this money can be tough, especially when you first get started. 

A positive cash flow in a given period is more money coming into the business than leaves. 

For example a positive cash flow. 

You make 10 sales of £10 = £100

You spend £50. 

The cash flow is £50 positive.

In a negative cash flow in a given period, more money leaves the business than comes in.

For example negative cash flow.

You make 5 sales of £10 meaning a £50 revenue.

You spend £60, meaning you have a £10 negative cash flow.

Cash Flow is different from profit because it is judged on the actual money that enters the business and not based on recorded profits or revenue.

Capital Expenditure (or reinvestment)

This is for an eBay business the money you spend on buying new products to sell or money spent on equipment or marketing.

For example.:

You make £80 profits as per our example above, and you decide to buy 10 more £2 items to replace those you sold. 

You also decide to invest in a new product line with 10 items @ £3, taking your total investment to £50 with £30 of the £50 being reinvestment. 

Drawings 

This is the best bit of accounts: The money you withdraw from the business. Also known as MAKING BANK. This is the money that you can safely take out after you have paid all the bills, costs etc.

We recommend being conservative and sensible at the start of your business.

For example:

You make 10 sales of £10 in one week and decide that you take out £1 per sale, this means you have drawn out £10. There will now be £90 left in the business.

Cost of Sales

This is the money you have to spend to make a sale. For an eBay business, this is generally taken up with the eBay fees. It also covers some things like packaging materials and postage.  

Before we continue further into the accounts wormhole I would love to note something. Do not be afraid of the big bad accounts. This part is not as hard as you think if you follow some simple rules to ensure that you manage your eBay money.

To help clarify the above we 

Getting started managing your eBay income.

So let's begin. To manage the money that your eBay business makes, we recommend the following.

Step 1) Open or use a dedicated bank account. Accounts like Monzo, Tide and Starling all are great places to start. Of course please do the appropriate checks before deciding on an account.  It needs to be correct for your circumstances. 

Step 2) Open a PayPal account linked to your email address. Add this is your eBay account.

Step 3) Set up managed payment on eBay to get paid or MAKE BANK! 

Step 4) Have managed payments and move the money into your account once per week (this is better for cash management as daily payments can leave you bamboozled. 

Step 5) On a weekly basis you now need to manage this money.

Weekly Money Management

Managing your weekly money from eBay should now be relatively easy as you have a separate account, you have managed payments and you are now making sales.

You are going to have to budget for:

Postage & Packaging.

Re-investments in stock.

Fees.

Other Business costs.

This is a headache. However, we have put together a great simple way to ensure that you are able to manage the money. We call it the 10% method.

Every Week, when you come to check the account. I would do it either on a Sunday evening or Monday morning. Follow the below process.

Step 1) Check the income since last week.

Step 2) Divide the income by 10 to give yourself 10% of sales - withdraw this money as your commission/profit/drawings. The percentage is of course up to you. We used 10% as a guide. 

Step 3) Review the balance. Keep £100 in the account at all times to pay for postage etc. 

Step 4) Any balance above £100 is now yours to use to invest in stock be it new or second-hand. This is your capital expenditure balance or reinvestment.  If you are using an account like Monzo or Starling account, set this aside into a "pot" or "place".

Step 5) Use the account when spending money on postage, packing fees and buying new stock, and withdraw it from the pot after each purchase of reinvestment spent into the main account. 

This way you are managing budgets without even having to "think" about managing budgets.

Step 6) Repeat each week at the same time and day. If you are using Monzo, Starling etc, you can even note what each transaction does so at year's end it will be easy to manage your accounts. Many other bank accounts are of course available. 

Hopefully, this will make managing your eBay money easy if you decide to move on to selling on eBay more professionally.

Please note this is not your annual or legal account. You may need an accountant for this. 

Please do all relevant checks before embarking on any course of action regarding your finances. I am self-taught, so please double-check the above with other sources.

*****

This post is an extract from my book "My First eBay Sale" which is available now.

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