A Girl and Her Dragon – Taxes and FinanceApr 10, 2017Posted by Kylie H
I love running A Girl and Her Dragon Pizza, I really do. I love making pizza, eating pizza, seeing how happy other people are to eat my pizza, the works. I love trying new recipes, shopping for ingredients, experimenting with new toppings and combinations. Essentially, I love pizza
It was only after starting the business that I realized that pizza was not the be-all end-all (sacrilege, I know). I anticipated being paid to make pizza, and on paper, that is what I do. However, for every hour of cooking, I spend another two hours behind the scenes, booking events, cleaning linens, and sorting out finances.
Ah, finances. Bookkeeping, checkbook balancing, tax calculating, receipt filing, IRS cursing (kidding kidding, please don’t audit me)…I do it all. I’m blessed with an amazing accountant who sorts out my corporate taxes and makes sure my sales tax calculations are correct, but record keeping is a far larger part of running a small business than I ever expected.
Oh, I understood (vaguely) that I would have to pay taxes. I clicked around the IRS small business web page until I was thoroughly confused and an extended vacation to the Cayman Islands started to look appealing. I looked at Quicken and QuickBooks, at Caterease and other software that promised to make my life easier, but the all-too-cheery tutorials were equally confusing. But what do you do when the going gets tough? Well, if you are me and terrified of accidentally committing tax fraud, you give up and hire an accountant.
And thank God I did. Owner’s equity versus reinvestment? Depreciation and acceptable deductions? Over the course of a couple of hours, my accountant walked me through the ins and outs of small business finance, introducing me to an accounting software called Quickbooks that she said would do most of my work for me.
Of course, I accidentally bought two incorrect versions of the software before finally downloading the right edition. I then tried to return them, but Quickbooks executives apparently studied at the Comcast School of customer service, so that didn’t work out too well.
In the end, however, despite the extra expense, I set up my software, put together an account, and proceeded to enumerate —in painstaking detail—every purchase I had made related to my business. From the pizza oven itself to the bar towels I use to clean it, I enumerated my purchases down to the cent. My startup record started as a massive spreadsheet over a hundred items long but quickly shrunk to a journal entry (you record expenses in ‘general journal entries’ in Quickbooks) of only six or so lines.
With the start-up costs recorded, all I have to do now is keep track of my expenses and revenue. I use a system of invoices and the aforementioned general journal entries to keep track of my money. The invoices record every event I complete and file them by date so that I can track my revenue month-by-month, quarter-by-quarter, and year-by-year. The general journal entries record food purchases, legal fees, insurance fees, and the general expenses of keeping a small business. Of course, digital records are fine, but you cannot discount the importance of maintaining a paper trail.
I have an entire folder stuffed full of Passione Pizza invoices and grocery receipts. For once, coming from a family of hoarders has proven to be a blessing, because a year and a half in and I’ve barely made a dent in my mother’s supply of accordion folders.
That’s not to say there haven’t been bumps in the road or times when my lack of knowledge has caused trouble. For a couple of months, I didn’t realize that you had to add sales tax to your invoice, so I lost revenue paying those taxes out of my fees.
Then I had to work out all the different sales taxes. California sales tax stands at 6.25%, and each county appends its own tax onto that. Of course, it doesn’t stop there. Each town, city, and village—no matter their size—gets to assign its own sales tax. The sales tax in my town is 9%, but just half an hour down the road in San Jose, it drops a quarter point.
Many cities in my area recently approved higher sales taxes, so pretty soon I’m going to have to adjust all of these numbers. Ah, the joys of California living. I cannot complain too much, however. It would be impossible to move the trailer around without the roads these higher taxes pay for.
I was too young to vote in this last election, but next year when I go to the polls I will have to wrestle with a conundrum. Do I vote as a small business owner or as someone who enjoys open spaces and smooth roads? I know there will be a number of referendums on the ballot related to taxation, all of them raising money for worthy causes, so I guess I’ll have to wait and see.
Sorry, fell down a bit of a rabbit hole there. When I first started this business, I didn’t realize how many complications there could be. Changing taxes, carefully calculated depreciations, and so much more has confused and challenged me, inspiring anxiety even as my revenue grows. Over the next year or so I hope to take firmer control over my finances, learning how to calculate and pay my own taxes, put together business forecasts, and get someone in Quickbooks customer service to pick up the dang phone.