I sell refurbished small appliances on the side (mixers, coffee makers, that sort of thing). I buy broken units, fix them, and resell. The problem is I keep mixing up repair expenses with inventory costs in my records, and at tax time it's a mess. Does anyone have a simple way to track this without buying accounting software? I'm using a spreadsheet but I'm not sure I'm doing it right.
Bookkeeping
Repair costs are making my resale bookkeeping complicated
I'd say the main thing is to treat the repair parts as a cost of goods sold, not a general expense. So if you buy a $10 heating elemment for a $40 coffee maker you'll resell for $70, the $10 goes into the cost basis of that specific item. Your spreadsheet should have a column for 'parts cost' per unit. Then your profit is sale price minus (purchase price + parts). That's the cleanest way.
Are you tracking by individual unit or just lumping everything together each month? Because if you're lumping, you're going to have a bad time.
Right now I lump by month. I know it's not ideal. I have maybe 15-20 units going at once so tracking each one feels like a lot.
15-20 isn't that many. A simple sheet with one row per unit and columns for purchase cost, parts cost, sale price, fees, and date sold would take maybe 5 minutes per item. It's worth it. I did the lumping thing for a year and spent three days reconstructing everything in April. Never again.
Also keep receipts for parts in a folder, digital or paper. If you're ever asked to substantiate the repair costs, a monthly total with no backup is weak. Per-unit rows plus receipts is the standard.
What about labor? Do you count your own time as a cost? I never know whether to include that.
For tax purposes your own labor generally isn't a deduct ible cost since you're not paying yourself wages. But for knowing whether the business is actually worth doing, you should track hours separately. Different question though.
turnip_town is right. I track hours in a separate column just for my own info. It doesn't go Into the cost basis but it tells me if I'm making $15/hr or $4/hr on a given flip.
The hours thing is actually a good point I hadn't considered. Some of these repairs take two hours and I've never checked if it's worth it. I'll add a column. Thanks all, I think per-unit rows is the way to go.
One more thing, do you separate shipping costs on the buy side from the sell side? I always get confused about which one affects cost basis.
Shipping you pay to receive inventory is part of your costt basis. Shipping you pay to send a sold item is a selling expense. They're different lines.