Why you need to use a spreadsheet whether you sell homemade blankets or AVON.
If you are a small business owner or represent a direct sales or network marketing company, you know how much there is to keep track of. Between clients, orders, marketing tools, mileage, events and everything else, tracking is a big part of the business! And jumping back and forth between various websites, apps and notebooks to keep everything straight isn’t very convenient. Even though these things do have a place in the day to day management of your business, you should be using a custom spreadsheet as the final destination for the ins and outs of your business.
Bad Rap for Direct Sales Reps
Many people see the name of any one of the many direct sales companies and their brain wants to yell scam. And it’s understandable because many people come in the name of direct sales and truly end up being con artists. Scamming people out of who knows how much money. And there are also previous consultants who honestly were just not ready or capable of running a direct sales business and ended up on the financial debt side of bad business decisions. In some cases, because they either listened to the wrong people or didn’t listen to the right people.
Only half of small businesses last more than 5 years. And according to this 2018 Forbes article https://www.forbes.com/sites/forbesfinancecouncil/2018/10/25/what-percentage-of-small-businesses-fail-and-how-can-you-avoid-being-one-of-them/#2ac2d7be43b5 , one of the reasons for that dismal number is the need to compete.
And competition, although not noticeable at first, is a strong aspect of direct sales. Always trying to outpace the next rep, or doing things you know you shouldn’t to increase your sales numbers or reach an incentive (I’m looking at you unnecessary inventory!) can lead you into a life-altering debt trap if you don’t have a realistic view of which expenses are necessary for the growth of your business and which are detrimental in the long, or short, term.
But there is hope!
It’s true, you do need to spend money to make money. But, if you are fresh on the self employment scene, there are ways to make sure that you have a balanced view of the money you are pouring into your business. Keeping track of your investments, and monitoring them to make sure they are profitable can save you from a heartache of pain down the road and give you an idea of where you need to make adjustments.
The Business Model of Support
The only difference between a network marketing business and other small businesses is that consultants have huge companies behind them offering various avenues of support. Consultants and reps are independent contractors and their business is very similar to Chron’s definition of a franchise linked here: https://smallbusiness.chron.com/definition-franchise-business-4467.html .
Similar to a franchisee’s relationship with corporate Burger King, network marketing consultants are given a product line to sell, help on how to sell it and some trackers to see how much you’ve sold.
The trackers for most direct sales companies can be found in their online back offices. With places to put your clients’ information and fancy charts to show how much you’ve sold and earned. This is awesome for boosting your morale and motivating you throughout the year, but it doesn’t really help when it’s time to tally up expenses.
If you sell enough products or earn enough achievement or leadership bonuses by the end of the year, your company will send you a Form 1099, ( https://www.irs.gov/forms-pubs/about-form-1099-misc. ) and you will probably be flabbergasted at how much it says you sold. It’s flattering they think you were so successful, but it will definitely not match your calculations.
Not the whole picture
“. . . direct sales companies can’t possibly anticipate what each representative is going to do so they provide what they can with the numbers they have.”
Angela Davis, Davis Virtual Support
Although the support the marketing companies provide is a big perk, when you open up your 1099,or pull up your back office trackers, to file your taxes, you might quickly decide that it presents an awful estimate. If that’s the case, it’s probably because your company didn’t take into account that the following may have applied to your situation:
- Discounts
- Promotional Giveaways
- Personal Purchases
- Reduced profits due to inventory clearance
- Other creative things you did with your earnings
And this lack of variables is understandable, direct sales companies can’t possibly anticipate what each representative is going to do so they provide what they can with the numbers they have. That’s why as independent contractors, we need to put emphasis on the importance of record-keeping and note all of our expenses throughout the year so we can put them against the income reported on our 1099s.
Keeping accurate records will give you a clear picture of your business, allowing you to see where adjustments need to be made. Plus, your tax return numbers will reflect your actual business, not an incomplete picture.
(If you haven’t filed your taxes yet this year, make sure to check out this tax calendar to see how much time you have left! http://www.calcityfinancial.com/tax _calendar.cfm )
The Final Solution
Even if you aren’t in network marketing, I know you’re thinking, “I use websites and apps for tracking all this stuff already.”
Guess what? I do, too.
On top of my company provided back office, I track orders and payments with Square, I had tried a few different CRMs to track contact with my clients, and there are so many more apps and websites available to track parts of my business! I will continue to use my favorites, but there has to be a way to keep all of this information in one place!
And there is.
Keep in mind, there is nothing wrong with putting notes and items in different apps, websites or notebooks when they are helping you keep track of what’s important. Anything that makes it easy for you to book-keep should be kept.
Where the problem lies is in when it’s time to crosscheck data or submit your income and expenses during tax time. It can get frustrating trying to explain to your CPA that there are a lot of exceptions to all of the rules when it comes to your income, especially when they are spread across multiple programs.
By taking some time once a week to log your records into a spreadsheet, you’ll have a single, simple document to review and present to your CPA during tax time. Click below to head over to the File Cabinet and check out the Comprehensive Small Business Log. Customize it to track the unique expenses of your small business year after year and watch it grow with you!
The Comprehensive Small Business Log comes with one (1) hour of personalization and instruction on how to make the most of your new spreadsheet if desired.
If you really aren’t keen on doing any logging, feel free to book Davis Virtual Support to do the logging on the Comprehensive Small Business Log or another spreadsheet for you! At regular intervals or just once at the end of the year, we would love to be of service!
Davis Virtual Support 