Using QuickBooks in Your eBay Business

QuickBooks can give you up-to-the-minute reports about the status of your eBay business and keep track of everything in the background — including payroll and sales tax liability.

Here are a few things that make this business accounting software by Intuit an indispensable tool if you want to streamline an online business:

• Inventory Reports: As you purchase inventory, aside from deducting the money from your checking account and expensing your merchandise account, QuickBooks adds the purchased merchandise to your inventory. Every time you sell an item, QuickBooks deducts the item from your inventory. QuickBooks has many other reporting features for your inventory and end-of-year reporting for taxes.

• Sales Tax Tracking: Depending on how the program is set up (based on your own state sales tax laws), you can request a report that has all your taxable and non-taxable sales. The report calculates the amount of sales tax you owe. You can print out this report for backup information on your sales tax payments to your state.

• Payroll: Whether you use the online payroll service to prepare your payroll or input the deductions yourself, QuickBooks posts the appropriate withholdings to their own accounts. When it comes time to pay your employees' withholding taxes, QuickBooks can generate the federal reporting form (all filled in) for submitting with your payment.

• Sales Reports: QuickBooks gives you a plethora of reports with which you can analyze your sales professionally. One of my favorite reports is the Sales by Item Summary. This report gives you the information below for every inventoried item you sell in whatever time period you choose:

• Quantity sold

• Total dollar amount sold

• Percentage of sales represented by each individual item

• The average price the item sold for

• COGS (cost of goods sold) by item

• Average cost of goods sold by total sales per item

• Gross profit margin in dollar amounts

• Gross profit margin expressed as percentages

Depending on how you post your transactions, you can analyze your eBay sales, Web site sales, and/or brick-and-mortar sales individually or together. You can also select any date range for your reports.

Some online auction management services integrate with QuickBooks. This integration means that your individual transactions can be downloaded into the QuickBooks program, setting a up a new customer for each of your sales.

Although this process is quick and easy, inputting each sale as a new customer will cause the size of the database to become huge quickly. QuickBooks is a very large program to begin with, and if you're going to use it (and update it) for several years, the database will become even larger.

If you've ever worked with large files, you know the larger the data file, the more chance there is for the data to become corrupt. That's the last thing you want. Besides, QuickBooks will max out with over 14,000 customers — very doable in several years on eBay.

To keep track of your customers, you can use an additional copy of your PayPal monthly report and combine them with cash sales into an Excel (you can also use Microsoft Works) spreadsheet to build this important data.