How to manage your social media shop finances

Today, starting shops on Facebook, Instagram, Pinterest, and even TikTok can expand your product reach. Selling through social media shops helps you access their nearly four billion users worldwide. 

But it can be challenging to manage the money. But, with the proper knowledge and tools, social media finances can be easy. 

This guide offers tips for managing social media shop finances, including:

• Recording expenses 
• Tracking sales
• Using the right tools 

Like all businesses, you’ll need to keep up with what you spend and earn from your shop. The HMRC requires you to track your social media shop finances and keep those records for about six years. 

Your expenses are an essential half of bookkeeping for your business. 

Business expenses 

With your social media shop, you might be spending money on: 

• The products you sell (the more you sell, the more complex this’ll be)
• Marketing materials 
• Paid advertising and promoted post 
• Business software 

To get a bigger picture of what counts as a business expense, see: Ultimate guide: what are business expenses?

Expense records

When recording expenses, be sure to write down any purchase you make that directly impacts or supports your business. 

When you do this, include:

• The amount you spent
• What you bought (and from where)
• When you bought it (the date)
• Why you bought it

For example: 

Date: 02-02-22

Purchase: 50 Ceramic mugs 

From: Wholesale UK

Amount: £200 / £4 per mug

Reason: To restock Instagram shop

Also, be sure to collect and save all relevant receipts, such as stock purchasing orders. 

Over time, these transactions could get ahead of you. So, take time each day or at week’s end to update your records. 

Regularly checking in with your spending won’t just help you avoid errors. It’ll also show how profitable your shop is. 

For example, if you realise you spend more than you make or restock too often, you can adjust for better finances. 

To manage your expenses, you’ll need

• A business current account 
• Modern accounting software

It’ll be much easier to maintain your records if you open a business current account. This bank account, specifically made for businesses, will organise your social media shop spending in one place. 

Without a business current account, you could miss an expense or mistake a personal transaction for a business one.  

On top of this, modern accounting software like Countingup can help you organise and analyse your expenses. Countingup, a two-in-one business account and accounting app, helps you better understand your spending.

The app offers automatic expenses categorisation using HMRC approved categories to find expenses easily. Plus, the receipt capture tool reminds you to snap a picture of your receipt for clutter-free records. 

Key tip: Don’t go it alone! Use tools that simplify and automate the process to better connect you and your finances.

Just like you need to track expenses for your social media finances, you’ll also need to monitor sales. The other half of your bookkeeping records what you earn from your business. 

Tracking sales isn’t just obligated by the HMRC to make accurate financial statements and tax reports. It also helps you track your cash flow to understand your business performance. 

The challenges  

If you sell various products from several social media shops, tracking sales can become a challenge. 

Some social media shops can accept payment through their own platform (TikTok). Meanwhile, others must direct buyers to your website to pay (Facebook and Instagram). 

If you only sell on Facebook or Instagram, you’ll only need to look to your website sales to update your records. 

To keep an accurate record of your shop revenue, you’ll need to track what you sell and how much you sell it for. 

Luckily, since you sell online, you’ll likely receive most payments by credit card. As this money goes through your chosen payment system to the merchant account and ends up in your bank account, you’ll have a clear record of it. 

For example: 

Date: 02-02-22

Product: Ceramic mug 

Price: £9

Here, the revenue (earnings before expenses) is £9. But, as you add this to your balance sheet, you’ll see the profit (or retained earnings) is £5 because you paid £4 for it. 

As straightforward as it seems to record sales, it can get a bit more challenging. For example, you could stock various products, sell in large quantities, or have multiple shops. 

To simplify this, you might record the number of sales of each product rather than each sale.

This process could look like 

Product: Ceramic mugs 

Week: 30-01-22 to 05-02-22

Amount: 20 

Price: £9

Revenue: £180

When you update your records, be sure to check them over closely. To maintain accuracy, you’ll need to avoid duplications or omissions. 

To manage your earnings, you’ll need: 

• An e-commerce sales tool 
• Modern accounting software

Using an e-commerce tool will help you track sales, analyse demand, and calculate sales tax. 

Some examples are:

• Shopify– offers the most variety 
• Woocommerce – offers a website plugin 
• Outfly– designed for social media selling

Then, the Countingup app generates cash flow insights to track your earnings. With this tool, you can quickly analyse the money coming in and out of your business to compare sales and spending. 

Apart from cash flow insights, the app has year-round tax estimates. With these, you can prepare for tax season and avoid surprises. Altogether, the tools help you maintain clear records and make better business decisions.  

Now that you can keep up with your finances, stay social. 

Organised finances open the door to offering the best products and services for your social media shop. All you have to do is look to the tools that can make things easy. 

Bonus tip: Managing your shop inventory is another essential part of social media selling success. Learn more with What is inventory management?

Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

Save yourself hours of accounting admin so you can focus on growing your business. 

Start your three-month free trial today.