If you’re running a small online business or selling on platforms like Facebook Marketplace, Etsy, or Shopify, there’s one thing that can make or break your success — understanding your numbers. Tracking your profits and expenses might not sound glamorous, but it’s the backbone of a thriving business.
Too many small sellers focus only on sales — they celebrate every order but forget to track how much they’re really earning after fees, shipping, taxes, and supplies. The truth is, if you don’t know your numbers, you don’t know your business.
In this guide, I’ll walk you through exactly how to track your profits and expenses like a pro, even if you’re not an accountant. You’ll learn the right tools to use, what to track, and how to stay organized without feeling overwhelmed.
Why Tracking Your Profits and Expenses Is So Important
Let’s start with the “why.” Tracking your money isn’t just about taxes (though that’s a big part of it). It’s about knowing where your business stands financially at any given time.
Here’s why it matters:
- It helps you price smarter. You’ll know your true profit margins and can adjust prices to stay competitive without losing money.
- It prevents financial surprises. You won’t wake up one day wondering why your bank balance doesn’t match your sales.
- It makes tax season painless. When you’ve tracked everything all year, filing your taxes becomes quick and stress-free.
- It helps you make smarter growth decisions. You’ll see which products are actually profitable and where you might be overspending.
Think of tracking as your business’s health check. You wouldn’t drive a car without a dashboard — so don’t run a business without one either.
Understand What Counts As Income and Expenses
Before you can start tracking, you need to understand what actually counts as income and expenses in your business.
Income (Money In):
This includes all the money you earn from product sales, delivery fees, and other related services. But remember—your gross income (total sales) is not your profit.
Expenses (Money Out):
These are the costs you incur to run your business. Common examples include:
- Cost of goods sold (materials, supplies, wholesale purchases)
- Shipping and packaging fees
- Platform fees (like Etsy or PayPal fees)
- Marketing and advertising expenses
- Software subscriptions
- Equipment or tools you use to produce or list items
- Taxes and transaction fees
Understanding this breakdown is key because once you subtract your total expenses from your total income, what’s left is your net profit — your real earning power.
Set Up a Simple System (Don’t Overcomplicate It)
You don’t need fancy accounting software to track your finances — at least not at first. What matters most is consistency.
Here are three ways to start tracking today:
- Use a Spreadsheet:
If you’re just starting out, a simple Google Sheets or Excel file can do wonders. Create columns for:
- Date
- Item sold
- Sale price
- Platform fees
- Shipping cost
- Material cost
- Total profit
This approach gives you full control and visibility. You can even use built-in formulas to automatically calculate profits.
- Try Free or Affordable Accounting Software:
If you’re ready to level up, tools like Wave, QuickBooks Self-Employed, or FreshBooks automate tracking for you. These apps connect directly to your bank account and marketplaces, making it easy to see your cash flow in real time. - Use a Mobile App for On-the-Go Tracking:
If you sell at local markets or through social media, apps like Expensify or Zoho Books let you record transactions and receipts instantly, right from your phone.
The key is to pick a method that fits your workflow — one you’ll actually stick with.
Separate Your Business and Personal Finances
This is a big one, and it’s where many new sellers slip up. If your business and personal money are mixed together, you’ll never have a clear picture of what’s actually going on financially.
Here’s what to do:
- Open a dedicated business bank account (even if it’s just a separate personal account used only for your business).
- Get a business debit or credit card to pay for supplies and expenses.
- Deposit all sales income into your business account and pay all business costs from it.
This separation makes tracking a breeze — and it saves you from a headache when tax season arrives.
Track Every Expense — No Matter How Small
It’s easy to overlook small expenses like packaging tape, printer ink, or online listing fees. But over time, those small costs add up and can eat into your profits.
Make it a habit to record every expense as soon as it happens. Keep digital copies of receipts (snap a photo on your phone or use receipt tracking apps).
You’ll be surprised at how much clarity this brings. You’ll start to see where your money goes — and where you can save.
Calculate Your True Profit Margin
Many sellers mistake revenue for profit. Selling a product for $30 doesn’t mean you made $30. You might have paid $10 for materials, $5 for shipping, and $3 in platform fees.
That means your actual profit is $12 — not $30.
To calculate your profit margin, use this simple formula:
Profit Margin (%) = (Net Profit ÷ Total Revenue) x 100
If your profit margin is below 20%, you may need to rethink pricing, reduce costs, or negotiate better supplier deals.
Knowing your margins helps you make informed decisions — like which products are worth scaling and which ones to drop.
Track Platform Fees and Hidden Costs
When you sell online, it’s easy to forget that platforms take their cut. Facebook Marketplace, eBay, Etsy, or PayPal each have their own transaction fees — sometimes hidden until you dig deeper.
Make sure you:
- Review the fee structure of your selling platform.
- Deduct those fees from each sale in your records.
- Include payment processing costs (like Stripe or PayPal percentages).
These fees can make a big difference in your bottom line. By tracking them closely, you’ll know your real earnings instead of just guessing.
Review Your Numbers Weekly or Monthly
Tracking profits isn’t a one-time task — it’s a continuous habit.
Set aside time weekly or monthly to review your income and expenses. Ask yourself:
- Which products brought in the most profit?
- Where am I overspending?
- Did I meet my sales goals this month?
These insights help you identify trends early. Maybe your ad costs are creeping up, or maybe one product consistently outperforms the rest. Either way, data gives you control over your business direction.
Use Visual Reports To Understand Your Growth
Numbers are great, but visuals make them powerful.
Most accounting software or spreadsheet tools can create charts showing your monthly revenue, expenses, and profits. These visuals help you:
- Spot seasonal trends.
- Compare performance month-to-month.
- Predict cash flow issues before they happen.
Even a simple line graph can help you see patterns that raw numbers might hide.
Plan Ahead for Taxes
If you’re earning money from selling products, you’ll likely owe taxes — and failing to plan for that can create nasty surprises later.
Here’s what to do:
- Set aside 15–25% of your income for taxes in a separate savings account.
- Track all deductible expenses like packaging, shipping, and advertising — they can reduce your taxable income.
- Use accounting software or hire a tax professional if your business is growing fast.
Staying ahead of taxes means you’ll never scramble to find receipts or money when the deadline hits.
Automate Whenever Possible
Automation saves time and ensures consistency. Connect your bank account, sales platform, and expense apps so transactions are recorded automatically.
For example:
- When you make a sale, your software logs the income.
- When you pay for shipping or supplies, it records the expense.
- At month-end, it shows your total profit automatically.
Automation removes guesswork and keeps your finances accurate, even when you’re too busy to track manually.
Stay Consistent (It’s a Habit, Not a Chore)
The hardest part about tracking profits and expenses isn’t the math — it’s the consistency.
You don’t need to spend hours each week on bookkeeping. Just dedicate 10–15 minutes every few days to log new sales and expenses.
Think of it like checking your social media messages or emails — it’s part of running your business.
When you stay on top of your finances regularly, you’ll always know where you stand, and making decisions becomes faster and easier.
Frequently Asked Questions (FAQs)
- Do I need accounting software as a small seller?
Not necessarily. If you’re just starting out and have fewer than 50 transactions a month, a well-organized spreadsheet is enough. But as your sales grow, investing in software like QuickBooks, Wave, or FreshBooks can automate your tracking and save time. - How can I know if my business is profitable?
Your business is profitable if your net income (total income minus total expenses) is positive. To calculate this, track all revenue and expenses for a month, subtract the latter from the former, and check the result. If it’s consistently positive, your business is making real profit.
Conclusion
Tracking profits and expenses might not sound exciting, but it’s one of the smartest habits you can build as a small seller. It gives you clarity, control, and confidence — three things every successful entrepreneur needs.
When you know exactly where your money is going, you stop operating on guesses and start running your business like a pro.
So, don’t wait until the end of the year to get organized. Start today — set up a simple system, record every transaction, and review your numbers regularly. Your future self (and your bank account) will thank you.