Etsy seller and maker glossary

Annual Investment Allowance

The relief that lets you take the whole cost of equipment against your profit in the year you buy it, up to £1,000,000 a year. A kiln or a laser cutter bought before your year end gets its relief a whole year earlier than one bought a fortnight later.

Attributed order

An order Etsy charges an Offsite Ads fee on. A click on any of your promoted listings makes any purchase from your shop in the following 30 days attributed, whether or not it was the item advertised.

Batch

A run of the same item made together. Costing by batch rather than by item is the only practical way to turn a bag of clay into a cost per mug, and it is the level at which scrap has to be counted.

Bench rate

What you earn per hour of actually making. The flattering of the two hourly rates, and the one product costing normally works in.

Business rate

What you earn per hour of everything: making, photographing, listing, packing, answering messages and bookkeeping. Usually about half the bench rate, because making is about half the week.

Capital gains, on your home

The relief you get on selling your main home can be reduced if part of it was used exclusively for business. Keep some private use of every room and the problem does not arise.

Card reader fee

What a portable reader charges you at a fair, commonly around 1.75 per cent. Cheaper than Etsy per item and it comes with a stall fee and a day of your time attached.

Cash basis

Recording income when the money arrives and costs when they are paid. Simpler than traditional accounting and the default for most sole traders, and it changes which side of a year end a commission deposit falls.

Commission

A piece made to order for one customer. The deposit is income when you receive it under cash basis and when the work is done under traditional accounting, which matters across a year end.

Consumables

Sandpaper, blades, glue, brushes, gloves. Deductible, cheap individually and substantial across a year, and almost never logged.

Contribution

What one sale leaves after everything that varies with it: Etsy's fees, materials, postage, packaging and any ad. It is the money available to cover your studio and yourself, and it is not the same as gross margin.

Cost of goods sold

Opening stock plus purchases less closing stock. Not what you spent on materials in the year, which is the mistake that makes a big buying month look like a disaster.

Currency conversion fee

Etsy's charge when a sale settles in a currency other than your own, commonly around 2.5 per cent. It comes off the deposit rather than arriving as a bill.

Cut-off

The line between one accounting period and the next. A sale on the last day of the month belongs in that month even though the deposit arrives in the next, and getting this wrong is the commonest reason a set of accounts will not tie.

Deemed supplier

Where a marketplace is treated as making the sale to the consumer rather than you. Etsy is the deemed supplier on digital downloads, so it collects and pays over the VAT on those sales itself.

Deposit

The money Etsy actually transfers to your bank, after fees, refunds and anything on hold. It settles many orders and is not a sale, so treating it as turnover understates your sales.

Digital service

Something delivered over the internet, essentially automated, with minimal human intervention. A printable is one. A live online class is not, and the difference decides which VAT rules apply.

Etsy Ads

On-site advertising with a daily budget, charged per click. A different thing from Offsite Ads, which is charged per sale, and the two are confused constantly.

Etsy Payments

Etsy handling the money itself. Fees come out before the deposit, so what lands in your bank is never your turnover.

Fee credit

A refund of Etsy fees, usually after a cancelled order. It reduces your costs rather than adding to your sales, and putting it in the wrong place overstates turnover.

Finished goods

Made, listed and unsold. One of the three kinds of stock a maker holds at the year end, and the only one most people count. Valued at what it cost to make, never at the listing price.

Flat rate, working from home

HMRC's simplified expenses: £10 a month for 25 to 50 hours, £18 for 51 to 100, £26 for 101 or more. Available to sole traders and not to companies, and usually worth less than working out the actual cost if you run a kiln.

Gift wrap

An optional extra at checkout. Etsy charges its transaction fee on it, along with the item price and the delivery, so it is not the free upsell it looks like.

Gross merchandise value

Everything buyers paid, before any deduction. The figure your VAT threshold is measured against, and never the figure that reaches your bank.

Listing fee

A flat charge per listing, renewed every four months and on every sale. On a single-item listing you pay it once per sale, which is why it behaves like a per-order fee rather than a subscription.

Made to order

Made after the sale rather than before it. Kinder on cash flow and on stock, harder on despatch times, and it means you carry materials rather than finished goods at your year end.

Materials multiplier

Pricing by multiplying your material cost. It cannot see how long something takes, which is the input that varies most between handmade items, so it overprices fast items and underprices slow ones.

Merchant of record

The party legally selling to the customer. A payment processor is not one; some platforms are. Only a merchant of record takes the VAT liability off you, and the two look identical from a seller dashboard.

Net realisable value

What you could actually get for stock after any further costs of selling it. Stock is valued at the lower of cost and this, which means damaged or obsolete work gets written down.

Offsite Ads

Etsy advertising your listings on Google and social platforms, charged only when an attributed order lands. 15 per cent below 10,000 dollars of annual sales and 12 per cent above it.

One Stop Shop

A single registration and return covering digital sales to consumers across the EU, instead of registering in each country. Relevant when you sell direct rather than through a marketplace.

Overhead per item

Studio, power, tools, insurance and software divided by what you make in a month, plus the non-making hours divided the same way. Rough, and far better than the usual alternative of leaving it out.

Payment on account

An advance payment towards next year's tax, due in January and July once your bill passes a certain size. It is why a first January bill is often half as large again as people expect.

Payment processing fee

Etsy's charge for taking the money: a percentage plus a fixed amount per order. The fixed part is what makes cheap listings hard and digital downloads under a fiver very hard.

Personalisation

Adding a name or a date before sending. If it is automated the product stays a digital service for VAT. If you open the file and do it yourself, probably not, and the rules that apply change.

Place of supply

Where a sale is treated as happening for VAT. For digital services to consumers it is where the customer is, not where you are, which is why cross-border digital has no threshold.

Raw materials

Bought and not yet used. One of the three kinds of stock at a year end, valued at what you paid.

Regulatory operating fee

A small percentage of the whole order that Etsy charges in some countries. Easy to leave out of a margin calculation and it has changed more than once, so take it off a recent bill.

Renewal

A listing renewing after four months or after a sale, each time charging the listing fee again. On a multi-quantity listing that is one fee per sale, which people forget when pricing.

Reserve

Money Etsy holds back rather than depositing. It is still yours and belongs on your balance sheet, and it cannot pay a supplier.

Reverse charge

Where the customer accounts for the VAT instead of the supplier. Etsy bills UK sellers from Ireland, so a seller who gives Etsy a VAT number is charged no VAT on fees at all and records it on both sides of the return.

Scrap

Work that came out wrong. It is not stock and never was, and its cost is carried by the pieces that survived, which is why a cost per item divides by the good ones rather than by the ones you made.

Simplified expenses

HMRC's flat rates for mileage and working from home, instead of working out the actual cost. Available to sole traders and partnerships, not to limited companies.

Stall fee

The pitch at a fair. Deductible, and the largest part of a cost that is the same whether you sell four things or forty, which is what makes craft fairs a volume question.

Star Seller

A badge for consistent despatch, messages and reviews. Not an accounting matter, and worth knowing by name because seller forums discuss little else.

Suspense

Where an unexplained difference lives until you find it. Keeping one is what stops a reconciliation you cannot finish from quietly inflating your sales instead.

Trading allowance

£1,000 of trading income a year that needs no declaring. Measured on income and not on profit, so £3,000 of sales costing £2,400 in materials is over it despite £600 of profit.

Transaction fee

Etsy's main commission, charged on the whole order including the delivery you charged and any gift wrap. Not on the item price alone.

Waste allowance

The share of materials that never becomes a saleable item. Putting your real scrap rate into your costing is the difference between a price that works and one that is short by however much you throw away.

Wholesale

Selling to a shop at roughly half your retail price. Not half the margin, because you also lose the Etsy fees, the postage per item and most of the packing time, so it is worth working out rather than dismissing.

Work in progress

Thrown but not fired, cut but not sewn, made but not listed. The kind of stock makers most often forget at the year end, valued at the materials plus the work done so far.

Zero-rated

Taxable at nil per cent, which is not the same as exempt. Physical books and e-books are zero-rated in the UK. A downloadable pattern or template is not, and the difference is a fifth of your price.