At the end of last year, Blue Buddha’s founder Rebeca Mojica made the leap to launch her own brand, focusing on her finished chainmaille jewelry.  In this post, she talks about why she decided to do this and offers tips for getting the most bang out of your branding, even if you’re on a shoestring budget.

Have another question for Rebeca on this topic?  Leave it in the comments, post it to our page on Facebook or send it in an email to community@bluebuddhaboutique.com!

What made you decide to start the Rebeca Mojica brand rather than continue to sell as Blue Buddha?

Over the years, people have come to recognize Blue Buddha as a supplier of premium jump rings and instructions. The brand began as an artisan jewelry design company, but evolved into a jewelry supplier. When people hear the name Blue Buddha Boutique, they may think of innovative chainmaille designs, but they think in terms of “That’s something I can learn to make from Blue Buddha!” as opposed to, “I want to buy a completed version of that necklace!”

I had been contemplating this move for a few years. What finally sealed the deal was an art fair I did in the winter of 2010. Every single day of the four-day show, people came to my booth asking to buy pliers. I realized the time had come to make the switch once and for all so that I could have a jewelry brand that could stand on its own.

Is it common for larger brands to have subbrands?

Large companies almost always have sub-brands and/or multiple “divisions.” Actually, it’s a little creepy how big some of the huge corporations are, once you add in all their holdings, but that’s another topic. *chuckle*

What is more common in the artisan world, is for a designer to have two or three brands, each serving a different market. For example, some jewelry designers create high-end pieces that sell in museum shops and luxury boutiques. However, they still wish to make pieces for the “masses.” Unfortunately, if they were to sell high-end items right next to much more accessible items, it could dilute the brand. Customers might be confused: “Is this a luxury brand, or not?” Worst-case scenario, the mixed-message could lead some customers to avoid purchasing items from this designer.


So the solution is to have a secondary brand, possibly even one that allows the designer to sell directly to the customer via craft fairs, a company website, or an online marketplace such as Artfire. The prices for this brand can be lower because the middle men, if there are any, take a much smaller percentage than galleries and reps, who combined can take much as 70% of the retail price. If artists were to sell both lines under the same name, then the galleries would likely feel as though they are being undercut because customers could simply go to the artist’s website and purchase a similar piece for half the price.

Having multiple brands allows the designer to create distinct product lines that appeal to different tastes and budgets. Additionally, some artists like to take more chances with subbrands, because if something “bombs” it won’t affect their meat-and-potatoes line. Some designers use a subbrand to support controversial causes or non-traditional lifestyles; they can do so without ostracizing their core customer base. I know more than a few artists who successfully sell their work under a couple of different names, each with their own branding, and each targeting a different market.

Where you at all nervous about making this switch?

Truthfully, I was far more excited than nervous. It was like starting a business all over again, but with much more clarity and vision than the first time I started a business. I got to concentrate on all the fun stuff: new business cards! New logo! New tagline! The creative part of my brain loved it!

I was also reassured because I knew I already had a customer base; I wasn’t trying to start a jewelry line from scratch. I knew that having a jewelry business can be tough, and part of me half-expected to hear crickets chirping after we sent out our first official email announcing the Rebeca Mojica website. But instead, we were overwhelmed with emails of support … and of course, orders for jewelry! Yay!

How did you decide what colors would represent Rebeca Mojica brand?

First off, I knew I wanted nothing to do with the blues and lilacs that are associated with the Blue Buddha brand.  I figured if I was creating an entirely new line, it needed to be distinguishable. I wanted a palette of three basic colors so that we could mix and match for the website and other branding materials. From the three basic colors, each color would have one additional tint/shade that would be the exact same hue, just a lighter or darker version of it.

Gray was an obvious choice, because I work with metal. OK, one down.

Then, on to the difficult part of choosing another two colors to go along with the gray. Jenna, my marketing gal, and I read dozens of articles about color theory and choosing colors to represent brands. We read studies about what perceptions people had regarding colors (including A Guide to Choosing Colors for Your Brand and Colorize Your Brand). We looked at hundreds of photos of home decor in various color palettes. It was fascinating, but also easy to get a bit overwhelmed with analysis.

The next color we chose was a chocolate brown It is a good, neutral color, and to me, it’s also very organic. Even though I’m not making jewelry out of wood, I still think many of my designs have a real organic feel to them, and I am always inspired by the shapes I see in nature and the fractal-esque form of trees. The deepness of the color is elegant, as is much of my jewelry. It is also suitable to represent men’s jewelry, which is important because I plan on developing a men’s line later.

Having chosen two earth tones, I wanted just a splash of brightness to counter the neutral tones of the gray and brown. The deep red we selected represents the color used in my work. The way I use color is sometimes daring, sometimes whimsical, but almost always attention-grabbing. And the color red says all of those things to me. Also, I admit that I adore goth fashion and so red’s appearance in my branding wasn’t a complete surprise. *grin*

Once we had the basic colors nailed down, Jenna created a few different variations on the theme (okay, more than a few – see them to the right) so we could compare exactly which hues we liked best. Should the red be more on the orange side, or violet? What about the gray? Warm gray, or cooler, almost slate? We played around for a bit and settled on the final colors that you see on our marketing materials today.

As a post note, it’s funny that after we choose the colors (we ended up going with palette #3 – shown right), I later realized that the gray really had a huge blue undertone. “But I was trying to stay away from blue!” I agonized. Ultimately, though, after looking at other warmer shades of gray, I realized our shade really did work the best … and no one could possibly confuse it with the blues used in the Blue Buddha branding. So I had to let this one go, and I’m glad I did, because now I really love the colors of the Rebeca Mojica brand.

Do you think it’s important to have a logo? What if I’m not a designer, what should I do to create one?

If you are more than a hobbyist, and wish to earn actual income from your craft, then yes, having a logo is crucial. You’ll want to use your logo on your marketing materials–your website, business card, jewelry tags, care sheets, banners at shows, etc. If you have a clever, memorable logo, you’re more likely to get repeat customers. And if you do the same craft fairs year after year, you’re more likely to get new customers, too, for the simple fact that people will remember seeing your logo and work, and will feel as though they can “trust” you because you’ve been there for several years.

At this point in my business, I’m lucky to have Jenna as a full-time marketing person. With some input from me, she created the Rebeca Mojica logo and tagline, and created the clever interlocking circles above my last name (which I adore).  Obviously the vast majority of artisans will not have a full-time marketing person, or even a contractor, to handle a logo design.  We are, however, strongly visual people and many of us will be lucky enough to create a strong logo on our own.  Even if this is you, however, I do recommend eliciting feedback from friends, current customers, and peers whom you respect. Sometimes your vision doesn’t shine through in your logo, and you’re too close to it to notice a potentially humorous or confusing flaw.

If you can’t design your own logo, see if you have any friends or current customers that can do it for free, or in trade. When I originally did the Blue Buddha logo, I knew what I wanted, but didn’t have the skills to make it real, so I found a friend in design school who did it for me. The deal we worked out was $50, some beer and a piece of jewelry for his ladyfriend. Nine years later, that was money clearly well spent. We still have a design credit to him on our website to this day.

If you don’t have any design friends, then try going to your local college–or if you’re really rural, try the local high school. Nowadays, many students can do amazing things on computers. Yes, you’ll have to spend money on this, but if you’re working with a student, your investment will be minimal, and sometimes a student might even be willing to do it for free (or in trade) in exchange for being listed on your website as a resource. With any luck, you’ll connect with an exceptional person with whom you can work with again later on other projects you may need.

If you have someone else create your logo, be sure to have some idea of what you want, and what you don’t want. Designers aren’t mind readers. If there are colors you want used, be sure to say so and to state why. If you feel specific motifs represent your brand, let them know. Bring in examples of fonts you like and fonts you don’t like. All of this will help the designer develop a logo that you like sooner, rather than later, and it can save you both much frustration.  If you have a really good idea of what you want your logo to look like, you can even try sites like 99 Designs where you describe your exact specifications and receive design ideas and quotes from tons of designers affiliated with the site.

Finally, make sure you have a couple of versions of your logo that can be used. I’ve found it is best to develop a square one as well as a horizontal one. That way, if your horizontal logo is too long for your jewelry tags, the square one may be perfect. This gives you greater flexibility with your promotional materials.

You are always great at making a big impact on a small budget. For crafters, what branded items do you think give the biggest bang for the buck?

1. Website (or logo if you are on an online marketplace, like Etsy or Artfire or even just Facebook) — in today’s age, you need to be online, and you need to make sure your brand shines though on every page of your site.  I used IndieMade to create my site and highly recommend them for folks who need their own website and want to be able to start selling things right way.

2. eNewsletter – It is never too early to start a newsletter. (My first mailing only went out to a list of 6 customers … but they didn’t know that!)  Some mailing list services like MailChimp even offer free plans for lists of less than 2,000 names.  Every time I do a mailing with a promotion, we get jewelry orders. Without fail. So what are you waiting for? Get to it!  (Click here to join Rebeca’s email list and find out when the next sale is!  Enter your email address and select “Rebeca Mojica Jewelry” from the list choices on the next page.)

3. Care Sheets – Care sheets can be super inexpensive–ours are simply 1/3 page double-sided black and white copies. If you put enough useful information on your care sheets, customers will keep them. Which means they’ll see your name over and over again, and every time they refer to the sheet, they’ll be reminded that you are a trustworthy source of information. Keep a digital copy of your care sheet online–this is useful not only for customers, but it can increase traffic to your website if other people are searching for how to care for an item.

4. Banners for craft shows – If you do shows, you need a banner to grab people’s attention. You want someone who is walking down the aisle to see your banner and think, “Man, I gotta get to that booth right away, even if I skip this next booth!” Make sure to have a banner that is displayed over your head, rather than hanging off your table. If you’ve got a crowd of people looking at your stuff (and you do want a crowd of people looking at your stuff, right?), then no one will be able to see your banner if the only one you have is on the table, hidden behind everyone’s legs!

5. Business cards — Note that business cards didn’t even make it into my top 3! That’s because we live in a digital age, and the paper business card is not as important as it used to be. Sometimes at craft fairs, people just go around gathering business cards…and then never look at them again. So you don’t need to spend a lot of money on your cards.  If someone is interested in your stuff and grabs your card, it doesn’t need to be the most spectacular thing they’ve ever seen. It just needs to have enough information (including images) to remind them what you make, and then they’ll probably just go to your website anyway… and then throw away your card.  If you don’t have a designer, using a site like Moo cards can make the post of the images you do have along with your logo (they also have lots of modern premade designs to choose from!)

What can we expect from Rebeca Mojica brand jewelry as you continue to develop its new identity?

I’m looking to dive more into the Japanese family of weaves. I’ve already started creating several pieces that will make up the Bubble collection…essentially large statement pieces with lots of white space that look like, well, bubbles! I’m looking to develop a few new lines at different price points. And, I plan to come up with 1-2 haute couture pieces (think Poseidon’s Embrace) each year. There’s a few ideas for chainmaille clothing that have been tugging away at my brain for a few years, so I expect they’ll start to take shape–literally–over the next couple of years.

I probably won’t get too deep in making many new jewelry designs for about a year and a half, as I’m about to start work on a second instructional book, and that is going to take quite a bit of my attention. (Hmm, not to mention being preoccupied with opening up a new retail space for Blue Buddha Boutique … ) However, as soon as the second book is finished, lookout! Because then I’m all about making new designs! In the meantime, though, there are a lot of pieces I’ve made and sold at shows, but have never put online. Each month, we’ll be adding several of these to RebecaMojica.com, which means there will still be plenty of eye candy for you!

branding · marketing on a budget · Rebeca Mojica · tips for selling your jewelry

In part two of our “Publishing Your Crafty Project” posts, Rebeca addresses what it’s really like to publish your own book.  If you’re thinking about publishing your own crafty book, this is a must read. 

Read more in the post below and download the FREE PDF for an in-a-nutshell comparison of self-publishing vs. using a publisher.  

Publishing Your Crafty Book

By Rebeca Mojica


Writing a Book 
Writing a craft book is no joke.  It is a labor of love.  The chances of you getting rich, or even earning a decent amount of money, from your book are next to none.

The cold, hard truth

The average book in America sells fewer than 5,000 copies.  According to one source, of the titles on the shelves in retail stores, 93% never sell more than 1000 copies in their lifetime. Some of the books that have spent weeks on the New York Times bestseller list don’t even sell more than 50,000 copies.

Most new writers only earn 1.5-8% of the cover price for each book sold. (Note that percentages can vary for the same book, depending on if the book was sold through Amazon, through the publisher’s book club, etc.).  Do the math—this is not a lot of money for potentially 60, 100, 250+ hours worked. For small craft books, if the publisher pays an advance, the advance may only be $1,000.  The book might need to go to a second printing for the author to begin to receive any royalties at all … and the majority of books do not have a second print run.

So after all of this, why would anyone want to publish a book?  Well, it certainly can open doors and will greatly enhance your credibility as an artist/instructor.  It is deeply satisfying to tackle such a large project and have the wonderful feeling of accomplishment that comes from writing a book.  It can be thrilling to see your name in print.

For more info, see The 10 Awful Truths about Book Publishing and Book Industry Statistics.

Before you write your book

You need to have a market for your book so that the book will sell. If you are using a publisher, you must prove there is a market for your book. Your book proposal should list all the reasons why and how your book will sell.
To build enough influence to sell a book, you’ll need to establish yourself as an expert in your field.  A great way to do this is by having single projects published in magazines, as already explained.  Have a website where you engage your students and readers.  Teach classes.  Build your newsletter mailing list.  Do whatever it takes to get your name out there as often as possible.

Be prepared to similarly promote your book. Set up a website devoted to your book.  Write blog posts and other articles promoting your book.  Create press releases for your book.

When you are ready, prepare a book proposal.  Even if you are self-publishing a book proposal can be a useful tool to help keep your focus as you write.  Your proposal should include a complete outline of your book, the total number of pages, at least one sample project and/or chapter, biographical information as well as a complete analysis of the market: What other books exist on this topic? How will your book stand out?  Why will people buy your book? How large is the market for your book? Is the market growing or shrinking? A great resource to help you through this process is Write the Perfect Book Proposal: 10 That Sold and Why by Jeff Herman and Deborah Levine Herman.

If you want to use a publishing house, send your proposal to multiple publishers. With any luck, you’ll hear back within a few months, and with a lot of luck, you’ll have your pick of publishers. Contact authors that have used those publishers to see what their experiences were.  Some publishers will request the book be fewer pages, or you change your focus slightly. It is up to you if you want to change your original vision in order to finalize your contract.

If you are self-publishing, some places you may wish to check out include authoragency.com, Xlibris.com, iUniverse.com and “1stBook-publishing.”

Download part 2 of the FREE “Publishing Your Crafty Project” PDF for an in-a-nutshell comparison of the process of self-publishing vs. using a publisher!

chained · craft advice · publishing a book · Rebeca Mojica

Last week, Rebeca spoke at the Chicago Craft Mafia’s January Craft Racket about getting your work published in magazines and collaborative books, as well as publishing your own crafty book.  We hear questions about this all the time (in fact it was the subject of one of our first “Ask an Artist” posts) so we though we’d share the resources she presented at this meeting and open up our blog to comments and questions from maillers and other crafters about getting work published.

Below is part one of a two-part series.  This post, along with its FREE downloadable PDF, focuses on getting your work into magazines and multi-authored collaborative books.  Tomorrow’s post will tackle publishing your own book … stay tuned!

Publishing Your Crafty Project

By Rebeca Mojica and Lindsay Obermeyer

Getting published in magazines and collaborative (multi-authored) books.  

Having a single project published in a magazine or book is a great way to get your feet wet with publishing.  Obviously it requires far less work and commitment than writing an entire solo-book, and you can get your name out in front of thousands of people who otherwise might never hear of you.

Finding a magazine or book:

There are far too many trade magazines to list here as each industry—beading, woodworking, felting, quilting—has its own publication, and often, multiple publications within the industry.  You know your craft well, and so you should know which magazine(s) are appropriate.  Some of the biggest craft book publishers include C&T Publishing, Interweave Press, Kalmbach Publishing, Krause, Lark, North Light, Potter Craft, Storey Publishing, Visual. There are dozens more.  Go to the bookstore or visit the Crafts & Hobbies section of Amazon.com to get the names of different publishing companies that might be a good fit for your project.

Magazines usually have “submission guidelines” pages on their websites. Sometimes they’ll also include an editorial calendar.  Book publishers often post “call for submissions” on their websites.  See the full PDF dowload below for tips on the submission process!

Download part 1 of the FREE “Publishing Your Crafty Project” PDF for a handy checklist of of what to do before and during the submission process as well as more information about providing supplies for your project.

For more on advice on running your craft business, visit ChicagoCraftMafia.com!

books · craft advice · getting published · magazines

The words “audit” and “IRS” can strike terror in the hearts of many Americans—individuals and business owners alike.  It’s hard not to have visions of a monstrous institution filled with agents dressed like characters in a Dick Tracy comic, waiting in rooms with interrogation lamps and you with your box of crumpled receipts.

The reality however, is that if you’re being audited, you’re not up against a big headless institution.  Ultimately, you’re going to be dealing with one person (this became very apparent to us when our one person had to cancel because they had broken their wrist – I.R.S. agents really are human!)  It becomes your job to make that person’s life as easy as possible (and avoiding annoying them at any cost.)  The best way to do this?  Do what is asked of you in the preparation stage (see my previous post Preparing For an I.R.S. Audit.)  Yes, it’s a lot of work—although, by keeping really good records, it doesn’t have to be that bad—but it’s worth it.  We know from experience!  Continue reading to learn more about the actual audit and what we learned from the entire ordeal.

The Audit

The morning of the audit came.  I was ready! “Bring it, IRS!” I said, as I gathered my paper files, USB flash drive, receipt books, and my handy-dandy spreadsheet that now had a new column indicating where each item was for quick retrieval during the audit (i.e., – whether the item was on the USB stick or if we had a hard copy, and what the file or folder name was). You can see my colorful spreadsheet in the photo here, just to the right of my laptop.   Despite my enthusiasm, the audit was not to be had that first day, the next, or even the next….but that’s a story for another post.

When it did finally happen, the audit was fairly straightforward – really.  My CPA had told me the agent would probably be surprised that I’d pulled together everything on the list and sure enough, she did seem surprised that I had everything (Operation Make-Their-Lives-Easy-And-Don’t-Annoy-Them = complete!)  “Wow,” she said, “You’re so organized!”  (This sentiment was repeated a few times throughout the audit, particularly when she took a tour of our facilities and saw our shelves of inventory *grin*.)

The agent wanted to review the classified items, so I pulled up my ledger and told her exactly how the money in those categories was spent.  She took notes on the breakdowns of each category. After thoroughly reviewing the classified items, which took all of about 20 minutes, the agent was satisfied with the responses and said everything was in order.  I answered a few other questions (How do you count your inventory? How often do you count your inventory? How much of your orders are paid for in advance? etc).  None of the questions were particularly intrusive, and none of them surprised me.   We took a tour of the facilities so she could see some of the day-to-day operations. Finally, the agent requested a copy of my QB file on a USB stick as well as hard copies of my business and personal tax returns for the years requested.

And that was it. I had been warned that the audit could take up to four hours, and I’d set aside my entire day just in case, but we were finished in about an hour and a half!  Yipee!

(I secretly hoped that the IRS agent would write some note in my file that read something like, “This business is so organized and on top of things, that we should never audit them again because it is just going to be a waste of taxpayer resources.”  Well, I can hope, right?)

The Verdict

The agent told me she’d be recommending “no change” to my tax return, but there were still a few levels of people who needed to review the QB file, so it could be several weeks or even a couple of months before we’d know for sure what the final verdict was.  She said she would be in touch if they had any questions once they’d reviewed the files.  I decided to keep separate all the papers and files I’d pulled just in case they were needed again.

A few days later, I received a confirmation letter with the “no change” recommendation, and then the real waiting game began.  Finally, about 6 weeks later, on December 12, I received the official letter from the Powers that Be:

Our recent examination of your returns for the above years shows no change is ncessary in the information reported. We have accepted the returns as filed.  This is the final notice you will receive regarding the examination.

Yay!  Seven months after receiving the initial notification letter, we were done.

Lessons Learned

All in all, we’d probably spent about $500 in accounting/bookkeeping fees and about 15 hours of staff time to prep for the audit.  It was an irrecoverable expense, but definitely a manageable one for a business our size.  And I think it’s made our business be in even better shape for the future.  My main takeaways:

Good records are crucial.

When my accountant sent back my file, out of the thousands of entries, there were only a couple that she’d flagged for me to double check (perhaps the memo field had a question mark in it, or one company that we typically bought inventory from had a charge in a different category, because we bought office supplies that one time, etc.).  If we didn’t keep good books, I probably would’ve spent dozens of hours going through our file, instead of just about 6 or 8.  My goal is to have even more solid numbers going forward. For the past few years, I’ve been sending my Quickbooks file to my CPA three times a year (not including tax time) for review. I am now asking her to look at everything with the same eagle-eye we did during the audit. This way, if something, no matter how small, doesn’t make sense, we can catch it right away, instead of trying to remember all the details two years later.

Stay on top of the numbers regularly.

Even though our books were good, they weren’t perfect.  There were a handful of items that I realized had been miscategorized. I used to enter all the data in myself, but I’ve since delegated this responsibility, and I realized that some information slipped through the cracks.  For instance, even though I know that two separate charges from the same vendor might be in two different categories because we purchase different types of items from that vendor, my bookkeeper who only comes in twice a week will not know that by just looking at the bank and credit card statements.  So I vowed to look more closely at the line items after data is entered into our Quickbooks file.

Be prepared on audit day. 

I made sure to have every single piece of documentation the IRS requested either in hard copy or digital format, and knew exactly where to find it.  This meant that when the agent asked me a question about a specific charge, I could pull up a spreadsheet and locate the relevant information within seconds. Because I knew exactly what was going to be asked, nothing was a surprise.  It was kind of like taking a final exam when you’ve gotten the questions a few days before.  Having said that, however, I do acknowledge that finding a few of the items in the first place, to prepare for audit day, took much longer than it should’ve.  And if I had been incapacitated or something, I’m sure it would’ve taken the manager three times as long to locate some of the items. So, we’re revising parts of our filing system to make finding certain items more intuitive. And I’m making sure that someone other than myself knows where all of these important documents and digital files are!

I highly recommend that all business owners keep records as though they are going to be audited.  This might seem like overkill, but it’s really not (you need to know where all your company’s money is really going anyway, right?)  I also recommend thinking about keeping records and other crucial company information in such a way that, if one day you disappeared, someone else in the company would know where everything was and be able to make sense of it without you.  Taking these actions ensures security for your business which is always good … and if you happen to be audited, you’ll be ready.

being audited · Internal Revenue Service · irs audit · small business taxes

As many of you know, our company was audited by the IRS this past year.  As a business owner, I have always had a slight fear of the Great Unknown Audit by the Big, Mean IRS.  But you know what, it really wasn’t so bad.  Seriously.  We keep solid books, and we’re honest about what we make and where the money goes, so the audit was a minor annoyance, nothing more.  The morning of the audit, one of my employees even said, “Oh, wow, I didn’t realize the audit was happening today. You seem so calm.”  And I was. Parts of the audit process were even downright amusing to me.  Either I have a twisted sense of humor, or I was just in one of those “well-I-have-to-laugh-because-what-else-can-I-do” situations.

Obviously, though, I wouldn’t wish an audit on anyone.  I know many of our blog’s regular readers have their own artisan businesses.  Some of you may think you are “too small” to be in the IRS’ radar, but did you know that sole proprietors are 10 times more likely to be audited than other companies?¹  I’m writing this article so you have an idea of what might happen during an audit, and you can make sure you have all your ducks in a row in case you are ever audited.

The Notification Letter

In mid-May 2011, I received a letter from the IRS letting me know that my business’s federal tax return for 2009 had been “selected for examination.”  I was directed to call the IRS agent listed on the letter to schedule an initial conversation about the exam.  The letter indicated that someone could represent me during any part of the examination.

Did you notice anything weird about the above paragraph?  No mention of the word audit!  I was fairly certain that “examination” meant audit, but wasn’t 100% sure, so when I left a message with the agent, I said, “I am pretty sure I am being audited, but the word audit wasn’t mentioned in the letter, so I’m just checking…”  When the agent called back and left a message for me, she said, “I’m returning your call about the examination, um, I mean, audit. …” OK, so I was being audited after all.

After a few days of phone tag, we spoke.  The agent said she would send a letter listing everything I’d need to have ready for the audit. She did mention a few items over the phone, and she also said that four line items on my tax return were “classified.”  This means they were going to take a closer look at those items for sure.  She said that they had been “classified” for  a specific reason, and when I asked her why, she replied that the computer wouldn’t letter her see that information because she didn’t have clearance to know.  Um…OK.

Our biggest show of the year was looming, and the agent was very understanding in setting the date for our audit.  We settled on July 6, which gave Blue Buddha about 6 weeks to prepare (really we had about 3 weeks to prepare, since we would be focusing on our big retail show for the first part of that timeframe).  This was fine by me. I wanted to get the darn thing over with sooner rather than later.

Items to be Examined by the IRS

A few days later, I received the massive list of everything I needed to prepare. Are you ready?  Here goes:

OK. Deep breath. As soon as I’d gotten over my initial shock, I entered everything into a spreadsheet. I created a column to indicate who I thought should be responsible for preparing the item (myself, my manager, the bookkeeper or the accountant).  Another column indicated progress, and a final column was left open for comments. I sent the spreadsheet to my CPA.

Then I called my bank to get the ball rolling on the “copies of all cancelled checks.”  We do our banking electronically, and it would be a pain to print up each check image one by one. I was certain they had a faster way to do it. I expected there would be a fee attached, but much to my delight, US Bank waived the fee. It was going to take a few weeks to send everything over, however they would do it for free.  Woo-hoo!  One item (almost) checked off the list!

My CPA called me that afternoon, completely astounded at the letter as well as the classified items.  “I’ve looked at all the entries in your Quickbooks file for each of those items, and absolutely nothing seems off,” she said.  “You didn’t even spend that much on travel; I have no idea why their red flag alarm was tripped.”

She went through the spreadsheet with me, marking off a few items that were not applicable to us (Woo-hoo! More items crossed off!) and making a few other notes. She also assured me that I could handle representing myself at the audit.

Over the next few weeks,  I worked with my manager, bookkeeper and CPA to gather everything needed.  It wasn’t difficult, just time-consuming. We had to dig through older folders to find specific receipts as well as make sure all the items that were saved as PDFs were well-organized. We went through every single entry in our Quickbooks  ledger to make sure it was accounted for correctly.  It was not the most thrilling thing I’ve ever done for my business, that’s for sure.

I’ve shared this list with you so that you can look through it and consider how quickly you could pull together everything on this list. If it would take you more than 20 hours (unless you are a multi-million dollar company), then your financial organization could probably use a little tweaking. Remember, too, that the IRS can audit any return for the previous three years (they can go back longer if there is a suspicion of tax fraud). It becomes significantly more difficult to remember the details of transactions for years you’ve already closed the books on.  You don’t want to have to spend hours trying to figure out what some payment was for, due to poor record keeping.

If you’ve read this list and are freaking out…take a breath. First off, the odds of you being audited for a particular year are very small. Second of all, it’s not too late to get organized. You don’t have to go back and try to clean up your books from years past, but vow to keep great records in 2012 and beyond. Make sure to send your financials to your accountant not just at tax time, but at other points in the year to make sure you’re staying on track. And then, if you are ever audited, you can smile, knowing that you can handle it.

Stay tuned for tomorrow’s post, Surviving an IRS Audit, to learn what happened next in the process.

¹ 16 Tips to Avoid a Tax Audit of Your Small Business Return by Daniel Kehrer

being audited · CPA · finances · Internal Revenue Service · irs audit · small business tax matters