Mastering Bakery Finances: Pricing, Bookkeeping, and Tax Prep for Microbakers | Episode 63

Running a microbakery is more than just baking—it’s a business. And if you want to keep growing and making a profit, you have to get comfortable with the financial side. In this post, I’m sharing key insights from my conversation with Megan from Purple Elephant Group, a former bakery owner turned financial expert. We break down pricing, bookkeeping, tax prep, and the financial strategies that will help you run a profitable and sustainable business.

If you’ve ever felt unsure about your pricing, struggled to track expenses, or wondered if it’s time to hire a bookkeeper, this guide will give you the clarity and confidence you need. Let’s dive in!

1. Pricing: Are You Charging Enough?

One of the biggest mistakes microbakers make is underpricing their products. If you’re barely covering your costs or not paying yourself, it’s time to re-evaluate.

How to Know If You Need to Raise Prices:

• You feel like you’re working hard but not making much money.

• You struggle to cover ingredient costs, packaging, and business expenses.

• You haven’t adjusted your prices in over a year, despite rising costs.

💡 Tip: Don’t base your pricing on what other bakers charge. You need to calculate your own costs and make sure your prices reflect the actual cost of running your bakery.

What to Include in Your Pricing:

• Ingredient costs (including shipping!)

• Labor (your time matters)

• Packaging

• Overhead (electricity, water, rent if applicable)

• Equipment wear and tear

• Taxes and transaction fees

If you need help getting clarity on pricing, tools like the Cake Cost App or Megan’s free bakery pricing spreadsheet can help.

2. Bookkeeping: Why It Matters & How to Make It Easier

Bakers love baking. Most of us don’t love bookkeeping. But keeping track of your finances isn’t just about staying organized—it’s about making sure your business is actually profitable.

3 Simple Steps to Stay on Top of Your Finances:

1. Use Cloud-Based Accounting Software – QuickBooks and Wave are great options for tracking sales, expenses, and taxes.

2. Separate Business & Personal Finances – Open a business checking account to keep things clean and simple.

3. Schedule a Monthly Finance Check-In – Spend 1-2 hours each month reviewing income, expenses, and pricing adjustments.

💡 Tip: If numbers overwhelm you, consider outsourcing bookkeeping to a professional. Megan’s team at Purple Elephant Group specializes in helping bakery owners stay on top of their finances.

3. Tax Prep: What You Need to Know

Tax season can feel overwhelming, but staying ahead of it makes all the difference.

Key Tax Prep Tips for Microbakers:

• Keep ALL receipts, especially for cash purchases.

• Use accounting software to track income and expenses throughout the year.

• Set aside money for taxes—15% of your profit is a good starting point.

• Know what you can deduct:

  • Business equipment

  • Ingredients & packaging

  • Marketing & website costs

  • Business insurance

  • Home bakery workspace (for cottage bakers)

If you just started your business, you may be able to deduct up to $5,000 in startup costs! Talk to a tax professional to see if you qualify.

4. Bookkeeper vs. Accountant: Do You Need One?

Many bakers don’t realize that bookkeepers and accountants serve different roles.

Bookkeeper:

• Tracks daily/monthly finances

• Helps manage cash flow and expenses

• Prepares financial reports

Accountant:

• Helps with long-term financial planning

• Files taxes and ensures compliance

• Advises on business growth strategies

💡 Tip: If you don’t know where your money is going or feel overwhelmed at tax time, it may be time to hire a bookkeeper.

5. Handling Waste, Donations, and Wholesale Pricing

One question I hear often is: What do I do with unsold bread?

Tracking Waste & Adjusting Production:

• If you’re consistently overbaking, adjust production to avoid unnecessary waste.

• Keep a simple spreadsheet tracking unsold items to see trends in your sales.

• Use extra product for sampling, marketing, or creative new product offerings.

How to Record Donations for Tax Purposes:

• Donations should be recorded at their full retail price.

• Categorize donations in your bookkeeping system under “charitable contributions.”

Wholesale Pricing: Are You Making Enough?

• Many small bakers offer wholesale discounts that are too big.

• Make sure your wholesale pricing still leaves room for profit.

💡 Tip: If you’re wholesaling, talk to a professional to make sure you’re pricing correctly and not losing money.

6. Business Banking: Setting Yourself Up for Success

A separate business bank account is a must. Mixing business and personal finances makes tax time messy and could even affect your liability protections.

Banking Best Practices for Microbakers:

• Use a Business Checking Account – Keep all transactions separate from personal finances.

• Open a Business Savings Account – Set aside money for taxes and future expenses.

• Transfer Owner’s Draw Properly – Don’t spend directly from your business account; transfer money as needed.

💡 Recommended Banking Option: Megan recommends Relay Bank as a great online banking option for small businesses.

7. Paying Your Kids Through Your Business (Legally!)

If you have kids helping with your bakery, you can legally pay them—and it comes with tax benefits.

How to Pay Your Kids the Right Way:

• They must be doing actual work (labeling, packaging, helping at markets).

• You need to pay them a reasonable wage for their tasks.

• If your business is solely owned by you (or you and your spouse), you don’t have to withhold payroll taxes when paying your children.

💡 Bonus Tip: Setting up an IRA or savings account for your kids using their wages is a great way to build financial security for them.

Final Thoughts: Take Control of Your Bakery Finances

It’s easy to push bookkeeping and pricing to the back burner, but taking control of your bakery finances will make everything easier. Whether it’s ensuring you’re charging enough, staying on top of taxes, or finally setting up a business bank account, small changes add up to big financial wins.

📌 RESOURCES & LINKS

🌟 Get Megan’s Free Bookkeeping Spreadsheet → Download Here

🌟 Sign Up for QuickBooks with Megan’s Discount Code → Get Discount Here

🌟 Check out Relay, an online bank to manage business cash flow → Relay

🌟 The CakeCost app to help ensure that you're pricing for profit → CakeCost

🌟 Follow Megan on Instagram → Here

What’s one financial change you’re making this year? Let me know in the comments or tag me @carolinebower_sourdough on Instagram!

Happy baking!

Try Sunrise Flour Mill Organic Heritage Flour: 20% off Sunrise Flour Mill https://thebreadwinner.captivate.fm/sunrise20