The realities of online sales have made it possible for more people to enter the business world and maintain smaller enterprises with lower overhead costs than ever before. This also means a steady increase in competition. In the end, success can all come down to great organization; and that entails good accounting.
Accounting might be the most boring part of running a business, but don’t let that distract you from the reality that it is one of the most crucial aspects of your success. With that in mind, here are five basics to keep up with if you want to stay ahead.
Get some software
Your great-grandfather did it all by hand, but that’s not the smart way to do it these days. Skip the Excel sheets and the handwritten ledgers, too, because in the end you’re just making more work for yourself.
If you get an ecommerce accounting service that can do it all for you then your whole life will suddenly be easier. Cash flow, inventory, payroll, and reports will get generated in real time, leaving you free to concentrate on running the business.
Develop a good system for counting inventory
If you run out of inventory, you can’t make a sale, and whatever inventory you have sitting around is invested money that’s tied up. One of the first steps in your successful ecommerce business is figuring out exactly what you need to have on hand to keep the sales volume smooth without tying up too much cash.
It’s also easy to lose count of what you have because you forget to take shrinkage into account. Shrinkage is the unexpected loss of inventory that inevitably happens to every business at some point. An item or two always gets lost, ruined, or stolen; so always physically count everything you have.
Make sure you’re factoring in all the costs
When you figure out how much everything costs, don’t forget that the cost of an item is more than just the amount of money it took you to buy it in the first place. You also have to figure out all the extraneous costs that go into selling it.
Whether you sell motorcycle batteries or potted flowers, you need to take into account the cost of the item, how much it cost you to store it, packaging costs, and whatever you paid (to yourself or someone else) in labor to package and send it.
Track sales early in the month or quarter
Don’t wait till the end of the month or the end of the sales quarter to see if you’re making your sales target. By that point, it’s too late. Keep watching those sales numbers right from the first week. This will let you know if you need to invest in more advertising to push through more sales.
Just don’t spend more in advertising than you’ll get in increased sales. It may feel great when an extra 50 sales and $500 rolls in at the end of the month, but not if you paid $550 for the ads. Always check out free or inexpensive ways of drumming up sales first, like tweets, posts, and promotions.
Plan for taxes
You need ecommerce software in part because it will automatically calculate sales tax for your customers once they input their address. This means a lot less headache for you as prepare your own tax forms.
Your tax rate will depend on where your ecommerce business is physically located, and it’s important to keep all the tax you collect set aside. Otherwise, you could find yourself in big trouble when tax filing season rolls around. It’s even a good idea to open a separate bank account just for storing taxes.
The business world is competitive, but with the right planning, software, and organization, you can make a success of your ecommerce business.