Owning an e-commerce store is a truly rewarding experience. The flexibility of an online store combined with low overhead can be quite profitable; allowing you to live life while still generating a decent amount of income. Like any business, however, managing your financials each month should be a priority to ensure your business keeps running smoothly and generating profit. Here are some tips for keeping your financials in order as an e-commerce store owner.
Effective Inventory Management
Managing your inventory properly is one of the best ways to keep your finances in order by avoiding lost product or over-ordering. Effective inventory management starts with ditching the old pen and paper method and using a modern tool such as a POS system to track your inventory in real-time.
Inventory management is equally as important in e-commerce and brick and mortar stores. If you don’t know how much inventory you have, you can end up ordering too much; leaving dead stock in your warehouse or storage room. Don’t take the risk of costing your business more with inaccurate stock counts and dead stock. Take control of your inventory and your finances for a more streamlined online business.
Keep Shipping Costs as Low as Possible
Shipping is one of the largest costs of running an online business. Shipping costs vary depending on the type of item and the weight of the item, and sometimes you are being charged too much. When this happens, you can either find a different way to ship or a different provider; or, you can do what many e-commerce stores do: charge the customer for their own shipping costs.
Shipping options are luckily numerous, so in theory, you should be able to find a shipper that can keep you within your budget should you decide to offer free shipping to customers. Many businesses offer free shipping only after the customers pass a threshold with their purchase amount. Some businesses go as little as $10, and others can be as high as $50-$100.
The United States Postal Service is a popular option for shipping packages, due to their “flat-rate” shipping boxes. If the item(s) fit in the box, they ship for a flat rate. This eliminates the costly “by-weight” shipping that you often see, allowing you to offer free shipping at a much lower cost to you as the business owner.
Track Profits and Losses Monthly
Tracking how much you make and what you’re spending your money on will help identify problem areas within your financials. You’ll want a good idea of what you’re spending on things like inventory, shipping, and marketing; as well as what products sell the best and generate the highest net income.
This is something every business should do. It’s safe to say that tracking profits and losses will grant you a much clearer financial picture of your business and allow you to make any necessary adjustments to save money or focus marketing efforts into best-selling items or services.
If you need help tracking your finances or coming up with a better plan to manage them, a financial advisor can do just that. Read this list of the best financial advisors in Los Angeles if you’re in the metropolitan area and need help with your online business.
Stick to a Budget
Creating (and sticking to) a budget is a great way to keep expenses in check for your online business. You’ll be able to set hard limits on spending, as well as allocate certain resources to different parts of the business on an as-needed basis.
A budget will help you identify the greatest costs associated with running your business, encouraging you to create solutions to mitigate or even eliminate these costs altogether. Don’t underestimate the power of a well-planned budget for your business!
Use Software or Other Tools To Make It Easier for You
There exist literally thousands of software programs and other tools that will help you run your business and take control of your finances. Something as simple as a new POS system that integrates with your bookkeeping software can help you generate more accurate numbers and keep your books balanced.
Using the right tools can help save you money as well. Don’t be afraid to use other websites, blogs, and even books to help you better understand how money works and how you should be managing it within your online business. The more you understand something, the better you’ll get at it.
Make sure when you’re looking for software or other tools that you compare prices and get the best deal possible. You don’t want to spend thousands on something you could have had for less; especially if you’re already having financial difficulty within your business. Compare prices and features to ensure you’re getting exactly what you’re looking for at a price the business can afford.
Conclusion
Keeping your finances in order can help increase the profitability of your business while reducing your overall stress and worry. Running an online business is largely a hands-off business model, but you’ll want all hands on deck when dealing with your finances. Don’t leave your money to chance; take control of your finances with the right tools for the job and the knowledge to help you plan and budget better.