When you own an e-commerce business, every decision you make, from how much money you spend to how much you charge for services or products, has an impact. An e-commerce business must do a number of things to stay viable, especially with so many new competitors appearing in the market.
It’s critical to be on top of every part of your business because if you’re not prepared, small lapses can lead to great losses. When sales don’t go as planned or your product strategy needs to be remodeled, smart financial decisions can save you from unnecessary problems.
Tips to Keep Your E-commerce Business Financially Healthy
Make sure that your e-commerce business follows the financial tips below:
1. Ditch the paper
This is a simple one. Almost every facet of money and asset management is available online. You may automate payments and have all of your invoices emailed to you as instant alerts.
2. Utilize the proper bookkeeping system.
Are you using technologies that help e-commerce businesses become more effective? Quickbooks, Netsuite, and other businesses provide small company platforms that differ from their consumer-facing versions. However, just because all of these options are available does not imply that they are all equal. Do your research and look into the differences between these tools.
3. Get ready for the off-season
When circumstances are good, set up a rainy day account since it’s necessary to budget for bad months. You can weather the hard periods when the house note and payroll are due if you keep a statement with “emergency” funds.
4. Prepare ahead of time.
Consider what will happen in the next five and ten years. Will your present business model be able to withstand the test of time? Make projections about your future growth and finances, then try to achieve them. Start accumulating little amounts for when you need to hire a larger staff, just like you would for a rainy day. Or, if you think you’ll be able to get that new business you’ve always wanted, start saving. There’s nothing wrong with having big dreams as long as you have a plan to back them up.
5. Do not attempt to do your taxes yourself.
This should go without saying, but there are many highly skilled tax preparers and accountants who understand the intricacies of e-commerce business. Investing the time and money to consult with someone who is familiar with all of the tax benefits and loopholes could bring great benefits.
6. Always keep an eye on your books.
Set aside time each week, or at least once a month, to review your books. Even if you’re working with a professional, it’s vital to understand what’s coming and going, as well as how much money is available. Furthermore, by understanding how money flows, you’ll be able to recognize an error if one occurs.
7. Understand your credit score.
It is critical to keep track of your personal and commercial credit because your credit score follows you everywhere you go. Many lenders and even vendors may run a credit check on you.
You do not have the millions of dollars that an enterprise level organization does. When someone asks why your finances are looking so good or so bad, the answer will rest on you — the business owner. Borrowing wisely will save you and your company money because lenders will not view you as a risky investment. Furthermore, the better your credit history, the cheaper your interest rate.
8. Maintain a budget
Stick to a budget. It can be difficult to commit to a number because there is always a new tool or program update that could change things. Create a budget based on your monthly expenses, or use a budgeting tool and stick to it. If you want to buy anything new, set aside a tiny amount of money for it.
Generate a catch-all amount that goes to miscellaneous every pay month, or create a catch-all amount that goes to miscellaneous every pay period.
Obtain donation receipts.
If you make a charitable donation, be sure you acquire a receipt. There are numerous tax advantages for businesses that give back, but you must retain all receipts.
Aside from money, there are other levels of what is termed “giving.” Teams can also contribute their time and space, which can all be deducted from their taxes. If you keep track of where you’re donating and how much you’re donating, you may save your company a lot of money while also doing good for the community.
Final Thoughts: Financial Tips for E-commerce Businesses
It is critical to understand that financial fitness begins with a strategy and a budget. Your ability to adhere to that budget and strategy is what will keep your cash flow and business going smoothly. By adopting these wise financial decisions, you will be well-prepared to face any unexpected bills or new projects!
Need more tailored advice to solve your specific e-commerce business financial challenges? Reach out to our finance experts at Today CFO.