5 Ways to Ensure that Your Online Business is Financially Sound

Keeping your eCommerce business financially sound is one of the most difficult – and important – aspects of running a successful company. When something is amiss with your financial management, it can quickly spiral out of control and threaten the very existence of your business.

I\’ve put together a list of the most basic steps you need to take to ensure that your online business stays on track financially. Of course, seeking expert advice is always recommended, but these tips will help you get started in the right direction.

1) Track Your Expenses Carefully

This should go without saying, but it\’s important to keep a close eye on your expenses. In fact, you need your records to be flawless. I recommend using cloud accounting application Xero to record your expenses regularly.

Many eCommerce business owners make the mistake of letting their spending get out of control, without realizing how much it is actually impacting their bottom line.

Create a budget and stick to it as closely as possible. You should know exactly what you\’re spending and why. This will enable you to understand which costs are generating a sufficient return and where you may be able to cut costs.

2) Keep Your Personal and Business Finances Separate

One of the biggest financial mistakes you can make is mixing your personal and business finances. This is actually a common mistake.

Not only does this make it much more difficult to track your business expenses, but it can also lead to serious legal problems down the road.

If you want to keep your eCommerce business financially sound, it\’s crucial that you maintain a clear separation between your personal and business finances.

3) Manage Your Taxes Properly (from Day One)

Another mistake that many online business owners make is failing to properly manage their taxes. This is a big issue when it comes to eCommerce industry, taxes set up and proper reporting is complex and usually poses a big challenge. But there are smart cloud applications which can automate and simplify this process.

It\’s important to ensure that you\’re paying all of the taxes you owe and taking advantage of any deductions or credits you\’re entitled to.

Failing to properly manage your eCommerce taxes can lead to significant problems down the road, so it\’s important to get this right from the start.

Send Us A Message

4) Build a Healthy Cash Reserve

One of the best ways to ensure that your online business is financially sound is to build up a healthy cash reserve.

Now, this is certainly easier said than done, but it\’s important to have a buffer of cash on hand in case of unexpected expenses or slow periods. Especially during the uncertain times like the crisis we are experiencing at the moment.

Ideally, you should aim to have enough cash to cover 3-6 months of operating expenses. This will ensure that you\’re prepared for anything that comes your way.

5) Shift Inventory and Supplies

One way to conserve cash is to shift your inventory and supplies. This means selling products that are slow moving or discontinuing products that are no longer profitable. It also means buying supplies in bulk when they\’re on sale so you can get a better price.

The key is to be proactive and make these changes BEFORE you\’re forced to do so. This will help you avoid any major disruptions in your business operations.

How to do inventory forecasting.

One of the most difficult parts of inventory management is knowing how much to order and when to place the order. Inventory forecasting feature can be helpful in overcoming this challenge. This is another reason to use inventory management software, like Dear Systems which enables to do inventory forecasting with ease.

Inventory forecasting helps you predict future demand by using sales projections, revenue and profit figures, financial reports, and existing inventory activity to create advanced models.

Proper inventory forecasting and management means you won\’t have to turn away orders and you can maximise your profits by ensuring you always have enough inventory on hand.

Final Thoughts

Of course, these are just a few of the most important steps you need to take to ensure that your eCommerce business is financially sound. For more detailed advice, be sure to seek out the help of an expert eCommerce accountant.

Have a look to find out more…