Accounting Tips for Successfully Operating an Online Store
Online sales in Australia are predicted to reach $55.8 billion by 2022, and the market is expected to keep expanding. Entrepreneurs in Melbourne's startup scene are swarming to this hot new niche.
As an e-commerce business owner, you will need the support of a competent accounting firm. Since an online store is an online business, basic knowledge of accounting and bookkeeping is necessary to interpret financial reports, anticipate income, and submit tax returns.
To build a successful e-commerce firm, you must follow the following guidelines:
1. Maintain Financial Stability
Using the balance sheet, you can track your business's health in the long run. The balance sheet is generated by calculating all assets, liabilities, and owner's equity totals.
Your company's assets are anything of worth, such as merchandise or office equipment that you possess.
In legal terminology, liabilities refer to the duties you have to others. Assets and liabilities are broken down into long-term and short-term categories. The difference between what you own and what you owe constitutes your owner's equity.
Someone likely entered something improperly later if your eCommerce company's income statement suggests profitability, but your balance sheet does not. You have a balanced financial statement if your assets match your obligations and equity.
2. Perform a Break-Even Analysis
How many units must be sold in order to break even and start producing a profit for you? Calculate your break-even point (the value obtained after subtracting your variable cost from the selling price) by taking into account your fixed and variable expenditures, product pricing, and the profit contribution margin, among other things .
Accounting services providers use the following calculation to determine your break-even point:
Fixed costs/Contribution Margin = break-even point.
You can also compute the contribution margin with this equation:
Average Price – Variable Costs = Contribution Margin.
Increase rates or decrease variable costs if your break-even threshold is high. This can be done by increasing shipping rates or employing less costly items, for example.
3. Observe the Flow of Money
Making money is the ultimate goal of your business. Your business's financial health depends on you keeping an eye on your cash flow.
Many eCommerce organisations assume that sales are the most excellent method to enhance cash flow; however, other solutions are available to businesses.
The first step is to identify and eliminate expenses that aren't necessary. Even little savings might have a significant impact on your monthly payments.
You'll also have to come up with a strategy for making timely payments. Although credit conditions should be carefully evaluated, allowing payment in advance from consumers with a poor credit history is preferable.
Increasing your cash flow by negotiating better terms with your suppliers is also a benefit of doing so. Discounts on extra transactions or longer payment periods help your business create more cash flow.
4. Manage the Inventory
You can't sell anything if you don't have inventory. On the other side, an excessive inventory buildup might have a detrimental influence on your company's liquidity and financial statements.
Decide how much stock you need to have on hand based on your inventory tracking.
If you run out of goods, you'll lose money, but if you have too many unsold products, it might be expensive. You should remember to have only what you need at your disposal at all times.
A thorough inventory management system will provide you with the most up-to-date information on your inventory, providing you immediate insight into stock levels and order statuses.
5. Keep a Record of Sales
In order for any Melbourne business to succeed, it must focus on selling its items. Knowing how many goods you've sold at any particular moment helps you determine whether or not you've fulfilled your monthly sales goals.
To meet the goals, the company must first reach the break-even point. Developing an effective marketing plan is critical if you want to sell 5,000 goods per month but only 1,000 by the second week.
You must, however, watch out that your advertising expenditures do not outpace your revenue.Forget about your bookkeeping service provider not keeping track of sales for you. Google Analytics may be linked to your e-commerce site to receive data automatically each day.
Accounting in Melbourne is in high demand for e-commerce enterprises, which are on the rise in popularity. Consider these ideas if you want your business to grow quickly and cheaply.
Managing your eCommerce business is generally a balancing act, but our financial coaching services may assist stabilise your approach and help you develop your operation. New Wave Accounting is home to the best accountants in the Gold Coast. Contact us now to learn more about how our comprehensive accounting and bookkeeping services can help you grow your business.