The basics of running a successful E-commerce business
If you want your E-commerce business to grow and be successful in this day and age, it’s crucial that you understand every aspect of your business. This includes understanding your financials:
Are you tracking your cash flow?
Even if your E-commerce business is small, it’s crucial that you use a separate bank account for your business, so you can track your income and expenses. Is your business actually making money, or are you continually having to use your personal funds to cover the costs of the business?
Do you understand the timing of your money?
Having lots of money come in at the end of the month is not helpful if you can’t pay your employees or your bills before then. Are the payment methods you are offering your customers causing long delays between the time they pay and the time the money is in your bank account?
Do you understand your inventory and cost of goods sold?
If you are selling products, it’s crucial to never run out of inventory. This will cause you to miss out on sales and income. Do you know how much your inventory is costing you? Besides the price of buying the products, make sure you calculate costs for things like packaging as well.
If your products are stored in a warehouse, you have to calculate such expenses as rent as well. Labor costs also need to be considered. How much time and money does it take to package and mail out the products, process returns, answer customer questions, etc.? Did you factor in your advertising costs, or any asset depreciations? Is FBA the better option?
Time for taxes!
Taxes can get pretty complicated for E-commerce businesses. Are you supposed to be charging sales tax on your products? Which expenses can be deducted from your profits to minimize the tax you have to pay during tax season? Should I charge tax to foreign buyers? Is it smarter to set up an LLC, S-Corp, or partnership for your business? How can I plan for tax season throughout the year in order to prevent large tax payments?
We are just scratching the surface of some of the items to consider when running an E-commerce business. As you can see, things can get complicated quite quickly.
At Averkamp CPA Group, we help lots of E-commerce businesses thrive. We can take care of your business accounting, bookkeeping, business setup, tax planning and preparation and business strategies, so you can focus on running your business, without the stress!