By 2021, the e-commerce industry is expected to hit $35.2 billion in Australia, and the sector will continue to grow. The up-and-coming domain is quickly becoming the latest love of Melbourne’s aspiring entrepreneurs.
If you’re planning to open an online store or already have one, you’ll need the help of a capable accounting firm to keep the company running smoothly and expand with each passing quarter.
To grasp financial reports, forecast revenue, file tax returns, and make sound investments as an e-commerce company owner, you should also have a basic understanding of accounting and bookkeeping.
You must adhere to tips mentioned below to run a successful e-commerce business:
- Track the cash flow
The aim of your company is to make money. You must monitor your cash in order to know exactly how much money your company makes. (everything that comes in and out of the business) Many eCommerce companies believe that the revenue is the best way to increase cash flow; however, there are other options.
The first thing to think about is cutting costs that aren’t required. Minor cost reductions can have a huge effect on your spending. You’ll also need to devise some payment-on-time plans. For example, credit terms should be carefully considered; unless your customers have a good credit background, it’s better to accept payment in advance.
Negotiating better terms with your suppliers will also help you increase your cash flow. Longer payment terms or discounts on additional transactions will help your company generate more cash flow.
- Analyze the break-even point
The number of units you need to sell to break even and start turning a profit is known as your break-even point. When determining the break-even point, you must consider your fixed and variable costs, the product price, and the contribution margin (the value obtained after subtracting your variable cost from the selling price).
To find your break-even point, accounting services provider uses the following formula:
Break-even Point = Fixed Costs/Contribution Margin
Where, Contribution margin = Average Price – Variable Costs
If your break-even point is high, consider raising your rates or lowering your variable costs, which you can do by rising shipping costs, using less expensive products, and so on.
- Balances the finances
Your company’s long-term health is tracked on the balance sheet. Total assets, total liabilities, and owner’s equity are all calculated to create the balance sheet. Assets are something of value that your company owns, such as inventory or office equipment.
Liabilities are the obligations you owe to others. Long-term and short-term assets and liabilities are described separately. The difference between your assets and liabilities is your owner’s equity.
If your income statement indicates that your eCommerce company is profitable, but your balance sheet indicates otherwise, it’s likely that something was entered incorrectly later on. Small business accountants keep in mind that your balance sheet is right only if your assets equal your liabilities plus your equity.
- Inventory Management
If you don’t have inventory, you won’t be able to sell anything. Unnecessary inventory accumulation, on the other hand, may have a negative effect on your liquidity and negatively impact your financial statements. As a result, it’s important that you keep track of your inventory and decide how much you want to keep on hand.
You don’t want to run out of inventory because it means you’ll lose revenue, but getting an excessive amount of unsold inventory can be costly. Bear in mind that it’s best to just have what you need on hand. You’ll have instant insight into stock levels and order statuses with a comprehensive inventory management system, giving you the most up-to-date information of your inventory.
- Keeping track of sales
Sales are the most critical aspect of any Melbourne business because no company can thrive without selling its goods. It’s crucial to know how many items you’ve sold at any given time because it lets you figure out whether you’ve met your monthly targets or not.
The achievement of the objectives is contingent on reaching the break-even stage. If you set a goal of selling 5000 items per month but only sell 1000 by the second week, you’ll need to devise an effective marketing strategy to help you meet your goal.
However, you must ensure that the amount spent on advertising does not exceed the amount received from sales. Your bookkeeping services provider would have no trouble keeping track of the sales. You can also link the Google Analytics tool to your e-commerce site to automatically receive data every day.
E-commerce companies are exploding in popularity, and the majority of them need effective and skilled accounting in Melbourne. So keep the above points in mind if you want to turn your business into a flourishing entity quickly and cheaply.
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