Online sales are the fastest-growing sector of retail. To run an eCommerce business successfully, accountancy is, of course, essential. Below are 5 ways you can achieve greater growth and profitability for your eCommerce business.
1. Improve cash flow
While you work at expanding your customer base, there are other ways to strengthen your cash flow. Analyse your outgoings and tighten up by reducing some unnecessary expenses. These could be excess office space, automated services that are no longer used, or printing out office documents that could be stored online. Other expenditures that you may consider minor, such as phones, stationery, and computer services, soon add up, so don’t disregard their impact. Reassess these and obtain competitive quotes. Keep track of the dates you need to both make and receive payments and structure your cash reserves accordingly. If you are offering credit terms to customers, ensure they have an excellent credit history.
2. Manage your business expenses
Whether you are manufacturing or purchasing the goods you sell, ensure you are accurately listing your production costs. These include labour, materials, machinery, warehousing, or in the case of purchases, the wholesale cost. Other expenses to factor in are rent, utilities, salaries, technology, and marketing. These figures are critical in highlighting what is and isn’t economical.
3. Balance your inventory
You don’t want to run short on your inventory, resulting in lost sales. At the same time, an excess of products can have a negative impact on your cashflow. Setting a minimum inventory level and striving toward a high turnover rate will help you achieve that all-important balance.
4. Understand the importance of the break-even point
When your net revenue covers your expenses then you are at a break-even. This is why calculating expenses is critical. If the break-even point is too high, look at raising your prices or lowering expenses such as shipping costs. If you are shipping large volumes, ensure you are receiving the best volume discount from your supplier. Automating parts of your business is another way to increase your profit margin. For example, automatically adding new customer details to your email marketing list can fast-track further sales.
5. Track your sales
Daily reports help forecast whether you will meet monthly profit targets. This gives you a heads-up on whether you might face cash flow or inventory problems and you can plan ahead accordingly. There are plug-in website tools designed to track sales on eCommerce sites. If sales are not on target, you are ahead of the game in planning extra marketing activities.
Propeller Advisory can help with these steps and many more, so contact us today!