How to Manage Your Online Business Finances

Ok, you have an ecommerce business, now what… How do you manage the finances?

You have just started or are running an ecommerce business, whether this is part time to pay for your kid’s college, the mountain home you have dreamed of, it’s your way out of the corporate world or you are already doing this full time, you have entered into the world of being a small business owner. Having worked for a global multinational company and being SOOOO happy working for myself, there is some risk as well as a ton of work to do.

As an ecommerce business owner you have many hats to wear, from shipping clerk, to online support, to product tester, to shopping cart expert, to so many hats running your own business. One of the key hats is managing the finances of your business so it isn’t just a hobby and it makes money.

So what does it mean to manage the finances of your business? What are you responsible for? What is involved and how do you manage this task so it doesn’t consume a whole weekend every month and multiple evenings?

First off, I have to recommend running each aspect of your business for a while, including doing the accounting. It is the best way to really have a handle on what is involved. This applies to the shipping and online support (every business owner should be part of this and directly involved with their customers). You may hate accounting and want to outsource this as quickly as possible, but you do have to understand it. If you are already outsourcing the bookkeeping, accounting and taxes already then great, but make sure you make time to review the finances on a regular basis, preferably weekly, don’t wait a month to find a problem.

Next, every business owner should understand the basics of accounting and finance. Not everyone is as lucky as I am to have married a CPA who takes care of our personal finances and all the business finances. You are responsible to understand what you are required to do, like pay taxes, sales tax, personal property tax returns, etc. You can’t be successful if you don’t know how your business is doing. Are you profitable? What is your overhead? What is the profit margin per product, understanding your cash flow (one of the most important aspects of any business)?

How do you educate yourself on finance? I recommend starting with Financial Intelligence for Entrepreneurs by Karen Berman and Joe Knight. I also recommend the Finance and Capital Markets videos on (If you are a parent, Khan Academy is the best resource available to help you help your children with homework).

OK, what are the basics that you need to keep track of and how?

    1. Keep track of your core finances bank accounts, loan, credit card, paypal, etc.
      The best place is to keep these online (if your business is online so should be your accounting). I recommend one of the new cloud accounting platforms, specifically, Freshbooks or Kashoo. Look for a tool that will integrate with your bank and credit card feeds.
    2. Keep a copy of everything.
      At the end of the year your accountant will need all this information to complete your tax return. When you grow to where you can outsource your accounting, you will make their job so much easier if you are organized. Store all your files (Business Documents, Tax IDs, Invoices, Bills and receipts (take a picture of everything) online in organized folders. You can file them on SmartVault, Dropbox, Google Drive, etc. Somewhere online and secure.
    3. Payroll.
      Check with your CPA and configure your payroll depending on the type of business structure you have selected (Partnership, LLC, LLC (taxed as an S-Corp), Corporation). Then use an online payroll service like Xero (releasing payroll soon), ZenPayroll, or another payroll service. Have this in place before you hire anyone.
    4. Sales Tax – YES, you have to collect sales tax.
      You must collect wherever you have Nexus (where you have a significant presence, so where you are, where you have employees or offices/warehouses (including third party distribution companies). Get a sales tax license in each state you have Nexus, learn the rules and configure Amazon or your shopping cart to collect sales tax. File sales tax returns and submit the money you collect monthly, quarterly or annually (based on your revenue). You can use tools like TaxJar, SellersToolbox, or services from Avalara or Exactor to automate the process. Or you can outsource the sales tax or all accounting to a company that specializes in sales tax. (Make sure they understand ecommerce, use a technology solution, and don’t charge you for the time it takes to do manually).
    5. Understand your financial position.
      Keep your finances up to date enough so you know how much money you have coming in and going out. Stop and check your finances before making any decisions; like purchasing more product, investing in a new product line or hiring.
      Now that you have the basics in place, focus on growing your revenue, finding smart ways to get more work done in less time, implementing online tools to provide better information with less effort, and have fun being a small business owner.
      When you are ready, have the revenue, want your weekends back, and you know what will be involved in managing the finances of your business, you can hire a bookkeeper or outsource your accounting to someone who specializes in ecommerce businesses.



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