Growing a business doesn’t merely involve making more and more money. It involves getting to grips with the tedious stuff—from liquidity levels to inventory management.
We’ll be looking at 5 accounting hacks to help you grow your eCommerce business—monitoring cash flows, optimising Cost of Goods Sold, business bank accounts, inventory management, and bookkeeping.
1. Open a business bank account
Let’s start with the basics—open a business account with a bank. It sounds simple, but you’d be surprised—plenty of budding businesspeople make this mistake early on, and pay for it in due time.
Blending your business banking finances and personal finances sows confusion, costing money and time in the long run.
Separating your personal expenses from your business—drawing a firm line in the sand between the two—makes it far easier to keep track of things. It’ll make tax time a breeze (well, it’ll make it less of a hassle) and improve your chances of getting funding from potential creditors and investors.
After all, you’ll smell like serious business.
2. Healthy cash flow
Having a clear, comprehensive knowledge of your business’s financial situation is critical. But make no mistake—this isn’t just about tallying up your expenses and revenue. You need to dig a little deeper.
Getting to grips with your liquidity levels is a good place to start. This will give you a clearer understanding of your payment cycle, allowing you to plan for the future—critically, enabling long-term growth plans. To make the most of this, be sure to have the most up-to-date and accurate cash flow statements.
3. Cost of goods sold (cogs)
Surprisingly, many businesspeople don’t count labour costs and rent as expenses. But having a detailed knowledge of how much money you’re pouring into a given operation is critical.
This is called Cost of Goods Sold (COGS), and it revolves around the product. How much money does it cost to acquire materials? What are you spending on producing the finished product? How much have you spent on selling it?
Understanding COGS is a subtle but powerful gamechanger—allowing you to keep costs down while increasing profit. To fully optimise this practice, you need the most faithful, accurate means of recording these expenses.
4. Manage your inventory
Inventory management means keeping track of your stocked goods—their dimensions, location, amounts, and weight.
This is to help you reduce the cost of holding inventory—you’ll know whether you’re running out of stock, or holding more stocks than you need. Also, you’ll know when to stock up on products and buy more materials to make them.
Trust us on this—make inventory management into an unshakeable, abiding business routine. With a forensic grasp on your inventory, you’ll streamline your business operations.
5. Develop a bookkeeping system
Many people conflate bookkeeping with accounting. This is a mistake. In many ways, they’re like a married couple—the two go hand in hand but they’re not the same thing.
Bookkeeping is the ongoing process of recording and categorising business transactions—essentially, collecting and collating financial data. Accounting is more analytical—it involves interpreting that data.
A bulletproof bookkeeping system is essential to formulating sound business practices. There are many ways of going about it, including (but not limited to):
- Do it yourself. There’s loads of bookkeeping software available online. Or if you’re feeling adventurous, an Excel spreadsheet.
- Hire a part-time bookkeeper—online or locally-based.
- Hire a bookkeeper or in-house accountant.
By getting to grips with the nuts and bolts of bookeeping your business operation can thrive, in addition with a platform like Osome to automate your financial admin, you can streamline and scale your business.
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