Ecommerce businesses have been on the rise ever since their inception, and the pandemic offered online sellers an added boost. Small businesses have just begun to scratch the surface of possibilities open to them with ecommerce. With the world’s goods and services at our fingertips, just one click away, online purchases continue to soar. Some of the most successful businesses are completely online, while even brick-and-mortar businesses have incorporated ecommerce for small business growth. As an ecommerce business, how do you navigate the challenges and improve your processes? Below are four ways to improve your back office and ensure that you are staying in compliance with all federal and state regulations.
Minimize risk with automation
Human error can become a major headache for an ecommerce business. A one-digit difference can make a huge impact when manually sending out invoices or entering shipping addresses. We’ve all done it—you meant to invoice $98.34 but accidentally typed in $48.34, or shipped to a client with a zip code of 78704 but accidentally sent it to 79704. When these human errors happen, you’re missing out on $50 or dealing with one lost package. When they happen at scale, the consequences can be much greater. By letting cloud-based accounting apps automate these processes, dramatically reduce the possibility of human error.
Apps such as Shopify, Square, and Dear can take the reins and complete the process, from customer purchase to creating a shipping label. Not only can you automate processes that make the customer journey smoother, but you can also automate back-office tasks. Some of the most common tasks to automate are inventory management, payroll, taxes, expense and bill management, and even bookkeeping. Automating these processes can give you back valuable time, all while keeping your information safe and secure.
Find cost-cutting opportunities
One of the many benefits of ecommerce for a small business is being able to reduce overhead compared to sellers with a physical location. But even if you think you have reduced all costs possible, think again. While bookkeeping is a day-to-day process, one of the end goals is to identify areas of opportunity. If you want to boost the company’s profitability, it’s time to pull up your financial statements, specifically the income statement. If you are using a cloud-based accounting system, such as Xero, this should be a simple process.
From the income statement, you will be able to examine expenses, cost of goods sold, and operating expenses. Start with the biggest expense categories and proceed from there. Maybe you need to reevaluate staffing levels or contractor relationships. Are there other suppliers to work with who may be able to provide goods for less? Has the shift to remote work left you with too much office space? If you’re unsure of where to start, consider consulting with a business financial advisor or outsourced CFO to help you make strategic decisions.
Know where you’re doing business
Your business may be based in Florida, but what happens when you sell goods or services to someone in Texas? Prior to 2018, businesses needed to have a physical presence in another state in order to be subject to that state’s tax. This all changed when the supreme court upheld South Dakota’s economic nexus law, allowing states to collect sales tax on transactions in the state from businesses that don’t have a physical presence there. Since then, nearly all states have enacted economic nexus thresholds for sales and use tax. Even small businesses selling online need to be aware of their state tax obligations.
To determine nexus, it’s best to consult with a business tax advisor. In order for an advisor to help make the determination, you will need documentation of all sales. Every transaction, big or small, needs to be properly documented and accounted for to reduce the risk of penalties. If you’re still stuck in Excel, it’s probably time to migrate to a cloud-based accounting software to help automate these processes, ensuring no transaction gets left behind.
Invest in technology
As you can see from above, in order to reduce risk, quickly pull real-time financial statements, and automate processes, you need to invest in the right technology. Cloud-based accounting apps typically don’t require a large upfront investment. The majority of the apps offer monthly or yearly pricing options, with solutions to fit businesses of all sizes. The amount of time small business owners get back from automating processes typically pays for the tech and then some. By integrating these apps into your accounting processes, your and your customer’s information stays secure, immensely reducing the risk of data theft and fraud. Not only will you see an improvement in your back office, but your customers will see a difference in the buying journey.
There is no one size fits all approach to finding the right apps, particularly when it comes to ecommerce for small businesses. Every business and its needs are unique, and therefore the solution can vary. If you’re on the fence about migrating to the cloud, give us a call and we can discuss the many benefits.