Financial Management For E-Commerce: 5 Important Tips

Financial control is one of the most important control mechanisms that would have to be effectively in place for any venture, including e-commerce.

Controlling a business’ finances isn’t just about inflows and outflows; it incorporates nearly every aspect of managing. These include cost management as well as inventory control.

How then would you manage the finances of your e-commerce business?

Frankly, anyone who does not know much about finances would find that controlling the finances of an online store becomes daunting because of many considerations that need taking into account.

But then, with good planning, focusing on the most important aspects of financial control, and with the use of the right tools, making the financial management of your e-commerce easier is possible.

In this article, you will easily be able to track your business numbers and hence assess the profitability of your business in both the short and long run.

Here are the five key tips for the prosperity of your financial management for e-commerce .

With all this in mind, you are adequately prepared to face your finances. Let’s get started!

1. Planning and performance indicators

Start by putting together a financial plan to guide your e-commerce’s daily activities and establish clear goals.

Monitor and track progress on all these by using financial metrics, which are commonly referred to as KPIs. These important ones include CAC, which is the Customer Acquisition Cost, and CLV, short for Customer Lifetime Value, conversion rate, among other KPIs, ROI, short for Return on Investment.

Choose metrics that work best for your business.

2. Payment methods

Another critical decision for your e-commerce business is choosing how you’re going to receive payment for your sales. It directly affects your cash flow and customer experience.

Common options include bank transfers, credit/debit cards, and virtual wallets. Many e-commerces use payment intermediaries, such as PayPal, and others.

Each tool has its own characteristics, fees and transfer deadlines, so choose carefully and integrate the information into your financial control system.

3. Fiscal control

In any business, including e-commerce, it is mandatory to issue an invoice for all sales. This also applies to online businesses, as each sale is a commercial transaction subject to taxes.

Fortunately, nowadays, we no longer need to use physical invoices. We can use the Electronic Invoice, which is the digital version of the document that formalizes the sale.

There are systems like eNotas that automate the process of issuing invoices for companies.

4. Cash flow control

For an e-commerce to grow and make money, it is very essential that there be a financial plan that would record all cash inflows and outflows.

Cash flow is a fundamental tool for this. Basically, it tracks all the financial movements of the business over a given period of time.

This will make sure that your income is more than your outgoing income: healthy finances. A well-planned cash flow gives one financial stability; it identifies times of higher and lower sales, thereby averting financial problems.

If your cash flow is red, take quick action to avoid bigger financial problems.

To establish a reliable cash flow for your e-commerce, follow these steps:

1. Know Your Expenses : Identify all expenses, including fixed costs such as the e-commerce platform, payments to suppliers, website hosting, taxes, advertising, installments and other occasional expenses.
2. Record Monthly Sales : Keep a detailed record of each month’s sales, separating cash sales from installment sales. Make sure to record transactions on the correct date.
3. Create a Financial Spreadsheet : By understanding your expenses and average monthly income, create an online financial control spreadsheet or consider using financial management software.
4. Keep the Spreadsheet Up to Date : It is crucial to keep your spreadsheet up to date to ensure it is a reliable tool. Automating part of this process through integrations between your tools and platforms can be an alternative to keeping it up to date.

Cash flow is a valuable tool that not only helps control daily finances, but also assists in strategic decisions, such as allocating resources for marketing, the ideal time for promotions and defining strategies for important dates in e-commerce.

5. Keep track of your inventory

An inventory in e-commerce ensures the products are delivered to customers based on a promise.

In addition to providing customers with good shopping, sound inventory control is an important management function in any business organization. It offers prospects of the sale and revenue that can be expected within a certain period.

Therefore, regularly monitoring the quantity of products in stock not only ensures customer satisfaction, but also helps control expenses related to storage, logistics and labor, among others.