Amazon Accounting: 8 Proven Tips To Keep Your Business Finances in Check
Are you starting up your own store on Amazon? Many go belly up. Give your store every chance to succeed by following these Amazon accounting tips.
Startup Amazon sellers go through the same financial challenges as any business. That said, they can also operate with just enough capital to keep their businesses afloat. To keep going, they have to be vigilant with their business finances, and making any wrong step may prove a detriment to their business.
This sounds grim, but the reality is that Amazon sellers only have to focus on the right steps to keep their business up and running—and there are only eight of them they need to take. So let’s explore the best Amazon Accounting Tips and see why they can keep your business finances healthy and in good order.
Invest in Accounting Software
Before getting into the task of keeping your business finances in check, you must see them first. You can’t manage what you can’t see, so it makes perfect sense to invest in financial tools before you wrap your brain around business money management.
Cloud-based accounting software such as QuickBooks Online (QBO) should get you started fast. This financial tool will help you store financial information tied to your business and help you arrange them in a way that makes sense, so you can see how your business looks from a financial perspective.
Know Your Business’s Supply and Demand
Ecommerce startups selling on the Amazon marketplace will always have inventory management as one of their common startup challenges. In particular, the core issue is matching supply and demand because the forecasted sales figures don’t match reality. Unfortunately and more often than not, this happens to a lot of startups.
The truth about inventory is that your business’s cash (and profits) are tied to it. So if units remain unsold, your business warehouses them, incurring expenses and putting a dent in your finances.
To keep things in check, take a conservative approach to inventory management. Purchase less than what you project. Then acquire goods on credit in case demand surges. Don’t forget to match your inventory strategy with an accounts payable solution.
Be a Prudent Spender
Your business does more than shell out money for inventory. As a recognized entity, it can spend on many business-related activities, including on unnecessary things.
We understand that startups have a lot of needs, and some owners may think all of them are worth spending on because, in one way or another, they can contribute to growth. In reality, there are only a few essential things a business needs to do business, and for a business to reach its full potential, the decision-makers must find out what those essentials are.
Spending decisions vary for every business, but the principle for prudent spending is the same. For starters, you can ask yourself, “will this positively affect my sales?” if the answer is no, then keep the money.
Put Your Money To Work
Being prudent with money and spending is the first step. If your business has a surplus of cash, you can invest the money and make money work for the business.
So find ways to make this money earn income. For example, purchase stocks or bonds, invest in another business, or put it in high-interest accounts. Research different investment vehicles, or better yet, talk to an accountant about how to put your business’s money to good use while considering your business’s needs.
Be Cautious With Debts
On the flip side of making money work for your business is debt. This is using other people’s money to help your business grow.
Getting into debt can be a risky endeavor to undertake. Apart from the hefty interest rates imposed, there’s also the possibility of using the owed amount for a fruitless venture which leaves the business more cash-strapped than its original financial state.
The key is to be cautious with debts. First, study how the interest rates compound. Then, as much as possible, avoid long-term debts and only use other people’s money if you’re leveraging it for a venture with a high success or return rate.
If the risk is too high, you can always find other ways to finance your business.
Have a Backup Money Source
Running a startup involves huge financial risks; at any given time, it can run out of cash and go belly up. So keeping your business running involves more than managing finances. You have to have a contingency plan.
A backup money source is the only way to bring security to your startup. Build your list of money sources you can tap when things go downward. You can start with the personal assets you’re willing to liquidate or invest, then move toward potential investors and lenders.
A list is important. It makes you less dependent on a few sources of backup money and increases your chances of infusing money into your business to keep it going.
Every business has to pay taxes; that is a fact. So hearing the phrase “tax avoidance” seems like a crime when in fact, it’s a legal business strategy.
Tax avoidance lets businesses use the law to avoid paying the standard tax rate or be exempt from it. For example, some states allow you to offset your charitable contributions to your income tax obligations. This is one form of legal tax avoidance.
Business owners, especially those working on startups, can consult with accountants and tax lawyers about how to avoid paying taxes legally. This will help remove some financial burdens, especially during the early stages of operations.
Hire an Accountant
Keeping business finances in check is easier if professionals are working with you. They can take care of the tedious bookkeeping and reporting tasks and present you with the numbers you need to manage your business’s finances.
You can also consult with them on matters concerning money management. They’ll help you strategize on how to maximize your business’s money and prevent it from running out.
For starters, you can check out bookkeeping firms. They have a team of accounting professionals ready to handle your accounting system so you can focus on financial management.
Take the Steps Toward Business Financial Success
The odds of startup success will turn in your favor. All it takes is to follow the steps laid out above and execute them correctly. To ensure that happens, you’ll have to work with accounting professionals who can guide you on how to keep your business finances in check, which can lead to better operations.
If you want to dig deeper into eCommerce finance, be it Amazon or others, check out our other articles on the site. There, you’ll find more Amazon Accounting Tips to help you get your online business off the ground.