As millionaire ecommerce entrepreneur Gary Vaynerchuk says, cash is entrepreneurial oxygen. You need a steady flow of money to pay for supplies, inventory, employees, and unexpected expenses as business ebbs and flows. Understanding how to raise and manage funds for your business is essential to survival and will help you reach your business goals. And, as your business grows and your finances become more complex, you’ll be grateful for your diligent record keeping. Chances are you already have a system in place that is working for your business, but you may be searching for new ways to save time or increase profitability. Here are some tips on how to better manage and understand your finances, all of which can help create a profitable, stable ecommerce business with room to grow.
1. Save Time and Energy With Professionally Designed Software
Ecommerce finance encompasses fundraising, accounting, managing loans, and financial engineering. It might take some trial and error to figure out the best accounting, financial, and organizational model for your business. And, trying to create your own system from scratch can lead to a number of challenges now and as your business grows. To save time and effort on bookkeeping, download finance and accounting software, such as FreshBooks, Xero, or QuickBooks. Professionally designed accounting software will help you set goals, manage spending, track inventory, send invoices, and more. And, because many programs save your information in the cloud, you don’t have to worry about your hard drive crashing and losing all your records.
Well-documented, well-managed finances will increase your productivity, time management, and profits, so you can feel confident the time spent reviewing and organizing your finances will be worth it. Not to mention, well-organized finances will make applying for loans and seeking partners or investors an easier process.
2. Update Revenue and Expenses as They Occur
No business is successful without an accurate record of revenue and expenses. The best and easiest way to get and stay financially organized is keep a record of daily expenses, including the nature of the expense and why it was needed. And, by updating your records as changes occur, you can turn bookkeeping into a simple, streamlined process. Don’t forget to save your receipts for tax season!
If you’re using accounting software, you can even connect your bank feed(s) so that business transactions can be automatically tracked and added to your records. This can save tons of time and labor costs – not only do you avoid having to manually enter all your transactions, but you avoid the potential for human error as you no longer need to enter in each transaction.
3. Know Your Potential Investors
Even experienced ecommerce businesses need an influx of capital from time to time, especially as the business grows and finances become more complex (adding employees, upgrading customer service, etc). Seeking investors may not be the right solution for your business need. But, if you are seeking investors, there are a few different types you should be aware of before making major decisions about managing your finances: venture capitalists, private equity funds, and angel investors.
Venture capitalists invest in companies they believe show potential to make it out of the competitive world of ecommerce. Some venture capitalists may want to have a role managing your company’s finances and making big business decisions before they are willing to invest, so make sure to pick an investor who shares your vision and goals for your company.
Private equity investments can provide a much-needed influx of cash to your company. Investors turn a profit by selling their stakes in your company once it is successful. Private equity funds may be harder to get for small startups, however, as these investors usually look to invest $100M or more into a company.
An angel investor is a more common and realistic type of investor for smaller businesses and start-ups. The angel investor is an individual that provides either a lump sum of cash to help your business get started or provides ongoing support as your business moves through financial struggles and works toward stable growth. Be prepared to collaborate and be flexible—angel investors usually want a large say in the company and may even seek partial ownership of the business.
Investors can supply much-needed cash to your financial bucket, but they might not be right for your business. You
Getting Help Can Save You Money In The Long Run
Accounting and financing in ecommerce are in a state of perpetual innovation as technology improves. It’s never a bad idea to meet with an expert to help you organize your finances or join an online forum like eCommerceFuel and pick up ideas from your ecommerce peers.