How to Optimize Your Ecommerce Accounts Strategy Today

If you're into ecommerce, Amazon is a great starting point. You don't have to deal with maintenance of a website, shopping cart, merchant account, storage and delivery. Almost everything is done for you. To be successful at selling on Amazon was no-brainer about few years ago. Now with rising costs and global competition, you need to be extra smart and strategic about how to overcome these waves coming. Recently Carbon6 team created this interesting article about how to optimize your Amazon business. Here we go! (if you'd like to read thefull article, please use this link)

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Let’s take a look at some of the key challenges for ecommerce businesses and sellers.

Excess Inventory: Avoiding Overstock & Slashed Margins

Sellers in most categories will be in the habit of ramping up stock levels for Q4. For some, this can really payoff. A huge amount of extra traffic can result in a lot more sales and a bumper period of revenue.

However, with the costs of living on the rise across the world and consumer spending widely predicted to slowdown in the months of uncertainty ahead, many sellers may find themselves overstocked.

This can lead to slashed prices and as a result, slashed margins.

How Rising Costs Will Affect Amazon Sellers

As we’ve discussed, rising costs are in effect throughout the supply chain.

One of the biggest challenges for Amazon sellers going into Q1 is these inflationary costs trickling down the supply chain, impacting profits further.

For instance, Amazon just announced on 10th November that reimbursements for lost or damaged units at an FBA warehouse will not automatically qualify for full reimbursement. Instead, items in an unsellable condition "will be reimbursed at a discounted rate."

 Amazon again shows it will do everything possible to maintain profit margins by trickling more costs down to sellers.

For Amazon sellers, this is an all too familiar story. Increased fees lead to additional costs, and a reluctance to raise prices to absorb said costs for fear of losing market share.

All of this presents a challenge that Amazon sellers will need to navigate skillfully going into Q1. 

Why Sellers Must Prepare for Downturns in the Retail Calendar

Q1 represents an interesting time of year for ecommerce brands, particularly those selling on Amazon. Whereas Q3 has Prime Day, and Q4 has, well… Q4, quarters one and two are much quieter on the retail event calendar. 

As a result, brands depend on the traffic they can generate themselves rather than relying on major promotions or retail events that traditionally drive conversion rates up and overall profitability higher.

How to Optimize Your Ecommerce Accounts Strategy Today

While the challenges for ecommerce sellers are apparent, there are a number of account strategy optimizations that will keep your business lean and your future bright.

Optimize Bookkeeping with Real-Time Data

Too many sellers fall into the trap of doing as little as possible when it comes to bookkeeping and accounting.

That usually means manically preparing books once a year, crossing your fingers that everything is in order, and having mostly outdated data to make decisions.

Instead, ecommerce sellers should be working with an accountant or bookkeeping service that regularly processes the books and prepares profit and loss reports. 

Sellers should be looking at a detailed profit and loss report on a monthly basis at minimum. This helps sellers quickly identify areas in the business that need attention and provides the insight needed to make sound, data-driven decisions.

Why Ecommerce Sellers Need Accrual Accounting

If you’re going to have regular visibility on your profit and loss, you’ll also want to make sure it’s calculated according to accrual accounting principles. Accrual accounting involves recording income and expenses when the transaction occurs, as opposed to when the cash goes in or out of your bank account.

Conversely, cash accounting – which is the default for most businesses and accountants – involves recording income and expenditure when the cash moves in or out of the account. Cash accounting is easier to administrate, but it makes it very hard to understand how your business is truly performing.

By adopting accrual accounting, you can easily compare month-on-month and year-on-year trends to optimize your finances and your overall business. 

3 Ways Amazon Sellers Can Future-Proof Their Books

While the road ahead may seem uncertain, successful entrepreneurs are those who put their best foot forward to create the best possible future. 

To have the best chance of success in that future, here are some tips for overcoming the challenges facing the ecommerce industry, and how to future-proof your financial processes.

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1. Get Organized

One of the most exciting opportunities in building an ecommerce brand is building to sell. Private equity firms, aggregators, and traditional buyers continue to hunt for new acquisition opportunities in the ecommerce space. 

But buyers are becoming smarter,and more seasoned in their acquisition process. This means they are looking for lean, organized, and documented businesses they can quickly pick up and plug into their portfolio.

By getting finances organized in the ways we’ve covered in this article, you can not only future-proof your books but also, as a result, maximize the potential valuation of your business. 

2. Get Systemized 

It’s one thing to get organized, but if you’re going to scale up your business, you also need to systemize your bookkeeping process. 

To successfully systemize your ecommerce business, you'll need to set aside time to create Standard Operating Procedures (SOPs) for bookkeeping in order to create a growing library of documented systems a team can follow.

It’s essential that you’re also leveraging quality ecommerce accounting tools to increase the reliability of your books and speed up the administration process.

3. Get Help

Bookkeeping is one of the key areas every Amazon seller should get outside help with as soon as possible. It's one of the most important aspects of a successful, growing business and demands a skill level most ecommerce sellers simply don’t have time to cultivate. 

By utilizing the services of a CPA or dedicated bookkeeping service, you can lean on the guidance of experts, ensure you always have up-to-date finances and position yourself to make clear growth-oriented decisions.

Lee Loree of Seller Investigators says that competing successfully on Amazon is becoming too hard to do without outside help. By removing yourself from as many processes as possible by hiring or consulting with experts, tools, or software will allow you to scale better, and assess new and previously unnoticed problems. 

Managing finances is no joke. In fact, the mismanagement of finances is one of the biggest causes of failure in business. However, by deploying the tips and strategies we’ve shared in this article, you can set your business up for long-term financial health, weather any storm, and grow profitably for years to come.

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