Online Selling: So How’s It Going For Small Businesses?
Many retailers have flocked online to reach customers who were stuck at home. Last year’s Xero business trends report showed up to a quarter of businesses intended to make the move. So in this year’s business trends report, we checked how that’s working out.
Specifically, we asked what aspects of e-commerce were the hardest for newbies to deal with. About 60% said they found it tricky to calculate fees and taxes on digital sales. A similar portion found it difficult to manage cash flow.
What the experts say
People forget that merchant service providers and marketplaces take a cut of each sale. Those fees – and sales taxes – need to be matched with the corresponding sale. It’s a big bookkeeping job.
Forecasting is also really tough when you have a new online shop, You really need a quarter of sales data before you can hope to make any sort of predictions.
Some of these problems can be helped with more automation, and with the right software of a lot of the accounting and mundane processes can be automated.
Takeaways for small businesses
There are a few things small businesses can do to help support their recovery according to Xero’s small business trends report:
Account for online transaction fees of up to 5% when setting prices (you may want to add delivery charges too!)
Don’t forget to add sales taxes (like GST or VAT) where they apply
You need to list fees and taxes alongside each sale in your books, which can become onerous as the number of sales grows
Software can do that bookkeeping for you (plus, as a bonus, it will help you forecast cash flow)
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