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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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