Getting your business off the ground is sure a lot of hard work, but accomplishing this feat doesn’t necessarily mean you’re beyond any potential danger. Any successful online business is founded on intricate processes that manage the financial transactions and profits coming into and out of business. While conventional offline corporations had a straightforward way of keeping track of their finances, the online world added a little layer that may have caused some confusion to many online businesses. We’ve gathered the most important tips that can help you safely manage your online business’s finances and profits.
Decide on How to Get Paid
PayPal is considered one of the most popular options, especially among beginners. Even after your learning days are over, you can choose to stick to this option. There are still options other than PayPal that may offer a more customized experience for you, but it will need some research to find the best one. PayPal offers a myriad of benefits for freelancers, such as flexibility, accessibility, and high-level protection. After releasing a few products, you might want to start using more professional services.
However, in many cases, you would still need a PayPal account to use many online payment services. If you have started as a freelancer then decided to build your own business, we strongly advise against using the same PayPal account to handle both transactions. It’s much better to dedicate a new separate account for your business to eliminate the risk of making errors or getting confused. After you have set up your PayPal account, there are a few steps you need to follow to link your business bank account to be able to withdraw the money whenever you need it.
Separate the Personal from the Professional
When you’re only starting out, you might be tempted not to bother with opening a whole new account to account for petty expenses like hosting and email service providers. But soon, you will realize that that’s a mistake once you notice income or more complicated expenses coming through your account. This is where it’s critical to separate your personal accounts from your business-related account quickly. Even though some people choose to merge them together, it can become very hectic when you’re trying to manage and pay your taxes.
If you’re a merchant in an online marketplace like eBay, it can sometimes pose challenging tax calculations if you aren’t familiar with tax forms. One of the most important forms you need to take care of is the Ebay 1099 taxes form, which is for self-employed individuals. Keeping a detailed record of your expenses through a business bank account can help you avoid losing money in many tax-related calculations. You get a lot of benefits like a business credit card and travel rewards, not to mention the ease of opening the account through online channels as well.
Keep an Eye on Expenditure
No matter how good your online business is going, if you’re not monitoring it, you are going to be on the losing end very soon. The market landscape can change in an instant due to a myriad of reasons, from global pandemics to recessions. This means that you have to stay on top of your expenditure in the most precise manner possible. You won’t believe the number of bills that you could be accumulating on your account without even needing the services themselves.
If you have more than one business account, make sure to create distinct categories to know what went where at any given moment. If you’re covering small expenses like hosting or email providing services, make sure that you don’t start racking up expenses on your personal or business accounts. You can implement accounting software to specifically keep an eye on all your expenses without leaving room for human error.
Adopt a Good Billing Strategy
Handling finances with clients and customers might be the most challenging part of any small business. Every business owner has at least one customer who is always late to make payments. If you want your business to operate on a healthy level, day-to-day transactions must be handled professionally and smoothly.
This all depends on handling the cash flow efficiently. Studies recently have proven that many startups tend to fail because of tied up cash in unpaid invoices. To avoid this problem, you must adopt an effective good billing strategy that doesn’t leave room for chronic late-paying customers to slack.
Use Accounting Software
The best thing about accounting software is that it helped remove the need for a highly-skilled accountant in a startup except for complex accounting structures. You can simply use accounting software for a very small fee; some are even free. You can easily connect all your business accounts and manage them through a cloud-based service.
The type of software shouldn’t matter as long as you’ve made sure it has all the features you need, in addition to good customer support services. The majority of accounting or bookkeeping programs will make it easy for you to issue invoices, sync with bank accounts, and even help you simplify the tax process by keeping track of payable and receivable accounts. You can get a professional freelancing accountant once every month to make sure that everything is in order.
Manage the Inventory
Online shops may not have the convenience of physical retail shops when it comes to managing inventory, especially if the shipping is a dropshipping module. Ordering too much inventory that exceeds the demand by margins can cause them to collect dust in the storage. You need to be quite aware of your inventory and which items are the most in-demand. Ensuring that items that run out soon are constantly restocked is a good way to keep a stable and positive cash flow. It may take some experimenting to find the fine line between having too much inventory and lacking the items your customers want.
There is no doubt that there are many ways to track down the business’s finances down to the minutest detail. Still, the problem can sometimes be knowing what method you should be going with and how you can implement it properly to avoid mishaps that can happen in risky financial maneuvers.