Essential Cash Flow Management Tips for Amazon FBA Sellers
23 January 2024
Did you know that an astounding 82% of businesses close due to cash flow issues? Cash flow is often overlooked
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For anyone planning on starting a business, starting an online store is an extremely viable option that shows a lot of potential for the future. In the period between 2010 and 2020, eCommerce sales increased by 800%. Global eCommerce sales were around $500 billion in 2010 and that figure had crossed $4 trillion in 2020. So the pie is getting bigger and there is plenty on the table for any online sellers that want to join. Hiring a dropshipping accountant is most important for this.
However, there are quite a few different ways that you can sell your products or services online. Exactly what kind of eCommerce business to choose is the million-dollar question entrepreneurs face. Business advice is a dime a dozen and for a new seller, it’s hard to tell what will actually work out to be a successful business model in the future. Each eCommerce model has its own pros and cons and while starting one may be easy, scaling it into a profitable enterprise is a different challenge altogether.
In this post we will examine dropshipping and why it is a highly suitable option for new sellers.
Dropshipping is a form of online business in which the seller doesn’t own any inventory. The seller develops a storefront where they attract customers, the customers place an order, and the retailer then places an order with the appropriate supplier or manufacturer and gets the product shipped to the customer directly.
Just like any other business dropshipping has a lot of tangents and facets. Some of the most important things to know before you get started include:
Ideally, you should focus on a specific niche or a specific range of products. Customers prefer to buy from specialist stores. Being a generalist is also a good option as it allows you to diversify your portfolio and reduce risk but it is difficult to scale such a store due to the intense competition.
A more effective strategy is to start with a focus on a small niche and as you develop a reputation in that niche you can branch out into other directions.
In a dropshipping business, you need to focus on all the things that a regular eCommerce or even brick-and-mortar business would have to manage. This includes managing suppliers, having a good accounting system, managing taxes, getting the appropriate licensing and of course marketing the business.
In the long run, you also want to have a plan for business growth and how you are going to scale your operations.
Dropshipping is very supplier-dependent. Since you won’t be holding any of the stock yourself you need to make sure you are working with quality suppliers who can deliver when you need them. It’s recommended that you have at least 3 suppliers for every product that you list on your store. Ideally, these should be suppliers in different countries so that you can always get your product shipped even if there is a trade problem with a supplier in one region or a certain supplier is out of stock.
Strong supplier relations are a central component of any good dropshipping business.
You can dropship in many different ways but ideally, you should have a proper storefront where people can browse your inventory, order, pay, and resolve any queries and disputes they may have. Generally, a website is the best way to do this and if you aren’t working on an existing marketplace then you will have to either develop this yourself or have a professional help you out with the store development.
A good strategy is to focus on a specific market so that you can have payment solutions that will work in that region. When you target a global audience managing payments becomes more challenging since every region has its own requirements and some gateways will work in some areas but not others.
Start small and increase your reach as you grow.
Initially, you will be able to handle everything on your own but as you start gaining momentum you will need people to help you out. You may need a marketing expert, accounting software and specialized eCommerce accountants, supplier relationship managers, tax services, website development experts, and others.
Yes! How profitable it will be for you depends on how well you are able to manage the business. Generally, it is very common for businesses to generate 20%-30% net profits on their sales. You can make more than this if you really optimize your business. Naturally, the higher your revenue and the more high-value transactions you have, the higher your profits will be.
It boils down to how much experience you have in eCommerce, how experienced your team is and how good you are at generating leads and sales. Generally, it takes businesses around a year to be able to create a full-time income and start comfortably start earning profits regularly.
For any business, it is recommended you have enough funds to sustain you for at least a year till the business gains momentum. You must know a dropshipping accountant for a successful dropshipping business.
Yes. You need an eCommerce accountant who can help you manage cash inflows and outflows and also take care of tax matters. You will also need accounting software that your accountant will use to organize all the financial information.
It depends on their level of expertise, experience, specialization, and whether they are in-house or remote accountants. You can hire accountants for anywhere between £5-£300 per hour for your business. If you want to keep costs low then hire a remote accountant. If you want to hire highly skilled experts who can give you the best financial advice possible, then it will cost a bit of money.
You could also consider getting an accountant on an ad-hoc basis in which case they will charge a fixed accounting fee for any accounting services they render or any advice that they give.
A good dropshipping accountant is one part of the equation. The other important part is the accounting platform that you use. There are quite a few solutions to help you with eCommerce accounting but some of the most popular and most powerful include:
A comprehensive platform that features a simple-to-use interface and offers plenty of financial services. The pricing is also quite modest and a platform is a suitable option even for medium to large-scale businesses. You can easily find accountants that are well-versed in Quickbooks and have them remotely handle all your accounting.
Another popular option is slightly more technical to use but will be a good choice for businesses that require those types of operations. Sage is slightly more expensive than other options in the market but the unique functionality makes it worth it.
One of the most popular options among eCommerce business owners largely because of the affordable price tag and the flexibility of the platform. Xero integrates very fluently with other systems, and apps, and is a particularly popular choice with Amazon sellers. Even for dropshipping online stores, this can be a great option to explore.
Yes. You will set up your account just like a regular seller and whenever you receive an order you will forward the information to your supplier. To successfully scale this operation make sure you are delivering on time and gather excellent reviews for your business.
Technically you can, but there is a caveat. Etsy requires the sellers to be involved in the manufacture or design of the products that they are selling so as to give the actual makers of the products the chance to sell. As long as you are disclosing to your customer how you are involved in the production or design of the product, you should be good to sell.
Etsy does allow sellers to have partners who are involved in the creation of products that they sell so you can have the product made by someone else but you need to be a part of the process at some stage.
Go through the guidelines before getting started so you don’t end up getting your store banned.
Yes. In fact, this is one of the most popular options. Through a Shopify website, you don’t have to disclose whether you are dropshipping or not and you get to create a space where your visitors aren’t distracted by other sellers and listings. Moreover, creating a Shopify store is very straightforward and you can even do most of the work yourself. This is a great way to start and it offers a lot of future expansion options as well.
Yes. Amazon is a fantastic platform to use as it allows and supports the dropshipping model and also gives you access to a massive market. As Amazon has expanded to many other countries you have a global reach through this marketplace. In fact, many people source and sell on Amazon. Together with the seller support that Amazon offers, this is a great platform for both new and seasoned professionals.
If your budget is low and you want to keep things simple then dropshipping is a fantastic way to launch your eCommerce business. Be mindful of the things we have discussed such as finding the right niche, creating a network of reliable suppliers, and sorting out payment gateway challenges. At the same time, also invest in finding the right human capital whether that is an SEO specialist or a dropshipping accountant.
Get familiar with common accounting practices and the systems you will be used to manage the business. Whether you start off on a marketplace such as Amazon or decide you develop your own platform, they are both excellent options. Moreover, be ready to spend some time before seeing any meaningful results. Stay positive and be consistent.
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