ECOMMERCE: PREPARE FOR BLACK FRIDAY WITH LAST YEAR'S FINANCIALS
Yep, it's that time of year again - leaves falling, temperatures dropping and for eCommerce companies, the busiest time of year is just around the corner.
Lots of items need to be checked off the to-do list for a successful holiday season. Most eCommerce businesses rely on the holiday season as its estimated 20-40% of annual sales take place in the last two months of the year.
So, what can a eCommerce company do to get ready? Start reviewing last year's financial statements now.
Financial statements contain a lot of beneficial information. Reviewing them now will help you determine how much inventory is needed to meet estimated demands; and if you'll need assistance financing a large inventory purchase.
What are Financial Statements?
Financial statements are a record of how your business did during a specific time frame. Most are created monthly or quarterly, providing an in-depth overview of the previous accounting period. To prepare a financial statement, your accounting team will need to "close the books," to make sure everything listed is accurate and final.
Also, in the mix (once the financial statement is ready):
Cash Flow Statement
For holiday planning, the income statement will be an essential report to review. The income statement, also known as the profit and loss statement (or P&L statement) shows your revenue and expenses over a set amount of time. It also tells you where your bottom line is (where you start making money.)
Reviewing sections of your income statement for things like COGS (cost of goods sold) and revenue earned can help you plan for upcoming sales and expenses. It can also reveal a lot of reliable information about your customers.
Research Your Customers
Holiday shopping has become an art form. Many start early looking for the best deal, but then some wait until absolute last minute to purchase a gift. However, Black Friday and Cyber Monday shoppers make up the most massive shopping group and are found to be consistent year over year.
Reviewing your income statements from October - December from previous years can help you identify when sales tend to spike so you can stock up on inventory. If you sell specialty items, you might see sales peak in early October - as gift buyers know it takes time to create and ship the item. However, if you sell less customized items, you might see more traffic towards the latter part of November into early December.
The better you understand your customers, the better you can plan for them and determine what inventory is needed.
Factor in Labor Costs
One of the most significant expenses you will experience all season is payroll. Chances are if your business is thriving during the holidays, you will need some seasonal help. Take a look at your payroll expenses from previous years. Use that data to help plan and anticipate the additional costs you’ll incur for additional staff to fulfill orders and meet customer demands.
Get Your Finances in Check
You've reviewed last year's data and pumped for the season ahead. But before you go any further, you'll need to check your cash reserves.
If you run a seasonal business, you understand how difficult it can be to keep money in the bank during the slow months. To prepare for the high volume months, compare your projected inventory expenses against what cash you have on hand. Determine where you come up short and look at different financing options; this may mean looking for a small loan or exploring a line of credit to cover inventory costs.
This may mean looking for a credit card to cover your costs.
Brex is the first card for startups and ecommerce businesses, with higher limits, no personal guarantee or security deposit required, and the most competitive rewards program on the market. With 60 days to pay your bills and improve cash flow management Brex offers the perfect financing solution for an eCommerce company.
No matter which lending path you choose. Start reviewing your finances now, so you can make the most out of the holiday season and start the new year cash positive.
Are you interested in learning how Basis 365 can make reviewing your finances effortless? Reach out and schedule a time to speak with an accounting expert today.