As an advocate for financial literacy and someone who works specifically with ecommerce businesses, I firmly believe in the power of Profit First to transform the way you run and look at your business. With the Profit First approach, you can ensure your ecommerce business not only thrives but maximizes profitability so you can take care of yourself and your family. So, let’s talk about some action steps you can take now in Q3 to work on maxing profitability this quarter!
Review Your First-Half of Year Performance
Take the time to review your first half of the year through the Profit First lens. Analyze your profit margins, operating expenses, and owner’s pay to understand your financial health. The Profit First approach emphasizes allocating profit first, which means setting aside a predetermined percentage of revenue for profit before anything else. This means you spend what you need to, not all that you have.
Stay Compliant with Tax Obligations
The Profit First system also emphasizes creating separate tax reserves to stay compliant with tax obligations. Quarter three is an opportune time to review your tax reserves, ensuring you have set aside enough funds to cover upcoming tax payments. This prevents any financial stress at tax time and allows you to focus on growing your business, or saving extra if you don’t have enough to cover your taxes yet.
Evaluate Inventory Cash Flow and Profitability
The Profit First approach for Ecommerce Sellers ensures that you set aside cash for inventory. After all, it is the lifeblood of your business. Analyze your inventory management strategies to identify opportunities to ensure adequate stock for Q4 and optimize your cash flow towards the products that have higher margins and turn over quickly.
Efficient inventory management directly impacts your advertising plan and budget too. Managing both together will enhance your profitability.
Reconcile Financial Data Regularly
Maintaining clear and up-to-date financial records is crucial for making informed decisions and an effective Profit First implementation. Regularly reconcile your bank accounts, credit card statements, and loans. Also do an inventory count to ensure you have its value recorded properly in the books.
This will ensure that the Profit and Loss is giving you accurate data. Clients that only record an inventory adjustment at year-end are setting themselves up for potentially big surprises, too late to make a difference in their year-end performance.
Remember, Profit First is not just a system; it’s a mindset that places your business’s profitability at the forefront of your financial planning. By taking proactive steps before you get swamped in Q4, you’ll be setting yourself up for success. If you need help along the way, reach out to the bookskeep team today!