By Anna Hill, Accounting We Will Go
Can you believe the year is almost 75% of the way over? That is crazy, where has the time gone?!? This is also very exciting, especially for those who rely on Q4 sales to make the year!
Before things get too crazy for your business, let’s talk about what you can do, at a minimum, if you are feeling behind and frazzled in your business. I want to discuss some of the common thinking errors that pop up this time of year and provide helpful suggestions and specific action steps you can take to keep from falling back into bad habits from prior years.
- “It’s too late – my accounting is so far behind, I may as well just wait until after Q4 to get caught up. I’ll just ignore it for now.”
Even if you are behind, do this ONE thing NOW that you will thank yourself for in January once you really do need to dig in and get started. If you set aside a few hours one morning, you can do this and then feel good knowing you have at least started.
Save your bank and credit card statements – you will need these to reconcile your accounting records to ensure you have all of the transactions in your books, on the right date, for the right amount. I suggest you use Dropbox or other cloud storage to save these, but some prefer printed statements, which is fine. Just be sure you can get your hands on these statements when you need them.
Typically you can download the statements from the online portal for each financial institution.
2 – “There aren’t enough hours in the day to get everything done, so I’ll just focus on the fires burning the brightest.”
While it is sometimes necessary to operation from reactionary mode, this is not a good long-term way to run a business. If you are constantly working to put out fires, consider stepping back to reorganize.
I suggest taking a day or two to get a bird’s eye view – evaluate what you can do to keep your business from running you. Even though you may think you cannot afford to “not work for a day or so,” planning and organization is work, and it will benefit you in the long run because you will be more productive with a sound structure in place.
Make sure you have enough supplies – boxes, tape, and other shipping materials.
Be sure you have enough set aside for operating expenses and not just inventory purchases – monthly bills such as paying for Contractors, Insurance, Dues & Subscriptions, Rent, and any other recurring expenses.
Spend a day reviewing your inventory. How much do you have at Amazon? How much do you have at your home/warehouse? What have you ordered that hasn’t arrived yet?
3 – “I really need to increase sales to meet my sales goals, so I’m going to be really aggressive with my repricer.”
Remember, you measure your business based on gross profit, not revenue. Gross profit is the difference between Inventory Sales Revenue and Cost of Goods Sold. This is also referred to as your “sales margin.”
If you are aggressive with your repricer, you may meet or even exceed your sales goals. However, you could inadvertently reduce your margin to the point that you barely make any profit.
Do not get caught up in vanity metrics – yes, sales matter, but what really matters is your gross profit. I work with many e-commerce sellers and I can tell you from experience that it is a fact that sellers who have the highest sales do not always have the healthiest business.
4 – “I need more inventory so I’m going to hire a few people quickly to help out.”
This is a great idea. If you are hiring someone, the first thing you must determine is whether or not the person is an independent contractor or employee. This is a common source of confusion, and it’s very important you establish this up front. The “degree of control” is the most important thing to understand.
The IRS has a comprehensive guide, the most important details are below, and here is the link: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
Common Law Rules
Facts that provide evidence of the degree of control and independence fall into three categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.
The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.
5 – “I am so busy that I have no time for anything other than working, I’ll take some time off around the holidays.”
I suggest you budget in some downtime during Q4. Remember working like a maniac will just result in you turning into a maniac! Proper sleep, eating decently well, and self-care are incredibly important.
When we are under stress, we make less than ideal decisions as our mind and body go to flight-or-flight mode. We can only operate effectively under these conditions for a limited time. Eventually, you will shut down from exhaustion or lack of sleep. Isn’t it better to make time for a break then let your body force you into one?
Pay attention and take a break if you feel any of these signs of stress:
- Low energy
- Upset stomach, including diarrhea, constipation and nausea
- Aches, pains, and tense muscles
As your mind turns to Q4 and visions of profits dance in your head, be sure you take a little time before the mad rush to consider taking some of these actions. Chances are you will feel much more in control if you take some time to do some preliminary accounting and business organization. Remember that higher sales do not equal higher profits, and hiring help requires defining the type of relationship between you and the person who is helping you. Most importantly, take care of yourself so that you can take care of all of the things you need to do to have a successful and sane Q4!
These small steps can result in big wins!
Owner of Accounting We Will Go, an online community with over 8,500 members focused on e-commerce business and accounting. We offer numerous courses, classes, boot camps, and training series at various levels to assist e-commerce sellers as they manage the accounting tasks of their business. accountingwewillgo.com