A well-put article by Semantics3 inspired us to write this post. They pose some very interesting questions about the future of retail and e-commerce. There is no doubt that in today's age more and more entrepreneurs are able to take their ideas, and shortly thereafter, sell them all over the country and the world. This affects brick and mortar retailers, many of which are looking for alternative ways to grow and sell their products online.
The infrastructure is there combined with technology to help them decentralize their business, and rather than spending hundreds of thousands of dollars to open up locations, business owners can invest far less to get started. This is a great option, but in our experience it opens up a lot of questions and concerns as to how the business owner should expand, how it will affect their tax and compliance, and how they will appropriately track this new delineated flow of sales, costs, fulfillment, and the physical movement of their products.
The business may run via multiple physical or online storefronts, and the inventory and people may live in various warehouses, states, or even countries. This means the data a business owner needs could be in six places at once. However, if they have the right solutions and processes in place, they could have everything they need to see from a product and operations standpoint in one to three places. A retail location making the move to e-commerce and a new or existing e-commerce business may have different challenges, but should have a centralized platform where their POS, online sales channels, fulfillment centers, and more, all feed to.
Where are you selling?
- Online Channels - Amazon, Shopify, WooCommerce, Magento, etc.
- In store POS - Square, Vend, Shopify, etc.
- Direct wholesale - Direct invoicing to customers
- On-the-go - Through your people or at events, could be through mobile POS
You could be selling from just one channel or location, or all of the above, but you shouldn't be trying to consolidate all the sales data manually. You need it centralized so that you can see what happened, what needs to be fulfilled, how much sales taxes you owe, and if and when you need to order more product.
How are you fulfilling your orders?
- I do it myself - From your storefront or your garage. It works, but not for long if you want to grow.
- Amazon FBA - Amazon fulfills orders from their many warehouses in 14+ states, but will charge you a fair share of your proceeds to do it. This also opens you up to state sales tax requirements from the warehouses they fulfill your products from.
- Outsourced warehouse(s) - Could be Shipwire, could be one warehouse or multiple in 5 states and 3 countries.
Fulfilling your orders on time, knowing whether you have enough inventory, and the cost of your products and fulfilling them, all becomes increasingly difficult as you start to 'receive' it in multiple places. You may also have multiple stages required to create and ship your products, all of which needs to be tracked to know what it really costs and how long it really takes to stock products and fulfill your orders.
What you need is a centralized inventory solution that integrates with your channels, your fulfillment, and your accounting software.
Your inventory becomes more key than anything else in terms of actually running your back office and driving the data that allows you to make decisions. Also, what good is it to have to double-enter any details to account for your sales and costs? Whatever you use for your inventory, it better sync with your accounting software, enabling you to see the whole picture and know it is reconciled back to what's actually happening in your bank account.
We specialize in helping e-commerce businesses centralize their operations so that they can scale, and so that we can seamlessly do their accounting and handle their compliance. Below is an example of one of the many inventory tools we use to do this that explains the movement of data and what it means for you.
Example of Dear Inventory:
- Purchasing and receiving your goods, and to multiple locations
- One-click build of materials to finished goods processes, capturing real unit costs
- Invoicing your customers for products
- Reviewing product sales and costs, your inventory on stock, and pretty much anything you want to know about your products across all sales channels and warehouses
- Adjusting stock on hand
It syncs with sales and fulfillment.
- Online sales channel will all sync into Dear (Amazon, Shopify, WooCommerce, and more)
- POS sales from physical sales will also sync to Dear (Square and Vend are good examples)
- Fulfillment software can then be ticketed to fulfill your sales right from within Dear
This means your inventory on hand is always in sync. You can even set low stock warning indicators to remind your team when it's time to stock up. If you can't physically see your inventory every morning, you need a way to know what you have and what's on its way in or out of your warehouse(s) and/or storefront(s).
It syncs with Xero so you and your accountant can seamlessly manage the financial side of your business too.
- Daily sales invoices with all details you want and ought to see, and can follow up on any invoices or collections seamlessly from Xero
- Daily purchases so you can manage paying your bills
- Daily cost of goods sold to accompany the sales that are syncing in, based off true inventory costs and depleting the value of your inventory on your books as it should be
This means daily gross profit across your entire organization can be displayed in one place. It also allows you and your team to easily manage your accounting, or the ability to outsource it, knowing that you are still in control of what matters most to you.
To scale your business you don't have to invest in a building or a tool, you have to invest in a system.
It isn't about where you sell or whether or not you use an awesome system like Dear Inventory. If you don't invest the time up front into a system and process that will work now and in the long run, you will inevitability have issues running your business and staying in compliance as you grow. Setting up a fully integrated system, like Dear for example, is not something that should be slapped together overnight. The systems that you will use everyday to operate your business need to be built up on a solid foundation and maintained just like a physical store you might do business out of. The big difference is that you can log into your system from anywhere, and can use it to automate and outsource other functions like your accounting.
This being said, even though you may be able to swing a hammer, you probably wouldn't renovate a building on your own. You'd hire someone qualified, then tell them what you're trying to do and what you want. Same goes for your back-office system. Do yourself a favor and at least speak with someone with experience. They can help you choose the right tools to save headaches and thousands of dollars in 'repair', like costly corrective accounting work and possibly past due sales taxes you otherwise could have collected up front from your customers if you knew you had to.
At HPC we help e-commerce owners scale their businesses with setup and training of Xero and robust inventory software like Dear Inventory, as well as provide ongoing accounting, support, business advisory, and tax planning and compliance.
Contact us today to discuss how we can help you scale your e-commerce or retail company.