How to budget for your e-commerce business

How to budget for your e-commerce business | 4-minute read

Whether your e-commerce store sells clothing, accessories, and home décor, or pet supplies, online courses, and educational resources, you should never overlook the importance of budgeting.

With a well-planned budget, e-commerce businesses can plan for growth, feel confident managing finances, and ensure long-term stability.

In this blog we will explain how to create a budget that complements the unique needs of your e-commerce business.

How is e-commerce budgeting different?

E-commerce budgeting is different due to the unique financial challenges the industry faces. For examples, e-commerce stores are likely to experience seasonal fluctuations in sales, complex inventory management, and consumer returns.

Understanding these unique challenges is the first step in creating an effective and maintainable budgeting plan for your e-commerce business.

How to budget for your e-commerce business

Here are the steps to consider when budgeting for your e-commerce business:

Asses your financial health

Asses your e-commerce store’s financial health by gathering income statements, balance sheets, cash flowstatements, sales data, and profit margins. This information will provide an accurate analysis of what money is coming in and going out of the business each month.

Set achievable goals

It is also important to define and set achievable business goals. You may want to set short term and long-term goals to keep motivated and budgeting on track.

Estimate your revenue

By analysing past performance, identify sales trends to estimate your revenue. Understanding peak and off-peak seasons can help you to make accurate financial projections, create a maintainable budget, and make realistic estimates.

Common e-commerce revenue streams:

• Online sales
• Affiliate income
• Subscription services
• Consultancy
• Online advertising
• Transaction fees

Categorise expenses

Sort and categorise your e-commerce business’s fixed expenses and variable expenses. As fixed expenses remain constant, they are easier to budget for. Variable expenses can be more challenging to budget for due to fluctuations. However, you can predict these costs by analysing past performance and market trends.

Common e-commerce expenses:

• Inventory storage
• Shipping
• Website hosting and maintenance
• Payment processing fees
• Marketing
• Software subscriptions

Create the budget

Based on your projections, allocate money to each expense category. It is important that expenses each month equal less than the total expected revenue. If it does not, look for cost-saving opportunities.

To make this process easier, you can use budgeting tools and software to track expenses and revenue in real time.

Once you have determined your initial budget, schedule regular reviews to assess financial performance and adjust your budget based on performance and changing circumstances.

By following these steps and reviewing your budget regularly, you can ensure your e-commerce business remains profitable and successful.

Why choose Unicorn Accounting?

Ensure you keep on top of your finances and tax obligations by outsourcing to an accountant. This means that you don’t need to worry about your end of year accounts, payroll, or bookkeeping requirements.

At Unicorn Accounting, we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management bookkeeping, cash flow statement, and tax filing services to support and scale your business.

Our team of accountants and Xero certified advisors have experience working with both small start-ups and family run online stores to large scale, international retail, and e-commerce brands.

If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience and skills with innovative technologies. To see how we can help you maximise the scalability of your e-commerce brand all year round, get in touch with Unicorn Accounting today or click here to get a free quote.

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