Online selling: So how’s it going for small businesses?

Many retailers have flocked online to reach customers who were stuck at home. Last year’s Xero business trends report showed up to a quarter of businesses intended to make the move. So in this year’s business trends report, we checked how that’s working out

Specifically, we asked what aspects of ecommerce were the hardest for newbies to deal with. About 60% said they found it tricky to calculate fees and taxes on digital sales. A similar portion found it difficult to manage cash flow.

What the experts say

“People forget that merchant service providers and marketplaces take a cut of each sale,” says ecommerce specialist, Shaheman Farid of Boobooks Accountants. Those fees – and sales taxes – need to be matched with the corresponding sale. It’s a big bookkeeping job.

“Forecasting is also really tough when you have a new online shop,” Farid adds. “You really need a quarter of sales data before you can hope to make any sort of predictions.”

Accountant Ya Wen How of AccountServe says some of these problems can be helped with more automation. “For some, you need to add the right software to help manage the accounting side.”

Takeaways for small businesses

There are a few things small businesses can do to help support their recovery according to Xero’s small business trends report:

• Account for online transaction fees of up to 5% when setting prices (you may want to add delivery charges too!)
• Don’t forget to add sales taxes (like GST or VAT) where they apply
• You need to list fees and taxes alongside each sale in your books, which can become onerous as the number of sales grows
• Software can do that bookkeeping for you (plus, as a bonus, it will help you forecast cash flow)

Check out other trends for 2022

You can see more on the ecommerce movement by checking out the full Small business trends 2022 report. It also looks at 10 of the biggest things on the minds of small business owners and the accountants and bookkeepers that advise them.