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Essential Financial Metrics to Track as a Small ECommerce Business Owner

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Mastering Your Business Finances; Essential Financial Metrics to track for Small Ecommerce Business Success

When I ask the average small business owner what sort of tracking they do within their business to get a detailed view on their finances, audience, reach, etc. the result is usually a deafening silence.

When we dig a little deeper, the main reason for the lack of tracking usually is that they don’t really know what to track, how to track it OR how to then use the metrics/data to grow their business. 

There’s lots of important metrics to track as a small ecommerce business owner, today I will focus on your financial metrics.

essential financial metrics to track for your small ecommerce business can be confusing

As a small business owner, keeping a close eye on and tracking your essential financial metrics is crucial for success and the longevity of your business. Proper financial tracking helps you make informed decisions, manage cash flow, and identify growth opportunities. 

HERE ARE THE KEY TYPES OF FINANCIAL METRICS YOU SHOULD MONITOR THROUGHOUT THE YEAR FOR YOUR SMALL ECOMMERCE BUSINESS:

Tracking your revenue as a small ecommerce business

1. Revenue
Revenue refers to the total $ amount coming in from your business activities, such as sales of products or services. Tracking revenue helps you understand the ups and downs in business which you will – inevitably – encounter.
Tips for Tracking Revenue:

  • Use accounting software like Xero or Henry to automate revenue tracking.
  • Regularly analyze sales reports to identify trends and patterns.
  • Compare actual revenue against your financial goals.

2. Expenses
Monitoring your expenses is vital to ensure your business stays within budget and maximizes profits. Expenses can include supplies/materials, hosting, email, advertising, salaries, marketing costs, and more.
Tips for Tracking Expenses:

  • Write down and categorize expenses for better analysis and control. 
  • Review and update expense records regularly.
  • Continuously identify areas where you can cut costs without compromising quality.

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tracking your expenses as a small ecommerce business owner
tracking your cashflow as a small ecommerce business owner

3. Cash Flow
Cash flow is the net amount of cash moving in and out of your business. Positive cash flow indicates your business can cover its expenses, while negative cash flow may signal financial trouble.
Tips for Managing Cash Flow:

  • Create a cash flow forecast to anticipate highs and lows.
  • Create strategies to speed up receivables and delay payables.
  • Maintain a cash reserve for unexpected expenses.

4. Profit and Loss
A profit and loss statement (P&L) provides a summary of your revenues, costs, and expenses over a specific period. It shows whether your business is profitable.
Tips for Analyzing Profit and Loss:

  • Review P&L statements monthly to monitor financial health.
  • Compare current P&L with previous periods (or same period previous year) to assess growth.
  • Use P&L data to make strategic decisions about pricing, cost-cutting, and expanding.
tracking your profit and loss as a small ecommerce business owner
tracking your conversion rate as a small ecommerce business owner

5. Conversion Rate
Conversion rate refers to the percentage of website visitors who complete a desired action, such as making a purchase. Tracking it is essential because it helps you evaluate the effectiveness of your marketing strategies and optimize them to increase sales and customer engagement.
Tips for Tracking Conversion Rate:

  • Use tools like Google Analytics to track user behavior and conversion metrics.
  • Define and monitor conversion funnels to understand the customer journey.
  • Implement A/B testing, a research method that compares two or more versions of funnel to determine which performs better. 

6. Inventory
If your business deals with physical products, managing inventory is crucial for controlling costs and meeting customer demand.
Tips for Inventory Management:

  • Use inventory management software to track stock levels of products as well as materials (or implement excel files to achieve similar).
  • Analyze inventory turnover rates to optimize your materials/supplies purchases.
  • Reduce excess inventory to generate cash flow.
inventory tracking as a small ecommerce business owner

Tracking these essential financial metrics, you can maintain a strong financial foundation for your small business, driving growth and ensuring long-term success.

In our next blog, we will go into more detail on other metrics you can track to keep a close eye on how your business is doing throughout the year, how healthy your small ecommerce business is and what strategies you can apply based on those metrics.

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