September 2024 Managing the Money with Megan Schmitke

A Quick Way to See if You’re Bleeding Money

by Megan Schmitke

One of my favorite ways to customize a retail client’s chart of accounts is to ensure that there is both a shipping income account and a shipping expense account.

The shipping income account allows you to break out this type of income from your actual product sales, so any money you collect from customers doesn’t inflate your product profit margins.

By separating out your outbound shipping expenses, you can see what you’re having to pay each month to get your amazing products into your customers hands.

(Remember, any inbound shipping that you pay to get your inventory into YOUR hands should be added to the product cost, and expensed as the items are sold through your cost of goods sold)

By separating out both your shipping income & shipping expense on your P&L each month, you can easily compare these 2 numbers to see if you’re charging your customers enough for shipping, or if you’re losing money on every shipment you send out the door.

Now, there may be a time when it can be a wise marketing decision to offer free shipping when their cart is over a certain dollar amount. This may be a helpful tactic to help you raise your average transaction value. And obviously in those cases, you’ll be ‘losing’ money on shipping. But, if your profit margins are strong enough, that increased cart value should outweigh the cost of the shipping you pay out of pocket.

Make sure your financial statements are laid out and organized in a way that helps you clearly see where all your money is coming from & going to each month. If you need a sample chart of accounts you can reference to help you make yours more efficient, you can download a copy here: https://www.findingfreedomfinancial.com/coa-template/