So May was very good as a whole, the velocity of sales really cranked up and I had my best month yet and reported a net profit of $1277 from eBay and Xx from Facebook Marketplace. After subtracting money spent on inventory of $558.30 I was left with cash flow of $750.30 + $59.50. So far same as what is in the summary post which can be found here.
Now I transferred $700 across to the investment property revenue stream and kept $100 to use on inventory procurement in June. I had a significant amount of money left in the PayPal account so I made a one time payment to eBay to bring my account balance for account fees to 0. Somehow I still had quite a bit of money left over. Something wasn’t making sense. It wasn’t until a coupe of days later when I was entering new Cost Of Goods Sold (Cogs) into my spreadsheet that it hit me, I have been accounting for the Cogs twice in most circumstances for the last few months.
I went back through May and removed the double charge and the overall profit figure jumped by $330 to $1607 (excluding Facebook Marketplace). That’s the equivalent of over $400 per week, not bad for part time!
So how did this happen?
This error was identified in 2 ways.
The first and most obvious was the excessive amount of funds in my PayPal account left over. Simple maths implied an error. But why had I not noticed this earlier? because I had recently changed the month before for all eBay fees to come straight out of PayPal where as prior had been direct ex Bank account. By consolidating everything to PayPal for fees and majority of shipping the picture was much clearer only relying against checking against one account.
The second factor was that originally I had no consistent systems of any kind. When I was recording things I had a mental note of what items cost so I could keep track that I was actually making money on items (I have a good memory). I call this era Pre-SKU. When I sold something I would record it on a spreadsheet along with its respective Cogs.
Later when I realised I needed a better system as the store was growing quickly I implemented the SKU system mainly so I could find things after I could not locate an item (Good memory??? hmmm)! At this same time I started to record everything into the spreadsheet including all my purchases as Cogs for the primary purpose of managing my monthly cash flow. You see, there were months in the early days where I would make a bunch of money from sales and then wonder at the end of the month where the money had gone to… it was simple I had spent it all on procuring inventory! A necessary requirement to grow the fledgling store to be sure but it was like wearing a blind fold.
Anyway so when I implemented this change I simply forgot that I was now recording all of the Cogs on the front end. So when things sold they no longer need to have the Cogs deducted from the profit determination calculation on the back end… The exception to this is anything Pre-SKU era which are easy to identify as well they don’t have an SKU! I had been so used to doing this mental calculation in my head when determining the expenses for each item sold I simply hadn’t thought about the fact that I was already doing it!
This serves as a useful reminder to be checking on those metrics to ensure your business is functioning as intended. Are you making the money you thought you would? Is your ROI worth your expended time, your most valuable resource? Where can you save money, or time, or both?
Business growth is synonymous with continuous improvement.