Running an eCommerce business is no easy task. You’ll need to invest copious amounts of time, money, and effort into growing your brand. You will also have to make big decisions to maximise its profitability. However, many business owners fail to pay attention to one crucial aspect—their own salary.
It may be tempting to just withdraw cash from your eCommerce business whenever you feel like it, especially if you are the sole proprietor. It’s your business anyway, so what’s stopping you from using the cash for personal use? This line of thinking may result in sloppy accounting and financial trouble.
It’s important for business owners to pay themselves a set salary as early as possible rather than withdrawing cash whenever they’d like. If you’re wondering why business owners should include themselves in the payroll, here are some excellent reasons:
1 - You Comply with ATO Regulations
Your brand’s financial obligations may differ vastly from others depending on your business structure. Even if you are the sole proprietor of your eCommerce store, using all of your business income for personal expenses will result in complex accounting issues. By paying yourself a proper wage, you’ll be complying with ATO regulations while ensuring your business retains money for various business expenses. This will prevent you from paying out of pocket every time you have to buy some items for your brand.
2 - You Value Your Efforts as a Business Owner
When you first start your business, the odds are that the profit will not be stellar. You will have to start somewhere, but you’ll also have to pay yourself as soon as possible, no matter how modest the wage could be.
As a business owner, you’re doing a lot of work. You’ll be handling decisions, financing your expenses, planning marketing strategies, and curating your products and services. When you pay yourself a salary, you recognise the time and effort you put into growing your brand.
During the first stages of your business, you may only receive a small amount of cash, but this can change as your business grows. If you’re a little too responsible and want to use all your profits into developing your brand, you may not clearly see the fruits of your labour. Including yourself in the payroll can help in motivating yourself and preventing burnout.
3 - You Assess Your Business’s Profitability
As mentioned above, your salary will start small at the early stages of your business. However, if your eCommerce store has been up for a while now, you should start seeing minor improvements. At first glance, your brand may be earning profits, but you may not completely assess its profitability until you formalise your salary. Accounting for this gives you a clearer and more accurate picture of how well your business is doing. If it does not give you a just wage, you may have to adjust your prices or employ strategies to improve profits.
Hire Experienced Accountants for Your eCommerce Business
Including yourself in a formal business payroll provides significant benefits for your eCommerce business. It helps you comply with tax regulations, motivates you to grow your business, and enables you to evaluate its profitability. While all brands are different and there is no set amount you should pay yourself, doing so is crucial if you want to keep your accounting clean.
If you’re looking for an accountant for your eCommerce business in Australia, enlist the help of the ECommerce Accountant. We provide top-notch accounting and bookkeeping services that will assist you in arriving at smarter decisions and enabling your brand to grow. Let us help you—contact us today!