Our client was an Australian-based online liquor store specializing in craft beer sales through its Woocommerce website and social media accounts. The client was operating a warehouse in Sydney, from where it would ship the goods to customers. Despite having a high turnover and good gross profit margins, the client was struggling to generate expected net profits from the business. The business had too many moving parts, which made it difficult to control and predict, leading to challenges in managing cash flow.

Our client was facing challenges in turning the business profitable, even with good gross profit margins. They were struggling with predicting and controlling the business due to multiple systems and moving parts. There was also difficulty managing cash flow for the business.

Following is the solution offered :-

1. Ensuring a Single Source of Truth: Before implementing the MIS, our client was using three different systems for accounting, COGS and stock management, and sales data. This led to discrepancies in reports, making it difficult to trust the data. We identified the reasons for these discrepancies and then synced all the data from all systems in one place (Xero, the accounting software used by the client). This allowed for accurate reporting and a single source of truth.
2. Identifying Core Business Problems: We discovered that the client was only considering the product price while calculating gross profits, ignoring the two biggest costs: shipping and advertising. This resulted in the business not being profitable for many products. We identified the need to revamp the shipping policy and asked the client to make shipping charges based on zip codes instead of having a blanket shipping charge to the customer. This helped us cover most of the shipping cost from customers directly.
3. Shipping Rates: We also analyzed the client’s sales combinations and found that 50-60% of sales were happy hour sales, 30% beer club, 10% gifting, and 10-20% rest. The client had a policy where all sales relating to happy hour beer club and gifting mostly qualified for free shipping. We advised the client to revise the shipping policy so that only 10% of sales would qualify for free shipping, resulting in better margins.
4. Business Segmentation: We segmented the business into different areas based on the nature of the product, which allowed us to predict cash flows with more certainty.
5. Monthly Book Close: We started closing the books on a monthly basis, allowing for early identification of loss-making areas. The business segmentation allowed us to identify loss-making products with accuracy, leading to increased overall profitability.
6. Budgeting: We encouraged the client to prepare and update budgets continuously, comparing actual monthly close results with budgeted numbers. This helped the client make better financial decisions, resulting in better margins for the business.

Our solution helped our client turn an unprofitable e-commerce business into a profitable venture, generating better margins, and improving overall profitability