Financial Management Key to Small Businesses, Says NetSuite Exec

Financial management is critical to ecommerce companies. But the tools to manage financial matters vary, and many of them don’t automatically integrate with a merchant’s ecommerce site, making the financial tracking and reporting process even more burdensome. To help us understand financial management for ecommerce businesses, we spoke with Jim McGeever, chief operating officer for NetSuite, a hosted, all-in-one ecommerce platform.

Practical eCommerce: How can a robust financial or accounting package help a small ecommerce business?

Jim McGeever: “Well, no one really likes to do accounting. So, we’ve set up our accounting module, NetSuite Financials, in such a way that you shouldn’t really feel like you’re doing accounting. You should feel that you’re running your business and that the accounting is essentially just the recording of how your business is performing.

“What I mean by that is, we set up our system so that you will just take orders on your website, you’ll pay your vendors, you’ll ship your products, and every time you do one of those transactions, it’s going to record it in your financials. The reasons why it’s very important to do this in a real-time basis is you need to know how much money is coming in and out of your business. The lifeline of a small business is the cash flow and if you don’t monitor that closely, then you can get yourself into a lot of trouble real quickly. So, you’re not ‘doing the accounting,’ you’re really just understanding how your business is performing.

“Now, there are some technical accounting steps, general ledgers, and entries that sometimes have to be done. But, because NetSuite is 100 percent web-based, you can have your accountants or a third party log on remotely and do that for you. So, if you don’t want to do any accounting at all (in terms of how you may have traditionally thought of accounting), a system like NetSuite actually enables that.”

PEC: Tell us more about NetSuite Financials, as the accounting module is called.

McGeever: “One of the things that it can do, especially being an online system, is automate payments without having to write checks. When you want to pay a vendor you can just do it all electronically. You don’t have to print a check out and mail it. So, you can do an online bill pay or ACH [automatic clearing house] transactions all directly through the system.

“Another example is, we’re completely integrated with all the major shipping firms such as FedEx, UPS and U.S.P.S. So, all the shipping rates are automatically calculated and integrated through the system.

“Another cool accounting feature I think is really important, especially in the web store ecommerce business, is we’ll show you the gross margin on every item you sell. So, you know exactly how much you’re making on each and every item. And that enables you to run reports in our system to see fairly quickly and easily what are the most profitable parts of your business.”

PEC: Does your package accommodate the collection and reporting of online sales taxes?

McGeever: “We’ve got a couple of different methods. One I find really useful, especially now given the complexity of sales taxes. We have an integration with a sales tax partner, Avalara, which we actually use internally in NetSuite. Not only will it calculate all your sales taxes correctly, no matter what the sate or municipality or city or local taxes, but it will also do your tax filings as well. You don’t even have to touch it. It will calculate the numbers and then prepare the forms and send them in for you as well.”

PEC: What kinds of financial-related mistakes do you see smaller ecommerce merchants making from time to time?

McGeever: “The biggest mistake I see is not looking at the financial data basically every day. I know a number of merchants who will look at their sales every single day. They look at how much they sold, but that’s only one part of the equation. Most people, when they’re selling products, are dealing with different margins and different possibilities on those items. They’re not focusing their business on the most profitable items that they sell or are not correctly merchandising their most profitable items. That can change over time. It’s not as if that’s usually a static thing.

“You’ve got to look at what’s going on and what’s driving your business. And not just the sales number, but also a profitability number on a constant basis. So, every day, if you’re running a sales report, what you should be running is a sales report with the costs as well so that you can see the profitability, not just the gross number.”

PEC: We know that NetSuite’s financial package module automatically integrates with the ecommerce package and customer relationship management (CRM) package. Could you walk us through a typical transaction to demonstrate that integration?

McGeever: “If someone comes to your website and places an order, it will automatically record the sale in your books. If it is something you have in your warehouse or in your store that you need to ship, it will also enable you to do a shipping fulfillment, calculate the sales taxes, calculate the shipping items, and print the label. And then you’ll be able to ship it out of your warehouse and it will automatically record the cost for you of that shipping transaction as well, so you instantly see your profitability on the item.

“Now, there’s a whole bunch of other things that happen as well. For example, on the CRM side, it’s going to record that transaction, not only in the customer center with account login on your website, but also internally in your instance of NetSuite. When you look at the customer records, you’ll then see exactly what they bought and when.

“Whether someone walks in off the street and buys in your retail store or they buy on the web, that’s all going to be recorded in one place, so you’ll know exactly who’s using that transaction. It’s also going to work on the shipping; once you ship something, it’s going to remove the item from your inventory and, again, whether the product is in your retail shop or warehouse, it’s looking at the exact same inventory item. So, if someone buys a product at your web store, it’s going to show as no longer available to be purchased either in the store or on the website. Because everything works together, and [the system] is looking all at the same data, you never have to worry about duplication of efforts or duplicate data entry. You never have to enter something twice to have it show up. You shouldn’t have to do any daily entry or the cost or the revenue. The sales tax, the shipping cost is all going to be taken care of for you.”

“Importing and exporting files in between modules all happens automatically and all in real time. You can actually have multiple websites. You can have one international website. Maybe you have a website in pounds and a website in dollars, the second you enter that transaction, it’s going to show up on your dashboard, which will give you an idea of exactly who’s buying what and what your sales and costs are for the day. And if you’re using a third party logics provider, it would actually assume the order was placed. It can email that provider straight away telling them to ship that product.”

PEC: NetSuite started as an online accounting package, right?

McGeever: “The company was started back in 1998 as NetLedger. It was an accounting package. The vision was always to create a suite of applications, but for the first couple of years of our life, all we did was focus on building financials. So, that’s really at the heart of our system.

“The reason we started with financials is because financials are the things that tell you everything about your business. It tells you what you’re selling, what your profitability is, what your cash flow is. That contains so much of the data, and then once we had the core of the data, it was fairly easy to add the modules on top of that.

“It was actually Larry Ellison, the chairman and CEO of Oracle, who was our primary founder. He was the person who said that we should start with accounting and he was also the person who pushed us fairly early on to come out with ecommerce capabilities and our web store capabilities. He had a very healthy interest in pushing us in that direction in the early days of NetSuite.”

PEC: Could you contrast NetSuite Financials with QuickBooks, the popular accounting software?

McGeever: “Sure. Most of our customers have come from QuickBooks. They’ve outgrown QuickBooks and then run into some limitations, and then they move on to NetSuite.

“We have customers with one or two employees all the way up to customers with tens of thousands employees. So, we are able to scale to both enormous volumes as well as complexity of business processes. The biggest difference is the ability to scale. You do have the ability to customize the application, and with customization in the world of NetSuite it’s all point-and-click. You don’t have to go in and code.

“We give you an enormous amount of flexibility. If you’ve got a process that you may commonly be tracking in a spreadsheet, you can now have it tracked automatically inside of NetSuite. We have international support, so we can handle multiple currencies and multiple languages. We have the ability to handle multiple subsidiaries. If you were selling in both, say, the U.S. and Canada, and had different subsidiaries there, NetSuite is able to handle that.

“One of the other key advantages is, with NetSuite being an online product, you can see this information and run your business from anywhere. You could be anywhere in the world and run your business. All you need is an Internet connection on the computer and you’ll be able to run your business as if you were sitting in the office.”

PEC: Anything else on your mind for our readers?

McGeever: “One of the things I would say is most of the ecommerce merchants who come to NetSuite have begun to see some success in their website and now are dealing with the challenges of shipping and sales tax and dealing with their financials. We’re very used to dealing with companies who are scaling their ecommerce operations. As a result, because the NetSuite ecommerce customers tend to be the more successful ones, we’ve built a lot of best practices and we understand a lot of what it takes to scale an ecommerce site. We’ve worked many, many thousands of customers over the years to help scale their websites. With NetSuite, we have a dedicated ecommerce team that deals with nothing but ecommerce customers, and we’re able to bring some of those best practices to our new customers as well.”

PEC Staff
PEC Staff
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