Financial reporting is critical for e-commerce companies. Given the lack of physical customer contact, e-commerce firms must leverage reports to derive insights that can boost their businesses.
In this article, you'll learn which financial reports contain the most information for your business and the metrics that unlock value. In addition, you will also learn the following:
Why are e-commerce reports important?
E-commerce reports are important because they help you track everything from customer preferences to financial performance metrics in your business. You can also track product performance and marketing effectiveness using the wealth of data you capture on your platform.
Here are some of the most critical business factors you can measure and track using e-commerce reports.
Success in the long-term comes down to satisfying your customers' needs. A growing number of customers is a sign of a high-quality product and efficient customer service processes. Aside from measuring counts, e-commerce reports also help you understand customer preferences.
You can design better products and create tailored experiences that keep people coming back for more.
Marketing is all-important in an e-commerce business. To drive traffic to your website, you must stand apart from your competitors. Digital marketing is the primary form of advertising most e-commerce companies adopt, and digital channels lend themselves well to performance measurement.
Thanks to large quantities of data, you can measure the effectiveness of your marketing strategies and keep tabs on what appeals to your customers.
While marketing brings people to your website, your product's quality incentivizes customers to return. . High-quality products require significant investment, and e-commerce reports will help you measure metrics that reveal how well you're sourcing raw material.
Financial metrics quantify your success, no matter what your business model is. Tracking these metrics is simple with e-commerce reporting. The numbers in these reports will reveal areas of concern that you can quickly address.
In addition, the numbers in these reports form the basis for financial forecasting processes that define your company’s future.
How well are you using your capital and are your financial forecasting processes up to scratch? Every business deals with these critical questions. E-commerce businesses rely on financial reports to project working capital and inventory requirements that fuel their businesses to greater heights.
How can you use e-commerce data to grow your business?
You can use e-commerce data to refine operations, create unique marketing campaigns, and improve financial efficiency in your business. These factors give you an edge over your competitors and help you meet customer needs easily.
Here are some of the best ways to use data in your e-commerce business.
Determine product popularity
Which products are selling the most, and are customers looking for additional accessories? Focusing your resources and doubling down on what sells is the surest way to greater profits.
E-commerce data gathered from website visits and product checkouts will help you form a picture of which products are popular and which ones are not. Here are some of the reports that help you understand product popularity:
- Per product sales report
- Overall sales report
- Traffic engagement summary report
Using the conclusions from these reports, you can negotiate better margins with the suppliers of your most popular products and boost profits.
Analyze promotion and discount ROI
E-commerce businesses face stiff competition and rely on promotions and discounts to increase sales. While the per-product margins on these campaigns are low, you can recoup costs via large sales volumes.
Capturing sales data in e-commerce reports and measuring performance is thus critical. Here are a few resources that will help you analyze the ROI from your discount and promotion campaigns:
- Product sales report
- Website traffic report
- Traffic channel report
- Profit margins report
Offer customer personalization
Modern consumers demand a high level of personalization from online experiences. For instance, you must identify a returning customer and offer products and service suggestions that interest them. Fail to anticipate their needs or suggest irrelevant products, and you risk losing their business.
The data contained within the following e-commerce reports will help you design unique customer experiences:
- Sessions by device report
- Traffic channel report
- Sales per customer reports
- Sales by billing country report
- Customer retention analysis report
- Traffic engagement summary report
Monitor customer demand
Tracking product sales is essential, but you must pay attention to demand and supply imbalances. For instance, are your customers searching for an unavailable product and purchasing a substitute instead?
E-commerce data will help you unveil such behavior and design better products for your customers. Here are a few reports that will help you track trends in customer demand:
- Product search report
- Traffic channel reports
- Overall sales report
- Website search report
Measure financial health
No amount of website traffic can save a business running on unprofitable margins. E-commerce data will help you craft metrics that track your financial health and install sound financial planning and analysis processes.
Here are some critical reports in this regard:
- Gross and net margin reports
- Sales reports
- Cash flow report
- Balance sheet summary
4 essential financial metric categories for e-commerce businesses
Financial metrics play a major role in helping you design effective processes for your business. At first glance, you might think there are too many metrics to track, thanks to the quantity of data your e-commerce platform captures.
Categorizing metrics into separate functions is a great way to mine your data and draw conclusions. Here are four essential financial metric categories you must track.
Paid advertising metrics
Your e-commerce business relies on a combination of organic and paid traffic. Paid traffic channels offer a wide range of metrics that help you design better campaigns. Here are the most important paid ad metrics you must track, along with a brief explanation of what each metric measures:
- Return on ad spend (ROAS): ROAS is calculated by dividing the revenue you received from an ad by the money you spent on the ad. Much like ROI, the greater the ROAS number is, the better your ad performance is.
- Cost per click (CPC): Paid ad platforms charge you per click. While not every click leads to sales, you must track your ad's CPC. A low CPC indicates engaging copy and design, while a high one reveals a lack of ad relevance, high competition, or both.
- Cost per action (CPA): CPA and CPC might look the same. However, CPA measures the cost of an "action" that could be a click, a website visit, or a sale. What actions do you want your ad viewers to take, and how much does it cost you to get them to do it? That's what CPA measures. CPA is a versatile metric since you can use it to measure any number of customer actions.
- Cost per conversion: A conversion occurs when a visitor purchases a product and becomes a customer. How many visitors from your ad purchase your product? Ideally, you would like to see low costs per conversion, much like CPC and CPA.
Finance teams might occupy the back office in your e-commerce business, but they help you unlock higher levels of efficiency. In addition to using the best tools for finance, you must also track the following metrics:
- Gross margin: Calculated by subtracting purchasing costs from the sale price, gross margin is a quick indicator of profitability. For instance, if you purchase your product from a supplier for $5 and sell it for $10, your gross margin is $5 or 50%. According to data compiled by New York University, 45.25% is the average gross margin for e-commerce businesses.
- Net margin: Net margin measures your business' bottom-line profitability. It is calculated by subtracting all costs related to your business (except capital expenses) from revenue. Like the gross margin, it is expressed as a percentage.
- Cost of goods sold (COGS): COGS sums up all purchasing and manufacturing costs you incur. You can use this number to calculate gross margin. For instance, if your COGS amounts to $5 and your product's sale price is $10, your gross margin is $5 or 50%.
- Selling and general administration expenses (SG&A): SG&A expenses measure the cost of running facilities and the salaries you pay your staff. For instance, the money you pay every month to a SaaS app to track inventory and automate order management is included in SG&A expenses.
Payment metrics measure collection efficiency and indicate how quickly cash arrives in your bank account. Here are a few important metrics in this category:
- Day sales outstanding (DSO): DSO is a unit of time, usually days or months. It measures how quickly your invoices convert to cash. For instance, if your customers pay you immediately on purchasing a product, your DSO is a few seconds. If they pay you after 30 days, your DSO is 30 days. The lower your DSO, the faster you receive cash.
- Amounts under dispute: How much are returns costing you, and how much booked revenue is under dispute? This metric will help you understand how satisfied your customers are with your products. When expressed as a percentage of revenues, you can gauge the amount of cash you collect that will remain in your accounts permanently.
- Length of credit cycles: Your business must pay suppliers on time while receiving cash from customers. Typically, e-commerce businesses pay suppliers after 15 or 30 days while collecting cash from customers upfront. Measuring the length of these credit cycles will help you estimate your cash levels and whether they'll run dangerously low in the future.
Finance automation offers the best way to improve these metrics quickly.
How much money can you expect a new customer to pay? How long will they remain your customer, and what is the most you should spend acquiring them? Customer metrics answer these questions and more.
- Lifetime Value (LTV): LTV is the amount of money you can expect to earn from the average customer.
- Revenue per user: This metric tells you how much money you're making on average per user.
- Revenue per channel: Which traffic source generates the highest sales? This metric will help you focus on those channels and identify customer qualities that can help you appeal to similar people.
- Revenue per billing location: Similar to the previous metric, your product might be popular in some regions compared to others. Identifying high-revenue zones will help you focus your resources there and boost ROI.
6 essential financial e-commerce reports
Here are six of the most important financial e-commerce reports. All the metrics you've just read will be present in these reports.
Profit margin report
The profit margin report uses financial data to calculate your gross and net profit margins. Many e-commerce reporting solutions incorporate tax information to calculate net profits. As a result, you'll receive a full picture of profitability.
This report will also highlight the expenses your company is incurring. For instance, are you spending too much on vendor SaaS apps? Or worse, are you incurring duplicate spending by purchasing similar apps? Profit margin reports are the starting point for such analyses.
All financial efficiency metrics are present in this report.
Cash flow statement
Cash flow statements help you project and calculate cash flows. These reports measure incoming cash and outgoing expenses. As a result, you can use them to project working capital needs.
For instance, if you're receiving $20,000 next month but incurring inventory costs of $50,000, you're facing a $30,000 shortfall. You can raise cash via debt or inventory financing to cover this gap. The cash flow statement thus plays an intricate role in your business' financial management strategies.
Digging deeper into this report will help you uncover the payment metrics you read in the previous section.
How much inventory do you have on hand, and is that enough to meet upcoming demand? Inventory reports help you estimate future costs and outlay cash to cover them. You can also rely on them during promotions and sales to project procurement needs.
Profit and loss report
Tied closely to the profit margins report, the profit and loss or P&L report illustrates how much money you're making or losing after accounting for all costs. This report might differ from your income statement, depending on how you account for costs.
For instance, if you account for non-cash expenses such as depreciation and amortization, your P&L report and income statement will be similar. Most business owners prefer a cash snapshot of their business. Thus their P&L report will differ from the income statement.
The balance sheet offers a snapshot of your business' assets and liabilities. You can calculate working capital levels, asset to debt ratios, and current debt levels using this report. The balance sheet also lists inventory and cash levels, both important pieces of data that you can use to measure financial health.
Paid marketing ROI reports
Paid marketing reports are highly customizable and will capture all the relevant metrics that you read in the previous section. Testing and experimenting are keys to paid ad success, and the metrics in these reports will help you measure ad effectiveness.
Customer acquisition report
The customer acquisition report lists and helps you track customer metrics such as LTV and revenue per user. When combined with activity data, you can draw a clear picture of customer preferences and tailor your processes accordingly.
2022 e-commerce reporting software recommendations
E-commerce businesses can choose from a wide range of tools to gain control of their finances. Here are some of the best choices.
Ramp simplifies e-commerce expense management by helping you create multi-level expense approvals and earn money via cashback on shipping and SaaS procurement. It integrates with critical business apps as your business grows.
By integrating with accounting apps such as Xero and e-commerce platforms like Shopify and Amazon, Ramp helps you automate expense approvals by capturing receipts and posting them. Ramp's Gmail integration eliminates the need for your employees to forward receipts.
Ramp also centralizes all of your software subscriptions in a single place, helping you oversee app expenses.
Xero is the go-to accounting solution for small e-commerce businesses. The platform connects to your bank accounts, helps you import expenses, and pay vendors seamlessly. Bank reconciliation is automatic, and you can accept payments from customers as well.
Thanks to its integration with Ramp, Xero helps you digitize expense management and translate expenses into accounting journal entries automatically.
NetSuite is the platform of choice for large e-commerce companies. It comes equipped with customer relationship management and ERP features that help you seamlessly connect accounting to customer statuses.
NetSuite is highly customizable and integrates with Ramp. You can auto-categorize merchant expenses, split expenses by department or code, and close your books faster when the month ends.
Payment processors such as Stripe are integral to e-commerce businesses and simplify payment collection. Stripe offers an instant and easy payment acceptance setup.
You can connect Stripe to your bank account and withdraw payments automatically. If you opt for one of the accounting solutions above, you can create a seamless and automated payment to accounting process. Ramp connects with Stripe and uses payment data to unlock higher spending limits on your corporate credit cards.
E-commerce businesses are intimately familiar with Amazon and the wealth of data it offers merchants. Amazon Business, the B2B and wholesale arm of the retail giant, caters to offering procurement solutions to businesses of all sizes.
You can customize your orders and delivery options to a greater extent compared to Amazon’s mainstream service. In addition, your business will also be eligible for cashback and other discount offers. The platform offers you spending reports and purchase history reports that you can use to analyze procurement trends.
Ramp integrates with Amazon Business and offers you the ability to create virtual cards tailored to the purchases on that platform.
Every e-commerce business needs a platform, and Shopify is one of the best choices for companies of all sizes. Shopify's bundles give you a website, payment processor, and backend inventory management as standard.
You can integrate Shopify with order management and accounting apps to automate e-commerce data collection and analytics. You can use Ramp's integration with Shopify to raise capital via revenue-driven underwriting. Ramp leverages store sales data to offer custom financing packages that suit your business' needs. Financial reporting lies at the heart of e-commerce success. You can leverage e-commerce reporting to gain a full picture of your business’ health and scale sustainably.
Learn how Ramp simplifies expense management, streamlines SaaS vendor management, and helps you scale your business here.