When it comes to dropshipping, we all agree it’s vital for business owners to keep track of their profit. Why? Because more than anything else, a insight into profitability could reveal your business’s health, potentials and back you with enough data to make important decisions. We already discussed it in this article about profit vs. revenue.
But it’s not so easy to know your true profit right away. Although it’s always possible to do manual profit calculation, we decide it’s way more efficient to let an app handle this tedious task. If your business is based on Shopify, you’ll come across half a dozen apps in Profit Calculation category.
You’ll need to try them out and see what really suits your need. If you’re unsure what to expect (or not expect), at least try to avoid these five problems that usually comes with profit tracking apps.
1. Time consuming
Perhaps the most popular issue, most profit analysis apps require manual input, which takes an enormous amount of time and effort. This situation is particularly irritating for some businesses where a store can contain hundreds and thousands of products. Image having to fill in Cost of goods sold (COGS) for each item!
An ideal app should be able to sync to AliExpress and automatically pull out COGS. This saves you lots of time and reduces the risk of mistaking numbers.
2. Assume an over-simplified formula for profit calculating
You’ve been in this industry long enough to understand that profit is not simply revenue minus COGS. Other major costs include Ad spend (Facebook Ads, Google AdWords), Shipping cost and Processing fees. There may also be additional costs.
So look for apps that enable you to take those costs into account. Otherwise, you risk missing the big picture.
Also check out this article for a comprehensive formula for calculating profit.
3. Assume that COGS doesn’t change over time
AliExpress suppliers change prices as often as women change their mood. Perhaps the products are in high demand, or you manage to negotiate a discount with your long-term supplier.
Whatever the case, COGS does fluctuate, and it’s dangerous not to take it into consideration. Say you has 3000 orders/month, an increase of $1.5 COGS would cost you an extra $4500 and you may not even notice!
A decent profit tracking app would acknowledge this fact and allow for cost update in different time period.
4. Unable to give real time data
Real time data enables you to act immediately.
Let’s say you notice today’s profit margin is dropping significantly. Something must have gone wrong – ineffective ads, sudden COGS increase, technical issues, to list a few. Realizing this, you can then dig in to detect the problem and prevent losses. The sooner the better. Tomorrow would be so late.
Real time means real time. Even when apps claim to sync COGS to AliExpress Orders, you only see the correct COGS for fulfilled items. So if you haven’t finished ordering items for today’s customers, the so-called “real time” COGS is likely to be misleading.
No room for delayed numbers or rough estimation. Big decisions are made in a second. So go for the apps that provide real time analytics.
True Profit is an app developed to overcome all those problems.
It automatically pulls and updates data from Shopify, AliExpress, Facebook Ads and Google AdWords to give you the real picture of your profitability. You get to see Profit, COGS, Shipping cost, Processing fees, Conversion rate and other major metrics in real time. A profit tracking app that gives real insights.
Try FREE for 14 days.
- 12 Pricing Strategies Every eCommerce Business Owner Should Have Known
- Why Keeping Track of COGS Is Painful for Shopify Stores
- Choosing Shopify Profit Tracking App 101: 5 Problems to Beware
- How to Calculate Profit for a Dropshipping Business (Shopify & AliExpress based)
- Revenue vs. Profit: How Focusing on Revenue Can Harm Your Dropshipping Business