Managing Your Dropshipping Business

Before you start selling your products you need to make sure you’ve got the right processes in place to manage your business efficiently. This article will show you how to manage your business.

Taking some time to get this right now will definitely save you big headaches later on!


The main areas you’ll want to focus on are:

  • Managing your cash flow.
  • Getting orders to your supplier.
  • Managing your inventory.
  • Getting ready for taxes.
  • Converting currencies.
  • Using analytics and reporting.

1. Managing Your Cash Flow

Cash is the lifeblood of any business and you always want to make sure you’ve got enough on hand to meet your commitments. You should:


  • Create an accurate monthly budget of exactly how much you’re spending on products, distribution, marketing, business processes, salary, and any other costs.
  • Ensure you’re bringing in enough every month to meet your costs.
  • Create a financial buffer of three to six months worth of expenses.
  • Track seasonal variations in customer numbers and revenue.


You need to strike a balance between having enough customers, the lead time on getting payments, and not expanding too fast. A good cash cushion is vital for your peace-of-mind and business success.

2. Getting Orders to Your Supplier

It’s important to make the relationship with your supplier as smooth and easy as possible. Wherever possible, automate the sending of orders to your supplier. Ideally, when a customer orders a product, the supplier should be automatically notified so they can send the right product to the right person.


Make sure you look at every part of the supply chain so you can understand what’s going on and tweak it until it’s as efficient as possible.

3. Managing Your Inventory

Although it’s not, strictly speaking, your inventory, you still need to understand how much product your supplier has available. Ideally you’ll want to automatically integrate that information back into your website so customers can’t order items that are out of stock.


Look at seasonal variations in what your customers are ordering and forecast likely future demand. You can then work with your supplier to ensure they have enough product to meet your needs.

4. Getting Ready for Taxes

Taxes are a fact of life. You will need to understand all of the taxes you’re likely to owe in your country so you can put aside enough money to pay them. Possible taxes include:


  • Sales tax or value-added tax — tax included or added on to the sales price of each product you sell.
  • Payroll or self-employment tax — tax paid to social security and other areas.
  • Income tax — tax paid on the profit you personally make from the business.
  • Business or corporation tax — tax levied on any profits the business makes.
  • Local and state taxes — taxes charged by the state, city, or wherever else you’re doing business.


A good rule of thumb is to put between 30% and 35% of your profits aside to cover taxes. You should speak with your accountant to get an idea of how much you will owe and how to reduce your tax burden.

5. Converting Currencies

Dropshipping often involves trade over international boundaries and currencies. Whether that’s because you’re buying from an international supplier or selling to an international customer. When it comes to taking payment or paying for inventory, exchange rates and fees can add up fast. Make sure you’re able to transfer money between currencies in the most cost effective way.


Here at The Currency Shop, we’re experts at international currency exchange. Our easy to use online tool will quickly find the most effective way for you to send currency to overseas suppliers and receive money from overseas customers.


Currency transfer costs are one of the easiest expenses to overlook in business, but they can really eat into your profit margins. It’s very easy to reduce costs of your international money transfers.

6. Using Analytics and Reporting

When it comes to dropshipping, data is your friend. Here are some ways to use analytics and reporting to enhance your business, revenues, and profit margins:


  • Use Google Search Console to find out who is linking to your business website and what keywords you’re appearing for in search. Build content around those keywords to enhance your search engine optimisation.
  • Use Google Analytics to see how people are using your dropshipping website. See the pages people are landing on and how they move through your website. Enhance problematic pages to reduce bounce rates and help people stick around.
  • Use Google Analytics to review your “conversion funnel” — how people actually get from arriving on your website to buying a product.
  • Use Google Trends to identify upcoming changes in the market and what people are searching for so you can start offering new products.
  • Use reports from your suppliers to see what they’re shipping to who, and the prices you’re paying. Match those against your sales reports to ensure everything aligns.
  • Use sales reports to see what’s in demand and forecast future sales and profits.
  • Use marketing reports to understand where you’re getting the best return on investment.


There are several other business processes you’ll need to get right to make a successful business, but if you focus on these you will be off to an excellent start. The rest you can learn and tweak as you go along.

What You Will Find in the Next Guide…


The True Costs of Dropshipping


  • Understanding Your Business Costs
  • Part 1 — Costs Per Item
  • Part 2 — Costs Across Your Business
  • Putting Together a Budget
  • Working Out Your Pricing Per Item
  • Get a Financial Cushion in Place


Read Chapter 8