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March 2009

The Hidden Profit Eater

Freight is a variable expense that can be hard to predict but has a definite - and often signifcant - impact on your bottom line. As you shop for and build relationships with suppliers and customers alike, consider where they are located and how much it will cost for you to receive their goods. Track your freight costs carefully, and be sure you're not overcharging or undercharging. Many art vendors have not been able to push volume sales through Etsy or eBay because they don't realize that online consumers are shopping rats and will be turned off by the rediculous overages some vendors put as shipping costs for their items. It's a good idea to check rates periodically to make sure the weight of the shipment matches the weight you were charged by your suppliers or are charging to your customers.

If your supplier prepays the freight charges and adds it to your merchandise invoice, verify the rates have been properly calculated. For your customers, a merchant account at UPS or stamps.com can make shipping a breeze. If you buy primarily from local suppliers and pick up the merchandise yourself, you still need to consider the cost of getting the material from their location to yours. In such a situation, your time and vehicle expenses will need to be calculated and considered as "freight costs" when you're pricing your good as well as when you report your taxes to Uncle Sam. This will keep your books in order and save you some coin at the end of the day.

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