posted on August 31, 2000 08:05:18 AM new
I'm still a relative newby and I've been reading a lot of messages regarding shipping charges. A long time ago in a business course I took I learned that if you did not specify "Shipping&Handling" that your could only charge for the exact shipping cost. Otherwise the handling becomes an income item and only the shipping is an expense item. (Could be wrong, the course was a long time ago but it makes sense). Not to mention that you are misleading the buyer - they're going to see the shipping cost.
I find nothing wrong with adding a little (and I mean a little) extra for handling charges. The envelopes I use cost me money, the time it takes to package properly costs money. At my add-on rate I think I make about $4/hour. I usually use Priority Mail since the difference between Parcel Post and Priority is minimal. Insurance and Tracking are at the buyer's option inless the item is over $50.00 - I'll pay the tracking and insurance.
posted on August 31, 2000 08:45:24 AM new
You have a couple of things smooshed together in your first paragraph in terms of S&H.
First aspect of this is that if you don't mention S&H in your ebay listing, and try to charge handling after the auction closes, you'll have some angry customers, negative feedback, etc. Ebay rules allow you to do so, but business common sense might suggest otherwise. We can also get into a long discussion of whether an auction listing is a full and complete contract, that can't be "amended" by adding in heretofore-unmentioned-costs like S&H, or even whether that would be an amendment or not.
The second aspect of this involves accounting, as reference your discussion of income and expense items. In general, its pretty simple - anything you spend in expense, anything you take in is income. You don't really do "handling" any different than "shipping" - any expenses are costs to be written off, and whatever money you get from your customers is income. Of course, you can try and get sophisticated, and divide up your money coming in to different categories, like shipping versus bid amount, but you really don't have to.
Now, let me add the standard disclaimer that if you are a larger size business, there are certainly some requirements for dividing up income and expense, and there are interesting costs like "depreciation" we can spend hours debating, but for small, part-time ebay sellers (that I assume anothertreasure is, although I can be wrong on that), generally a "one pot" kind of accounting is often sufficient unto their needs.
posted on August 31, 2000 09:02:33 AM new
I am still waiting for someone to show me how one can ship something without handling it.
I would suggest that you charge for tracking and insurance. Giving something away is not a good idea (I upgrade shipping if I make way over what I thought I'd get--that's about the only exception) I'd also be inclined to track anything that goes Priority mail as it is an automated system. Tracking on Priority is cheap too.
I'd recommend that if you want to cover your time/labor, your surcharge be modest. You probably won't get anyone who whines about a $1.00 per item.
posted on August 31, 2000 09:19:18 AM newI'd recommend that if you want to cover your time/labor, your surcharge be modest. You probably won't get anyone who whines about a $1.00 per item
I most certainly would whine about $1 handling charge on some items. (but I wouldn't bid anyway) A video or postcard that takes all of 2 minutes to package doesn't even compare to preparing a piece of Heisey glass or Hall pottery for shipment. I have won some Hall as well as a peice of Heisey, and I have no trouble at all paying a fair price for "shipping and handling". But, I only bid on the auctions where the cost is listed up front.
As far as income and expenses go, you can keep track of money spent on supplies and you can deduct milage cost as well. But it is not unreasonable to add a small charge when shipping an item wrapped in $2 worth of bubble wrap and peanuts.
The fact remains that sellers need to be up front about their "shipping" charges, so that potential bidders have all the information before bidding. Bidders who don't ask questions before bidding are just asking to get stung eventually. If you bid and win, and then complain about shipping charges, you are trying to close the barn door after the horse has escaped.
eBay should make the shipping charges a mandatory part of the auction information. Fee Avoidance is alive and well and living in the form of inflated handling charges on eBay.
posted on August 31, 2000 09:24:15 AM new
Quick statement:
Shipping is not Postage!
Postage is the inexpensive part of shipping!
Shipping includes:
Postage
Insurance
Delivery Confirmation
Customs
Delivery to Post Office(you are shipping it to a shipping point, aren't you?)
Bribes to Foreign Postal Officials
Chocolate Chip Cookies to Local Postal Officials
posted on August 31, 2000 11:20:32 AM new
anothertreasure - Your business course which was probably Accounting 101 was correct then and is still correct now. However, if you keep books for your ebay operation. I recommend four shipping related accounts. I call them Shipping Expense, Shipping Supplies Expense, Shipping Accural, Shipping Supplies. All of them are what in accounting we call Contra-Accounts.
Here's how they work, The actual cost of shipping/postage for your sales is put in Shipping expense, your money spent for shipping supplies is put in shipping supplies when you buy them. When you close an auction and charge shipping/handling as a seperate charge to the auction. Those exact funds are placed in the shipping accural account. When you ship the cost of shipping is deducted from the accural, when you buy supplies it is deducted from the accural. Using this method at the end of the period. You close the accounts. In an ideal situation the accounts completely close and zero out one another. Except shipping supplies on hand. That is an asset until consumed by the business. It is closed by moving the shipping supplies to regular supplies at the end of the period. If you have funds left in the shipping accural at the end of the period you close those out by moving them to cash at the end of the period and you have the knowledge that you overcharged on shipping regularly. If you have a shortage and have to get more cash from the business you undercharged for shipping.
Accounting is a useful tool in measuring one's success or failure in any operation. It is sad that not too many ebay sellers use it. If they did they would know that they weren't making any money trying to do ebay.
If anyone is serious about their ebay venture they will set up some books to measure their success or failure. Here's a recommended set of books and accounts.
Equipment - The computer system, scanner, digital camera, desk, fax, printer, etc. and so on.
Cash - Well it speaks for itself.
Inventory - A running written tabulation of what you are selling. If you sell based on I don't need it anymore that's okay too, as soon as you decide to sell it, list it as inventory.
Business Supplies - Inkjet Paper, print cartridges, you get the general ideal.
Shipping Supplies - What you spent on supplies to ship, boxes, peanuts, tape, etc. and so on.
Shipping Accural - Where the money for the shipping is accounted for.
Revenue - Where the money from sales go as payments are received.
Expenses - Well they are things like, portion of the light bill if you are working from home, portion of ISP Charge (Unless you have a seperate ISP just for the operation), portion of the phone bill (The second line cannot be 100% deducted as an expense unless that line was used 100% for the business and you never once did anything personal or family with it during the accounting period typically 12 months), ebay list fees, ebay FVF's (these can be combined but I recommend that you keep them seperate because of the fact that you can get a credit for the FVF if a sale doesn't go through)
Cost of Goods Sold - If you actually purchase an inventory for your sales. And if you sell things you already own. Email me for an explanation of that.
With that said each month develop the habit of preparing an income statement. For the ebay seller the simpliest thing in the world.
revenue - all the money from your sales.
Subtract from this number your cost of goods sold if you purchase an inventory. Then your expenses. What's left is your profit or loss for that month.
Even if you don't keep full blown books for your operation a simple income statement each month let's you know if you made money or lost money. It helps you prepare your Schedule C at tax time. It helps you plan your operations and needed cash for the next period. It does so much and takes such little time to prepare. With an income statement, you know how much to budget and keep available on your credit card for ebay's bill each month. If you still mail the payment, it helps you keep track of how much business you are doing so you never get your operation interupted because you have exceeded the $25.00 courtesy credit they give you for listing fees and FVF's.
In short if you don't have a grasp of basic accounting go to the listings and purchase a simple accounting textbook. That coupled with an hour an week will give you the basic knowledge of accounting for your ebay business. I'll close with get yourself informed or pay someone to inform you. It's your choice.
posted on August 31, 2000 11:59:48 AM new
While it's reasonable and fair to include some portion of the packaging, your time etc. in the S&H cost, you also have to be practical. You can nickel and dime a customer to death.
At some point you have to decide when to transfer some of what you consider S&H costs to the bid price. Few people will pay $5 to receive a $10 item. But they might pay $3.55 for a $12 item.
posted on August 31, 2000 12:22:52 PM new
I would pay $15.00 with FREE SHIPPING for that item. If people are so up tight about needing to make money for their time, why don't they include the 'real' costs in their starting bid instead of tacking it on at the end. This is like a tax ...
posted on August 31, 2000 12:25:37 PM new
People need to stop playing shipping accountant and do grade school math when they bid. If the item + shipping is less than item is elsewhere, it represents a value worth considering for a bid.
I am always amazed at how people nickel and dime themselves out of a good deal because they can't figure out how to add two numbers before making a decision.
There are always people who will hold out while the rest of the world enjoys the opportunity they have passed by.
posted on August 31, 2000 12:28:18 PM new
It costs us $1.50 to send out 2 ounces by Insured First Class US Mail - and that's not counting labor, which I concider handling.
I dare anyone to go out on the street and approach a total stranger and ask them if they would package up your item for a mere buck or two. Wouldn't work so well, would it? You bet not, because people are generally not stupid and want to be paid fairly.
But, on eBay, being fair is not supposed to be a concideration! Oh, no! The Seller is supposed to meet YOUR approval on what it costs them to ship that package to you. Sure, $20 S&H to send to you a postcard is ridiculous and bad business, but $6.95 to send a 2 ounce item?
I also Welcome anothertreasure! ("One Person's Junk is Another Person's Treasure!"
As captainkirk mentioned, it could be a long discussion about whether we have a real contract or not, but it doesn't have to be. I saved the message thread from the last time that we had a really good discussion:
posted on August 31, 2000 01:01:33 PM newnetworker67 Thanks for taking the time to give us all a "Keeping EBay Books 101" course. I, for one, sorely needed it!
You say: "Cost of Goods Sold - If you actually purchase an inventory for your sales. And if you sell things you already own. Email me for an explanation of that."
Since I don't have your address, I'll just ask you here! Please go into more detail!
Sandy AKA: chev1959
posted on August 31, 2000 01:21:38 PM newRB said: I would pay $15.00 with FREE SHIPPING for that item. If people are so up tight about needing to make money for their time, why don't they include the 'real' costs in their starting bid instead of tacking it on at the end. This is like a tax ...
There are several reasons for not including expenses in the starting price.
Let's say I have 2 items for sale in individual auctions. Each weighs almost a pound. I charge $5 S&H for each ($3.20 for Priority and $1.80 for packaging). To keep the math simple let's say it $3 postage and $2 handling.
Reason 1) If I start my auctions at $9.99 plus $5 S&H, my insert fee is 25c for each auction. If I add the $2 handling to my starting bid, the starting bid is now $11.99 and the insertion fee is 50c. So, by including the handling fee in the starting bid, I cost myself an extra 50c in insertion fees.
Reason 2) Ebay gets additional FVFs. If my item gets 1 bid and sells for the starting bid of $9.99, my FVF is 50c. If I include the handling in my starting price, my starting price is now $11.99 and I'll pay 60c FVF. Ebay now gets an extra 10c.
Reason 3) If the same person wins both items and I can ship 2 for the same price as 1, the bidder will pay more if I include my handling charge in the starting bid. I sell both items for $9.99 each and ship for $5S&H, it costs the winner $24.98. At $11.99 for both and $3 postage, it costs the winner $26.98.
Reason 4) A higher starting bid (caused by including the handling fee in the starting bid) can chase some bidders away.
So, reasons #1&2 can cost the seller extra fees and reason #4 can cost extra bids. Reason #3 costs the buyer that wins more than one item. It seems that the only one that would gain by me including my handling fee in the starting price would be Ebay, since they would occasionally collect higher insertion and FV fees.
posted on August 31, 2000 01:43:15 PM new
Sorry, but those charges and fees that you mention are 'red herrings' if you are trying to rebut my argument.
Answer to Reason 1) - Include the extra 50 cents in your starting bid
Answer to Reason 2) - Include the extra 10 cents in your starting bid
Answer to Reason 3) - Good point. Offer the buyer a deal! (and stop clouding the issue by talking about multiple item wins by the same bidder )
Answer to Reason 4) - Then you are wanting too much for your item (the old competition problem) - perhaps you need to rethink selling your stuff on eBay
Let's say you want to buy a washing machine at Wal Mart. Would you prefer to see the bottom line price on the tag, or would you prefer to see the 'basic' price without "options"? If the latter, be prepared to add the freight to get it to Wal Mart, the salaries of the guy that moved it from the warehouse to the floor, the cashier that took your money, yada yada yada ...
posted on August 31, 2000 03:35:39 PM newyankeejoe - From an accounting perspective Supplies are an asset on your Balance Sheet. They are reduced as an expense as you consume them within your operaton.
borillar - What school of thought tells you that $6.95 is fair to ship a 2 ounce item? Before you go into that labor, gas and other ebay seller nonsense. Allow me to remind you of a few things.
1. You are probably a sole-proprietorship operation therefore you can't pay yourself a salary. So you have no payroll expense if you are doing the work. Your labor is supposed to be included in your listing prices.
2. When you complete your Schedule C for your business. You are allowed to take a Vehicle Expense deduction at 32 cents a mile using the straight line method. So if the distance to go from your home to the post office one way is 5 miles you travel 10 miles a day or you get to reduce your taxable base by 3.20. Each trip you take 10 packages so each package handling is 32 cents.
3. So you want labor as part of handling, fair wage for that work is $8.50 per hour, takes an hour to pack 10 items. So each item has a labor of 85 cents.
4. Total it all up with the mailing your fair shipping and handling is $2.67 you have gouged your customer for $4.28.
Wait a minute I forgot those shipping supplies, where's that office supply catalog. That envelope cost you big fat 60 cents each wholesale. That bubble wrap is harder to figure but let's say you buy it by the box 50 feet long, by 2 feet wide. Cost $32.00 bucks a box you do a great job and use a lot you get 50 packages per box. A whopping additional $1.24 cents to our $2.67 we get a fair handling all expense included total of $3.91 cents.
So I ask again what are you doing with the extra $3.04 of the $6.95. I hope you have a section on your books called excess revenue from shipping. If you don't sounds like tax evasion to me. Oh wait a minute, I didn't let you mark up the packing supplies to ship the items that you had to purchase. Okay we got evevelopes and bubble wrap. Each package used $1.24 in actual supplies, okay your post that I am replying too tells me you are the greedy sort. So let's let you mark it up 100%. We still have a whopping overage of $1.80 charged by you to your customers.
I ask again do you have a section on your books titled excess revenue earned from shipping operations. Because you have a neat profit center built into your shipping which if you have books 100% of that operation is expenses so you are either hiding the excess $3.04, or you are going back and reducing your revenue for each period by the 6.95 per package not itemizing the charges on the books and reducing your taxable income from the operation by an ungodly amount. All of which equals bad business practice at the least and tax evasion at the worst.
Help me out here, there it is broken down for you to see you are from the sounds of things clearing more profits from your shipping than from your sales from a percentage perspective. Because your shipping is making in excess of 85% over your cost all varibles included.
[ edited by networker67 on Aug 31, 2000 03:40 PM ]
posted on August 31, 2000 03:48:25 PM newRB: Answer to Reason 1) - Include the extra 50 cents in your starting bid (Bkmunroe's note: Actually this should be 25c, the difference between the 25c fee for a $9.99 item and a 50c fee for a $11.99 item)
Answer to Reason 2) - Include the extra 10 cents in your starting bid
So, if my item was $9.99 plus $5S&H. My customer would pay $14.99. Ebay would get a 25c insertion fee and 50c FVF.
If I include the $2 handling portion in my starting bid, add the 25c insertion fee difference and the extra 10c to the FVF and my starting price is now $12.34 and I charge $3 shipping. My customer pays $15.34.
Now, why would I want to do this? Sure, after deducting all of me expenses, I make the same amount of money in either case, but it's extra work for me calculating all these extra fees. Ebay gets an extra 35c in fees and the buyer pays an extra 35c. Great for Ebay. Bad for the buyer and seller.
Answer to Reason 3) - Good point. Offer the buyer a deal! (and stop clouding the issue by talking about multiple item wins by the same bidder )
Sure, but the only reason that I'd have to offer the buyer a deal is because I added all of these extra fees to my starting bid. Again, it's extra work for me. Neither, the buyer or seller benefits from this over my original way of listing.
Answer to Reason 4) - Then you are wanting too much for your item (the old competition problem) - perhaps you need to rethink selling your stuff on eBay
Everybody has a limit to how much they'll spend on something. Maybe the extra money added to my starting bid would cost me a bid or maybe it wouldn't, but I don't see how I benefit in either case.
posted on August 31, 2000 03:56:46 PM newA long time ago in a business course I took I learned that if you did not specify "Shipping&Handling" that your could only charge for the exact shipping cost.
False for any context we're likely to be thinking of. No formal definition exists for "shipping" or "handling".
Per customary use by the mail order industry, "shipping" means "shipping & handling" unless handling is specified separately.
Thus:
$6.95 shipping
$6.95 shipping and handling
$4.00 shipping + $2.95 handling
$4.00 shipping + $2.95 insurance and handling
are identical in meaning, each specifying the total delivery charge as $6.95
Few if any professional mail order companies quote shipping rates which are defined by actual postage, although surely one could do so if one wanted to.
As we've discussed here before, "actual shipping" is completely ambiguous with respect to charges by third party shipping services. Unlike some other stories however, it seems that most eBay sellers who specify "actual shipping" are not deliberatly planning to exploit this ambiguity, rather they have some very firm idea in mind as to what it means, and they don't imagine that anyone could be confused. Most times in fact they mean "actual postage".
posted on August 31, 2000 04:46:38 PM new
dave - I am hoping that my last post helps those every little thing sellers out there see how to account for every little thing in the shipping equation and And Still Be Fair About It.
It pains me to see so-called business people get themselves so caught up in digging for dimes while dollars can be scooped up off the beach.
posted on August 31, 2000 07:10:54 PM new
WOW! - Ask the time of day and you find out how to make a watch.
Seriously, thank you all, some great information and most of it graciously accepted. Especially the accounting items - just in case I grow, it's better to take care of it now.
I will contiune to charge a nominal fee to try to cover shipping materials and will continue to offer free insurance and tracking for "expensive" items - might stave of a neg, just part of the service, and is just something that I think shoud be done. That's what makes horseraces. And, as I have been doing, All extras are covered up front.
posted on September 1, 2000 06:18:46 AM new
Let me post a "minimalist" response vis-a-vis accounting and ebay...and also throw out a related suggestion.
if you do nothing else for "accounting" on your ebay operations, track the following three items:
1. Revenue. Add up all the checks received
2. Expense. Add up all checks written for any expenses that you would not have had if you weren't doing ebay.
3. Time. How many hours do you spend on ebay?
#1 - #2 gives you your cash flow, and
(#1 - #2) / #3 gives your profit per hour, which you can them compare to alternatives (like flipping burgers at your local fast food chain) and see if ebay is worth it. Its amazing how many people forget #3, and until you have some idea of what it is, don't worry about breaking down #1 or #2 any.
Once you have at least this level of "accounting" in place, if you feel the need, you can then make it more complex - by breaking out S&H from item amount, say, to see if you are making or losing money on the shipping side. Or adjusting for changes in inventory (but if you look at your business over a several-month period, chances are good for most people that any fluctuations in inventory will be mostly smoothed out).
Getting into accruals and reversals is overkill for most people on ebay, I would venture to suggest.
Let me guess....you work for ebay, right. EBay would love for everyone to include shipping and handling charges in their opening bid. It would be worth free millions of dollars in insertion fees and FVF per month.
[ edited by mark090 on Aug 31, 2000 09:28 AM ]