Every eCommerce business, whether it’s run through Amazon, BigCommerce, Etsy, or Shopify, needs a robust accounting system in place to handle the financial aspects.
Ecommerce accounting is a business’s foundation, and a solid foundation is necessary to keep a business thriving and moving. By recording every expense and transaction, business owners get real-time insights into the operations.
This means that they can predict any unpleasant scenarios and take necessary precautions. Accounting for eCommerce businesses allows entrepreneurs to pay their contractors and employees on time.
Not to mention the adherence to state and federal tax laws. Hence, we have compiled the best practices needed to improve eCommerce accounting in this blog post.
Like every business, eCommerce businesses rely on finance to stay up and running. However, both established and first-time business owners find eCommerce accounting to be daunting.
Therefore, we have listed below a few tips that will help them improve accounting for eCommerce businesses in no time:
Online retailers operating in a highly competitive market must leverage eCommerce accounting software to gain an undeniable edge. Keeping track of all the transactions manually certainly becomes overwhelming as the business grows.
By automating certain accounting tasks, eCommerce business owners can save more time. Moreover, they can monitor key performance metrics such as cash flow, customer profitability, total sales, and more using accounting software.
Besides, maintaining different Excel sheets for various customers and contractors is cumbersome. The eCommerce accounting software acts as an integrated solution for efficient financial management.
And, as the business grows, an accountant is likely to come into the picture. Accounting software then becomes even more necessary so that the accountant can utilize the business data.
Ecommerce business owners must be aware of every penny leaving or entering their company. Recording every transaction is one of the best practices required to improve eCommerce accounting.
And, by transaction, we mean all the expenses, fees, sales, and refunds. It helps capture a clear picture of the business’s cash flow. In general, sellers need to track six types of transactions to stay profitable.
Recording these transactions is also important for tax filing purposes.
Understanding inventory management is vital for every eCommerce business – big or small. It saves them time, money and minimizes waste. Unfortunately, eCommerce inventory management doesn’t get the traction it needs.
Inventory control helps business owners know:
To re-evaluate inventory practices, eCommerce business owners can run an audit even if they have the best software for inventory management. It can help avoid under-stocking or overstocking issues as well as account for any stolen items.
Depending on the size of their eCommerce business, sellers can either prepare financial statements themselves or hire an accountant for eCommerce bookkeeping.
Irrespective of who prepares them, we recommend prioritizing it to improve accounting for eCommerce businesses. It would help sellers make sound financial decisions.
Some key financial statements that should be prepared include shareholder equity statements, cash flow statements, balance sheets, and income statements. Together, these statements paint the complete picture of a business’s financial health.
Moreover, these financial statements are also vital for analyzing the performance of a business over a year, quarter, or month.
Running an eCommerce business can become easier if one considers outsourcing eCommerce accounting services. We recommend hiring an accountant or an entire accounts team to manage the finances.
However, that can quickly add the costs considering they need to be paid salaries and benefits. Outsourcing the accounting services to a reliable accounting firm can prove to be more cost-effective.
Ecommerce business owners can redirect the money saved towards growth and expansion.
OHI has experienced and qualified accounting professionals, including financial analysts, accounts receivable specialists, accounts payable specialists, and more.
By following the above-mentioned best practices, sellers can greatly improve accounting for eCommerce businesses. Using these strategies, they can boost their profits while maintaining regulatory and tax compliance.
Recording every transaction, investing in eCommerce accounting software, and outsourcing are some of the best tactics that sellers can use to their benefit.
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