More people than ever are considering starting a business online, especially as the ecommerce industry continues to grow. Several aspects of ecommerce require close attention to detail from the owner, such as hiring employees, meeting supply and demand and working with vendors. Another essential component of operating a business is accounting.
Take a look at why good accounting is essential and learn the five best accounting practices to integrate into your ecommerce business.
Benefits of Prioritising Ecommerce Accounting
If you’re active in the ecommerce world, you must keep track of your books. Whether documenting cash flow, managing expenses or tracking sales, using sound accounting practices and leveraging small business accounting tools will help your business thrive in a fiercely competitive, digital marketplace.
Here are the benefits of prioritising accounting for your ecommerce startup:
- Enables financial monitoring
- Helps maintain financial integrity
- Allows you to check valuable financial data and gather insights
- Makes your company stable and viable
Following the best financial management practices will help keep your business on the right track and stakeholders happy. Entrepreneurs are responsible for numerous stakeholders, such as:
- Employees
- Your family
- Customers/clients
- Shareholders/investors
- Creditors
Proper accounting will ensure you’re meeting stakeholders’ expectations — something every entrepreneur should strive to achieve.
Ecommerce Accounting: 5 Best Practices
If you’re running an ecommerce business with little to no accounting experience, you might feel intimidated — and that’s okay. Your goal was to bring your company’s idea to life, not crunch numbers and punch a calculator all day.
While it is important to use essential accounting tools such as Excel for budgeting or QuickBooks for tax purposes, other accounting tips can help you manage your finances more effectively. Here are five ecommerce accounting best practices to incorporate into your business.
1. Create a Roadmap
One of the best ways to manage your finances is to create a clear, concise roadmap to help you get organised. As a business owner, you probably already have excellent organisational skills.
Create a chart of accounts, general ledger or some type of financial organisation chart that works for your company. Keep all critical information contained in this chart for easy reference.
2. Choose Accounting Method and Cloud Software
There are two accounting methods to choose between — accrual or cash accounting. Will you record income when you receive it or as you earn it? Will you record expenses when you pay or incur them? Answer these questions and decide which accounting method will work best for you and your employees.
3. Track All of the Business’ Finances
This practice might seem obvious, but it’s the most important. Track purchases and expenses every step of the way, regardless of the accounting method you adopt.
Determine how much inventory you sell, how much you earn, what’s left of your stock and how much you can afford to spend on business expenses. You should also create a break-even point analysis, a financial calculation that determines how much you need to sell to cover costs.
4. Prepare for Tax Season
No one enjoys tax season, but it comes around annually, so you must be ready. If you fail to keep up with accounting for your ecommerce startup, taxes could quickly become a nightmare.
During this step, it is best to consult a small business tax consultant or professional accountant to help you with your tax planning. If you decide to DIY your taxes, consider researching various tax guides online, as plenty of websites allow you to get through tax season worry-free.
5. Ask for Help
Every business owner knows asking for help is nothing to be ashamed of, especially if it’s your first time running a company. Accounting is no easy feat and unless you’re well-versed in accounting, managing your finances could become overwhelming. Always ask for help when you need it to ensure your organisation stays profitable and afloat.
Maintain Your Ecommerce Business With Stellar Accounting Practices
Whether your company is on Etsy, Shopify or Amazon, accounting is an essential part of your ecommerce business. While you might not have the funding to hire a dedicated accountant, following these five basic tips will help you maintain good financial standing and keep your startup running smoothly.
- About the Author
- Latest Posts
