Bookkeeping tasks are essential for successful day-to-day operations of any ecommerce business. It deals with everyday transactions such as recording, stockpiling, recovery of bookkeeping records, inventory management, and more. The more significant part occurs through cutting-edge cash flow management software, making it more straightforward to oversee and access real-time information.
Considering the importance of bookkeeping, we have created this article to provide effective tips for your ecommerce bookkeeping.
Tips for Ecommerce Bookkeeping
Throughout the lifetime of ecommerce businesses, the small details may accumulate, and without proper bookkeeping, it makes the process more hassling and complicated. Someone who does good bookkeeping knows where all the cash is going or coming from. Keeping track of this information enables the small business to make much better decisions. Here are some you should take note of when you are your own ecommerce bookkeeper:
Keep Business Documents Organized
A lot of bookkeeping has to do with organising data and maintaining it. It’s simple in principle but can save business owners so many headaches down the road. For example, the sales tax authority requested more information on specific transactions that you made three years ago. Having had your documents already well organised, you can provide those in your tax returns immediately.
Everything is more streamlined with the right ecommerce accounting software. Seek help from your ecommerce bookkeeping or accounting in house team with which accounting software suits your business needs and most especially with navigating the program. The right software makes the bookkeeping processes smoother, including data entry, record keeping, consolidating data, preparing sales tax requirements, and organising these records overall.
Record Financial Data
Keep Personal Costs Separate from Your Business Costs
As an ecommerce business owner, you must be involved in your business’s financial management, but not in a way that you use your personal credit card and bank accounts. Sorting through your private and business transactions is time-consuming, expensive, and an easy path to errors.
So, keep business and personal accounts separate. By eliminating all personal transactions from your sales channels, you’ll significantly reduce the number of transactions your bookkeeper must categorise and reconcile.
Document the Solutions for Each Mistake and Learn from Them
If you’re handling ecommerce bookkeeping matters on your own, you may be more prone to making mistakes. But once you get through the basics, make it a habit to address mistakes the moment you spot them and ensure that you learn from them as well.
Keep track of any human error and solutions made so they can serve as your business’ growth benchmarks and prevent the same blunders the next time. It’s best that you have your own bookkeeping and ecommerce accounting team as they are quick to recognise emerging errors and provide a fitting bookkeeping solution. Make sure you don’t handle all the complicated aspects alone.
Track Your Cash Flow
First and foremost, you will need to look at your business’s chart of accounts, including cash inflow (e.g., sales income statement) and outflow (e.g., overhead and operating expenses). At the end of each period you’re tracking, you should be able to tally your credits and debits easily in your balance sheet. Your cash flow statement and balance sheet should be as transparent as possible.
Additionally, if you want to maintain positive cash flow, you must look at where your debts are going. With a proper bookkeeping system, you will see every mandatory recurring merchant fee (such as website maintenance, ecommerce platform fees, sales tax, inventory management system, cloud accounting software, and digital marketing costs) are and one-time costs that seem to be recurring too frequently, such as excessive merchant fees from a partner.
This brings us to what you should track next: the trend of your income and costs. Sudden spikes in costs demand a closer look, while any income surge should also be accounted for. This goes back to our point about making better business decisions.
Identify Your Break-Even Point
A business’s break-even point is when the income becomes equivalent to costs. When you find that your business is reaching that point, it’s time you seriously investigate each of your costs—from lease to work to materials—and your evaluating structure.
Ask yourself these questions: Are your costs too low or excessively high to arrive at your initial investment point in a sensible measure of time? Is your ecommerce business manageable? To understand how to compute the initial gross margin, every business needs the following details:
- Fixed costs
- Variable costs
- Selling price of the product
What’s the distinction between fixed and variable costs? Fixed costs are persisting expenses, notwithstanding the number of deals you make. You pay these costs to maintain your ecommerce platforms, like lease, sales tax, and insurance.
On the other hand, variable costs change with several factors. When you have more sales orders, your variable costs increase. These costs may include direct materials and direct work. The break-even point is your total fixed costs split by contrasting the unit cost and variable costs per unit. Remember that reasonable costs are the general costs, and the business costs and variable costs are simply per unit.
Use Accounting Software Programs
Every business needs to have an ecommerce bookkeeping software to precisely record their chart of accounts and data for their financial reports, surveys, and assessments. Many of these accounting software provides navigation customer support too, which is helpful when you’re dealing with bookkeeping by yourself. They allow you to smooth out processes regarding gathering receipts, inventory levels administration, processing fees, tax deductions, and e-invoicing payments.
Cloud accounting software, such as XERO and QuickBooks, might be helpful choices to consider as they allow multiple users to work simultaneously on the same data, which can streamline bookkeeping tasks more effectively
Have Basic Knowledge of Key Bookkeeping Elements and Stay Updated
Whilst you can hire bookkeepers to manage your ecommerce business’ financial matters, it doesn’t hurt familiarising the basics of bookkeeping as they will come in handy in the long run. Abilities like bookkeeping, information passage, utilisation of calculation sheets, doing track inventory, invoicing, and time usage allow you to comprehend and work with the financial statements of an organisation, as well as achieve other key accounting liabilities.
You may want to know crucial accounting basics too, such that you might need to determine an issue with an expert bookkeeper or accountant for online business. Knowing a few bookkeeping and accounting basics can help you get more proactively involved in your ecommerce businesses’ finances and arrive at effective solutions.
Furthermore, assuming that you have global clients, differences in regulation can lead to more errors. It’s crucial that you comprehend these regulations when you’re doing the bookkeeping by yourself, especially ecommerce sales tax. Make time to learn the basics of ecommerce bookkeeping services and stay updated with current tax laws in the ecommerce sector.
Better yet, hire expert bookkeepers or accountants for ecommerce that provide holistic bookkeeping services on your behalf. Finances, sales taxes, ecommerce bookkeeping, and accounting matters can be very complicated, but you don’t have to do all these by yourself.
References
10 Bookkeeping Tips You Can Use Year Round. (n.d.). Retrieved from kabbage:
12 IMPORTANT BOOKKEEPING SKILLS YOU NEED FOR A SUCCESSFUL CAREER. (n.d.). Retrieved from potomac: https://potomac.edu/the-top-5-skills-you-need-to-start-a-career-in-bookkeeping-and-accounting/
eCommerce Bookkeeping: Ultimate Strategies for Businesses. (n.d.). Retrieved from engaiodigital: https://engaiodigital.com/ecommerce-bookkeeping-ultimate-strategies-for-businesses/
E-commerce Store Bookkeeping Tips. (n.d.). Retrieved from osome: https://osome.com/sg/blog/e-commerce-store-bookkeeping-tips/
The Ecommerce Guide to Bookkeeping. (n.d.). Retrieved from ShipBob: https://www.shipbob.com/blog/ecommerce-guide-bookkeeping/
