Whether you are starting out or you already have your online business on Etsy, Amazon, or a similar sales channel, you need to have a good understanding of eCommerce accounting procedures to succeed. Warren Buffet is correct about accounting as the language in business. Regardless of your business is online or not, you must know how to keep track of records concerning revenues and resources. By going through this guide to eCommerce accounting, you can run your business smartly. This article will share some of the most effective eCommerce accounting tips to help you grow your online business. Having a record of sales is not enough. You must determine the proper balance in terms of income and expenses. A good eCommerce accounting guide will lead you to smart decisions along the way. This is why entrepreneurs who have accounting literacy are most timely to achieve their goals in a given timeframe. If you lack knowledge in eCommerce accounting, there is a higher chance of business failure. And this should not be the case, especially when you are just starting out. Even well-established eCommerce businesses should also see the meaning and importance of eCommerce accounting. Let us take a deep dive into it.
What is Ecommerce Accounting?
Ecommerce accounting is a practice of analyzing the financial records of your online business. It is done to create financial reports to help the management develop strategies and forecasts. A business owner should understand the current level of finances and plan for the future out of the given financial reports. As stated by BigCommerce, Some of the main accounting tasks are the examples given below.
Preparation of adjusted entries.
Financial information audits.
Tax planning and reporting.
Financial forecasting and risk analysis.
Preparation of financial statements, reports, and models.
Ecommerce accounting is essential because it helps equip the business owner with the right financial information to lead to the best decisions. While there are so many eCommerce platforms with built-in eCommerce accounting tools, constant financial data monitoring is key to making your business grow. Many would agree that accounting works are the least favorite task for business management. However, understanding it by heart, making yourself familiar with the in-and-out transactions, and constantly checking your online business platform are some of the most important tasks if you have an eCommerce business. Ecommerce accounting makes it easier for business owners to run their businesses online. With digital financial reports and intuitive eCommerce tools, you can ensure that your business is heading the right way. That is precisely what our users at Strikingly love about our web services.
Your eCommerce business will surely grow with our easy-set-up online stores and mobile app website management. We have also sorted some of the finest eCommerce accounting tips and procedures to help you learn how to manage your business finances.
One of the most effective eCommerce accounting tips is to keep track of all transactions.
You need to know each category properly regarding sales, costs, taxes, etc. The good thing is that most eCommerce tools, like what we have here at Strikingly, are intuitive and up-to-date. Indeed, you can rely on the real-time financial data that our web services can provide.
Based on the FinancePal article, there are six types of transactions that you’ll need to keep track of when running your business.
Revenue: The money that the company collects from sales.
Expense: This is the money paid by the company to keep the company running.
Assets: It’s anything the company owns, like cash, equipment, vehicles, property, etc.
Liabilities: This is the outstanding balance of any loans the company has taken out.
Equity: Money that the owners put into the company—typically, not expected to be paid back.
Returns and Chargebacks: Money that’s returned to a customer or credit card company due to a product return or fraudulent credit card behavior.
When you maintain your business budget, you are also securing a business future at the same time. Conducting a seasonal budgeting strategy is one of the effective eCommerce accounting procedures. For small businesses, there is what we call a slow period. It means that seasons might or might not require a massive amount of budget. Having a seasonal budget prepared is ideal for a startup business. Preparing your business budget for a year can help secure your company’s financial needs. This should be backed up with constant monitoring, of course. Checking inventory and checking your records regularly can make you aware of changes. Thus, you can allot more or less budget on the next month’s business transactions.
3. Choose Ecommerce Accounting Method
There are two kinds of accounting methods – cash accounting and accrual accounting. Cash accounting records all the ‘in and out’ cash transactions of your business, while accrual accounting records transactions as soon as there is an invoice (money is not yet transferred). The cash accounting method is suitable for short-term decision-making because it gives you a quick overview of the financial status. On the other hand, accrual accounting will be beneficial for long-term planning. The latter is commonly used for larger corporations.
As you see, there is an eCommerce accounting procedure for startup businesses. Choosing an eCommerce method that will work for your business is smart. Whether it is for short-term or long-term benefits that you are aiming for, having one will give you a great deal of knowledge about your business's financial status.
The crucial part about cost-cutting is what part of the costs you will trim down? After categorizing all transactions correctly, you understand how much money gets in and out of your business. Cutting the costs can benefit your company because you are just eliminating unnecessary expenses – some costs may be necessary but not a priority yet. As a business owner, you can think of ways to minimize the expenses for a specific material, like opting for a lower price. When you cut costs, you should not compromise the quality over savings. If you want to keep a good reputation for your brand, choosing quality over quantity is necessary.
5. Boost Your Profitability
Ecommerce accounting guides will also lead your business to profitability. The practice of recordkeeping and analysis are two important accounting tasks that will help you make profitable solutions. It seems that profit is the only thing that really matters for all businesses. In fact, there is indeed no single business not aiming for profitable ventures. You can develop strategies to increase profit margin by maintaining a good accounting routine. It all ends up with the numbers. You can use your record sheets to know where the highest profit comes from and how they are coming in. This way, you can develop ideas like building an online store, giving away coupons, and promoting your eCommerce business on social media. These are all possible here at Strikingly.
As a responsible eCommerce business owner, you must keep taxes up-to-date. You need to know and settle two tax categories – business income taxes and sales taxes. With Strikingly’s Simple store, you can set taxes for products shipped to different places. It can be challenging because you need to make sure tax rates are accurate for each customer. You can set taxes manually or have these automatically calculated upon check out with us. We ensure accuracy and security with all our online stores.
7. Get Ecommerce Accounting Assistance
It may sound like additional expenses to pay for an eCommerce accounting assistant. Still, it could save you from drowning in your own financial records that you don’t understand. For sure, a few will say that they love their accounting subject in college, but if you love it, hurray to you. It’s ideal to have a financial and accounting background if you are running your own business, but if you don’t – It’s outstanding. Don’t hesitate to seek help. You can hire a reliable eCommerce accounting assistant or build your eCommerce website with us. Either way, you will surely get proper support on how to manage your online business.
Image taken from Strikingly website
Finally, you get to the part where you have to execute all these ideas in your mind. But, wait, don’t make it too complicated. As a business owner, you must know that having accurate records and constant analysis is your best weapon to handle business matters. When it comes to financial data, there’s an easy way to keep them intact in one place. Build your own eCommerce website. With Strikingly, you get accurate and real-time reports of your revenues and business transactions. Our mobile-first web designs will allow you to grow your business online and increase profitability. If you are ready to start, join our millions of users worldwide. Start your eCommerce business with us today.