Establishing a fully-functional online store does not end when you build a business website. To achieve success, you must ensure that everything you put on your website is compelling and fulfills its duties. You must inspect everything from your homepage navigation, website contents, and call-to-actions to the type of products you sell on your business website. And what is the best way to do that? Through eCommerce accounting.
What is Ecommerce Accounting?
Ecommerce accounting can be defined as the systematic process of recording and managing all of the essential financial data of a business. It involves organizing all transaction data in operation held by a company. Understanding eCommerce accounting also involves tracking and categorizing each business transaction, whether an income or an expense.
The eCommerce accounting procedure includes comprehensive processes to get the most accurate information online businesses need. Among these processes are cash basis eCommerce accounting and accrual eCommerce accounting.
1. Cash Basis Ecommerce Accounting
Cash basis accounting is a more straightforward method you can use for your eCommerce accounting guide. It is also referred to as an “easier way” to get a clearer view of how your business’s cash status is doing. It is a method of eCommerce accounting that focuses on a business's cash flow. It involves a systematic process of measuring each transaction that involves a cash transfer. In a cash-basis eCommerce accounting procedure, an online business records only the revenues from its online customers and the expenses when they make payments to its suppliers. As for the taxes, it is mainly calculated based on the resulting net income of the online company.
2. Accrual Ecommerce Accounting
Accrual basis is a type of eCommerce accounting that focuses on measuring a transaction once funds are already earned or when an expense has been incurred. Under this eCommerce accounting procedure, a piece of more specialized knowledge in eCommerce accounting is much needed. Unlike the cash-basis method, a more hands-on approach is required to perform this eCommerce accounting well. This is one of the main reasons why large business companies mostly use accrual-basis.
Key Components of Ecommerce Accounting
Understanding a guide to eCommerce accounting can get you a little lost if you are a beginner. The terminologies it includes can get too confusing the first you hear them. To help you simplify what is eCommerce accounting, we listed below some of the essential elements you must never miss out on.
Learning these elements could not only add knowledge for you and make it easier to accomplish each eCommerce accounting procedure you make. If you know what these words are and what role they play, you can easily avoid confusion and inconveniences.
1. Accounts Payables and Receivables
These two terminologies are among the most common words you will encounter during your eCommerce accounting procedure. An accounts payable can be defined as the money a business owes to its constituents, like its vendors. On the other hand, an accounts receivable is the money customers owe to a company. These two, in general, are terminologies given to an outstanding bill or invoice included in an eCommerce accounting guide businesses use.
2. Purchase Order
Purchase order can be defined as a legal document involved in an eCommerce accounting procedure. An online business’s purchasing department typically issues it once an order is placed. A Purchase order typically includes the item’s quantity, price, and type of products that a buyer wants to purchase from an online business.
3. Sales Order
A sales order is another eCommerce accounting document that indicates all essential details of a brand’s sale. Often, a seller creates a sales order in response to a purchase order placed by his buyer. It includes client information, the number of goods sold, the sale amount, delivery address, date, and payment information.
4. Ecommerce Sales Tax
This eCommerce accounting element refers to the total percentage of a product or service’s sales price primarily dedicated to taxes. An eCommerce sales tax usually depends on state to state basis. Typically, when specific eCommerce merchants perform enough business in a state to pay their taxes right, it is referred to as a “nexus”.
5. Cost of Goods Sold
Cost of Goods Sold, or simply COGS, is the total cost of producing and distributing a company’s product. It includes the product’s shipping costs, credit card fees, warehousing, and other costs directly involved with product selling.
Sales management is essential to any business. One of the common mistakes businesses commit is being too careless when it comes to inspecting and monitoring their sales. It is not enough that you only know you are getting revenues. As a reliable entrepreneur, you must know everything which concerns the money that goes in and out of your business. By mastering a guide to eCommerce accounting, you can easily take a closer look at everything within your product sales. Setting up a reliable eCommerce accounting procedure for your online business can help you manage your revenue better. You can easily see where a specific sale was made, which products get the most checkouts and monitor your product stocks.
2. Better Inventory Management
Inventory is another crucial element in mastering what is eCommerce accounting. Managing your products plays a huge role in preventing overselling your products and saving production costs. Most businesses use their inventory to track business’s performance towards a target group of consumers. Stocks can tell them how their business is currently doing in the overall market and even help them specify the areas they need to pay extra attention to give a better customer experience. Understanding how an eCommerce accounting guide works will make it easier for companies to manage their inventory. They can immediately get a good grasp of how their stocks are doing, how much expenses they’ve made in their past transactions, and even ensure that there are enough goods they can give to meet the demands of their target market.
Ecommerce accounting can become too overwhelming the first time you encounter it. With all the technical words and terminologies you might not have even heard of, it can be confusing, especially for starters. To give you a glimpse of how we do it here in Strikingly, we listed down our top three incredible tips you can use when it comes to managing your eCommerce accounting like a pro.
1. Focus on Managing Sales and Inventories
Having the best eCommerce store that practices the most awesome eCommerce accounting tips means having an extensive focus on managing your sales. As an entrepreneur, you must have a firm grasp of what is happening within your online store. It is not enough that you are aware you are getting sales. Instead, you must exert extra effort in focusing on how much revenue your online store is getting. You must learn what is eCommerce accounting and use it as a weapon in understanding everything you need to know about your business sales. You can use it to identify which products on your online store have the highest checkouts and let yourself see which parts of your business you are losing more money. Focusing more on how you can manage your sales will make it easier for you to identify whether you are generating more money than what you are investing.
Managing your sales also includes keeping an updated list of your products’ prices and categories. You might not seem to notice it, but online consumers are keen on how entrepreneurs present their products to them. Here in Strikingly, you can easily manage your products on your Simple Store without getting stressed about how you should do it. In just a few clicks, you can reorder your products on your online store, add new product categories, add product sale prices and even delete your out-of-stock inventories. Sounds interesting, right?
2. Use Ecommerce Tools
As someone running a digital store, you cannot always rely on your power. Ecommerce tools are every business’s holy grail. Equipping your online store with these powerful tools can play a huge role in effectively managing an online business. Nowadays, where the digital world has massively affected how people purchase the products they need, it is advantageous to master how such things occur to capture more attention. As an online business, you aspire to give your online audience the best they can get from you. When you use eCommerce tools, you can easily help your customers with what they want from your business. You can easily provide them with the best solutions you can come up with, making you stand out from your competitors. Learning a guide to eCommerce accounting and using the best eCommerce tools can make your day-to-day transactions easier to accomplish. You can easily provide accurate data for yourself when making decisions for your brand.
Here at Strikingly, our users don’t worry about running an online store equipped with powerful SEO tools. Our websites are equipped with the best eCommerce tools you can use to grow and manage your website. Want to know your website stats? You can use our built-in website analytics to track your website performance. Beginner at website building? Worry no more with our beginner-friendly, drag-and-drop web editor function. Got minimal experience with marketing? Start with an email marketing strategy with us and easily connect with your customers. These are only a few of how you can build a promising eCommerce store with us.
3. Get the Best Ecommerce Partner
If there is one piece of advice we can give you about the best eCommerce accounting tips, it’s getting the best eCommerce partner.
Here in Strikingly, we always make sure we are doing more than just what website building is. We ensure that our users enjoy both worlds when it comes to starting an online business and website building. We provide that our users not only experience how to create an online store of their own but also manage it effectively, like how awesome entrepreneurs should.