You’ve just started your very own eCommerce business. Congratulations!
eCommerce is a great way to reach a larger audience with your products or services. But there’s one thing you need to make sure you do from the very beginning: account for your transactions properly.
Why is this important? Well, first of all, it will help you keep track of your inventory and the cost of goods sold. This information is crucial for knowing when to order more products and how to price your items.
One problem you might run into is calculating shipping and handling costs correctly. On each sale, you could lose money if you don’t consider these costs. And finally, you could run into trouble paying the proper taxes on your eCommerce transactions.
We know that accounting for your eCommerce business can seem daunting, but we promise it’s not as difficult as it seems. After this post, you’ll find out what you need to do to maintain your finances in order.
Accountant for Online Businesses
When selecting an eCommerce accounting, there are numerous things to consider. Your business size, complexity, and specific needs will all play a role in choosing the right accountant.
If someone has a trim-level eCommerce business, you may be able to get by using a personal accountant or bookkeeper.
However, if your business is growing or is complex, you may need to hire a dedicated accountant or accounting firm.
When choosing an accountant, ask about their experience with eCommerce businesses and online sales. Asking for recommendations from people who know what you’re doing is also brilliant.
Ecommerce Accounting for New Businesses
First, you need to track inventory levels and your cost of goods sold. It will help you manage your business and keep tabs on your expenses.
Secondly, you need to calculate shipping and handling costs accurately. It will ensure that you don’t overcharge or undercharge your customers. Finally, it would help if you accounted for taxes properly. It can be complex, but plenty of resources can help you.
The good news is that plenty of accounting software programs can automate and streamline the process. We recommend Xe for new businesses. It’s user-friendly and has all the features you need to get started.
Following these tips, you’ll be on your way to keeping your eCommerce business on track.
Tips for Accounting for Your Ecommerce Business
We want to look at the main account-taking tasks you’d have to take up every week or month: Being thorough about all these will help you understand your money flows and prepare your tax returns.
- Understand the types of transactions involved in eCommerce businesses.
- Keep track of inventory levels and the cost of goods sold.
- Calculate shipping and handling costs.
- Account for taxes properly.
- Use accounting software to automate and streamline the process.
By following these tips, you’ll be well on keeping your eCommerce business finances in order.
Understand the Types of Transactions
An eCommerce business owner needs to understand the types of transactions in your business. It will help you properly account for them in your books.
There are two main types of transactions that take place in eCommerce businesses:
1. Sales
Sales transactions include any revenue generated from the sale of goods or services. It could include revenue from online sales, in-person sales, or sales of physical goods that transfer to customers through shipping.
2. Purchases
Purchases transactions include any costs caused by purchasing inventory or other items needed for the operation of your business.
It could include the cost of goods purchased from suppliers, shipping costs, or other operational costs.
It’s essential to keep track of both sales and purchase transactions in your accounting records.
Keep Track of Inventory Levels
To properly account for your inventory, you must keep track of the number of goods on hand and the cost of those goods.
This information will help you calculate the cost of goods sold (COGS), a key metric in eCommerce businesses.
The cost of goods sold is the total cost of all the inventory you have sold over time. This number is crucial because it helps you track your profitability and determine where your business spends the most money.
Calculate Shipping and Handling Costs
Shipping and handling costs are often one of the most significant expenses for eCommerce businesses.
These costs can vary greatly depending on the size and weight of the products you sell and the distance they have to travel.
It’s essential to track these costs to calculate your profits accurately. Many accounting software programs have built-in features to help you track and manage these costs.
Account for Taxes
Taxes are a complex and often confusing issue for eCommerce businesses. Many types of taxes may apply to your business, and it’s essential to understand which ones apply to you.
Optimize Accounting Software & Bookkeeping Tools
One of the best ways to simplify the accounting process for your eCommerce business is to use accounting software.
Such software can automate many accounting tasks. So many different accounting software programs available, so it’s essential to choose one that will meet the specific needs of your business.
Cash Flow Forecasting for Ecommerce Businesses
Forecasting your cash flow is an essential part of running any business. And it’s essential for eCommerce businesses, which can often have irregular income and expenses.
Many accounting software programs offer built-in cash flow forecasting features to help you manage your finances.
Cash Flow Forecasting Tips for Ecommerce
Cash flow forecasts are the crystal balls. It allows us to try and predict our future.
Derric Haynie of eCommerceTech.io added: “There is a significant connection between Net Expense and Lifetime Value.”
When you know how many sales you can earn by selling products after marketing, shipping, logistic, sales, and even reducing aggregate costs, you can see how much cash flow you’ve got and where to put it to work.
How Does Ecommerce Affect Accounting?
eCommerce can have a significant impact on accounting. For example, online businesses need to track inventory levels and the cost of goods sold.
They also need to account for shipping and handling costs. All of these factors can complicate the accounting process.
However, by using accounting software, businesses can automate many of these tasks and make the process simpler and more efficient.
What Are Ecommerce Accounts?
There are several types of accountants for online business.
These include inventory, shipping, and handling accounts. It’s essential to understand which types of accounts apply to your business so that you can properly manage your finances.
Conclusion
Accounting for your eCommerce firm may be difficult and time-consuming. So, it’s essential to do it correctly to ensure the financial health of your business.
By following the tips above, you can streamline the accounting process and make it simpler and more efficient.