The e-commerce landscape continues to grow rapidly. In fact, it is one of the fastest-growing retail segments in the world. In an increasingly digital world, businesses can now sell their products directly to consumers through online marketplaces like Amazon and eBay. E-commerce is a perfect channel for smaller businesses that cannot compete on price with larger retailers or wholesalers. However, running an e-commerce business has its unique challenges and opportunities.
Running an e-commerce business means you will be handling lots of transactions on a regular basis. Because of this, your accounting process must be streamlined, so you have as little stress as possible when dealing with your books every month. Here are 7 tips that will help improve your accounting for e-commerce.
Document everything-
If you want to keep your accounting for e-commerce streamlined, you first need to be sure you are documenting everything. This might seem like a no-brainer, but it is surprising how many businesses still do not adequately document their transactions. When you are documenting your transactions, it is important to do so from both a revenue and expense perspective. For example, when a customer orders through your e-commerce store, you need to record a few key pieces of information. First, you need to record the amount of the sale.
Second, you need to record the cost of the sale. Finally, you must record the revenue and expense amount in the right accounting bucket. When recording revenue, it is important to record the revenue amount, who or what platform made the sale, and if there is an associated revenue share (the amount of commission you give to a marketplace like Amazon or a payment processor). For example, if you sell a product through your website and Amazon, you need to record the revenue for the product sale on your website, and you need to record the revenue for the associate sales commission on Amazon’s end.
When recording expenses, you need to be sure to record the expense amount, vendor or payment type, and the expense account that the transaction is recorded. For example, if you pay for an ad or a product that you sell through your e-commerce store, you need to record the expense amount, payment type, and expense account.
Strong and organised accounting strategy-
The second most important step in ensuring streamlined accounting for e-commerce business is understanding and following best accounting practices. By complying with standard accounting practices, you will ensure that you have all the information needed to make informed and accurate decisions and will also be able to provide auditable records.
Controlling your inventory is crucial for every successful e-commerce business. Having accurate inventory records will help you save money since you can spend less time re-stocking products and more time generating revenue. When your inventory levels are low, you risk losing customers. If a customer is looking to purchase your product and is out of stock, you will lose that sale. It is also important for your business to maintain strong customer relationship management practices. By having a well-organised CRM, you will be able to identify and respond to customer complaints, questions, and concerns in a more timely manner. Having an organised CRM will also help you identify key demographics, such as the types of customers who purchase your products the most. This can help you tailor your marketing efforts and improve your conversion rates.
Use a robust inventory management system-
As mentioned above, having accurate inventory records will help you save money. But having a robust inventory management system integrated with your accounting software will save you even more. The best e-commerce accounting software for your business will integrate with at least one inventory management system.
Having both systems connected will allow you to record your products’ sales directly in your accounting software. This way, you can keep your accounting and inventory systems completely synchronised. Inventory management systems make it easy for you to keep track of your inventory levels at any time. These systems will also make it much easier for your customers to purchase your products.
Customers will be able to add products to their carts from your website and will also be able to purchase products directly from your mobile app if you have one.
Automate your reporting processes-
Since e-commerce businesses often have a lot of transactions, it is important to automate as many of your business processes as possible. By automating your accounting for e-commerce business, you can save time and money.
You will also be able to better identify potential issues with your company, like fluctuations in your cash flow, long before they become serious problems. For example, you can set up accounting reports to notify you when your cash balance drops below a certain threshold.
This will give you enough time to take corrective action and avoid financial penalties, like needing to pay for expensive, expedited shipping. Automating your reporting processes will also give you a better idea of your business’s performance. This will allow you to make adjustments as necessary and identify any problem areas that need to be addressed.
Leverage cloud-based tools-
If your business is large enough to require an accounting team, you will want to select an e-commerce accounting software that offers cloud-based solutions. This way, you can access your accounting data from virtually any internet-connected device.
Cloud-based accounting software will provide many of the same benefits that come with automating certain business processes. With cloud-based software, you will be able to access your accounting data whenever you need it. Not only will this help you stay more organised, but it will also allow you to collaborate more effectively with your team members.
Whether you are working alone or with an entire team, you will want to make sure you select a platform that offers strong team collaboration features. Most e-commerce accounting software platforms will allow you to add other team members to your account. This will allow you to share sensitive company data with your team members and keep everyone on your team up-to-date concerning all important company information. However, you are constantly multitasking as business owners, which leaves less time to concentrate on accounting and bookkeeping.
In such cases, you can always rely on outsourcing companies. Especially if you are a small business, you can consider small business accounting services for a more streamlined accounting system.
Focus on building a solid foundation for the future-
Another important aspect of your e-commerce accounting is the foundation you build for your books. The sooner you implement good accounting practices, the less headache your books will cause you. When building your foundation, it is important to be as comprehensive as possible.
This means that you need not only to record the data that we have discussed above but you also need to record all the source data. This way, if there is a discrepancy in your books, you will clearly understand where the discrepancy is coming from. Because so much of your accounting process is automated, you must maintain a clean and organised database.
In order to do this, users can use cloud-based accounting software. Or you can also consider outsourced accounting and bookkeeping services. As a business owner, you must consider your business’s needs and requirements before making a choice. However, outsourcing small business accounting services is a cost-effective alternative, especially for budding organisations. This way, you can ensure that everything is recorded and accounted for properly.
Do not forget the importance of strong security measures-
Finally, do not forget about security when selecting an e-commerce accounting software. You will want to make sure the platform you select offers top-notch security. You do not want to put your sensitive company data at risk.
With secure data encryption, you can protect your company’s sensitive data from malicious attacks like data breaches. This will help you avoid potential costly fines and lawsuits that could otherwise result from a data breach. If you are a small e-commerce business owner, you can rely on outsourced accounting services.
Outsourcing companies consist of experts proficient in various accounting software and take full responsibility for safeguarding your company’s sensitive data. You gain expertise and access to the latest accounting software by hiring small business accounting services.
Conclusion
Accounting is not the most exciting part of owning and operating a business. In fact, most people find it pretty dry and tedious. However, it is one of the most important things you need to keep track of. Accurate and timely financial records are crucial in helping you monitor your financial performance over time and prevent potential problems.
As you can see, there are many different ways to improve your accounting process. If you implement these 7 tips, you should be able to streamline your accounting for e-commerce business and make it easier to manage. This will allow you to better understand your business, be more efficient with your time, and have less stress dealing with your books.
Now that you have read these tips, it is time to put them into action. Start implementing these tips today to improve your accounting process for your e-commerce business.
