Buying services or goods online is becoming the most popular way to shop. Similar to most companies, eCommerce businesses could really struggle without efficient accounting.
However, not every business will know how to manage their accounting properly. To learn more about some of the best practices for eCommerce accounting and why hiring an eCommerce accountant may be useful, read on.
What is eCommerce Accounting?
eCommerce accounting is the process of managing the financial data for businesses that operate online. It involves tracking, organising, and managing the overall data of the financial side of online businesses. eCommerce accounting is vital – although many online businesses struggle to find accountants who specialise in this area.
Benefits of eCommerce Accounting
Like all business types, online businesses require efficient accounting. Maintaining and keeping track of records, staying updated with taxes, and ensuring your online business avoids penalties are important. However, doing so wouldn’t be possible without proper eCommerce accounting.
With organised eCommerce accounting comes several benefits – it allows businesses to:
- Track cash flow
- Gain clearer financial visibility
- Reduce costs
- Understand the financial health of your business
- Make informed decisions
- Identify areas for increased sales
- Plan for taxes
- Manage inventory
What Should eCommerce Businesses be Tracking?
If you work in eCommerce, you’ll know first-hand how difficult it can be to keep track of everything – especially finances. Although there’s a lot to manage while owning an eCommerce business, there are a few key metrics that you should keep track of:
- Cash flow – the money that moves in and out of your online business
- Gross profits – the amount of revenue you make minus the amount of goods sold
- Balance sheets – Includes key metrics like assets, liabilities, and shareholders equity
- Profit and loss – shows how profitable your business is over a certain amount of time
Tracking your business’s financial metrics might seem like an easy task to keep up with, but it proves extremely difficult for companies to manage alone, especially those that operate on a larger scale.
The most common way of efficiently tracking these key financial metrics is by working alongside an accountant. Accountants ensure that everything is kept track of, while you focus on other aspects of your online business.
Top eCommerce Accounting Practices to Consider
So, what are the most helpful practices for accounting in eCommerce? To make life a little easier, we’ve rounded up some of the best practices for eCommerce accounting for your online business to consider.
Prioritise Effective Bookkeeping
Organised bookkeeping is key for any business, not just those in eCommerce. Effective eCommerce accounting starts with good bookkeeping – prioritising tracking transactions, such as sales, expenses, and business income, gives you the chance to ensure financial health.
Maintain Records
Businesses rely on accurate records. A system should be put in place to ensure the financials of your online business are kept organised and maintained. Not only will you likely need to keep records for tax purposes, but you’ll need them to fall back on when you want to compare your company’s performance and growth.
Monitor Cash Flow
You should always know how much money is coming in and out of your business. Positive cash flow will show that money is flowing in and that your online business has great financial health. Also knowing when more money is going out is essential, as you’ll need to take action quickly to prevent more loss.
Stay Updated with Tax Regulations
Staying updated with tax regulations is key to avoiding compliance issues and being issued fines or penalties. Tax laws can change, so a business needs to understand the types of obligations to stick to.
Track Inventory
Knowing what you have in stock and how well your goods are selling is important. Tracking inventory allows for more accurate financial reporting, which means that you can better determine your business’s profitability and avoid issues such as stockouts.
Regularly Review Your Finances
Comparing your financial statements regularly will help you better identify any potential issues – such as discrepancies. Without reviewing your business’s finances, problems might be occurring without you even knowing. Whether weekly or monthly, regularly checking for errors should be prioritised to prevent further, more serious issues.
Will Outsourcing an eCommerce Accountant Help Your Online Business?
Yes, outsourcing your eCommerce will help your online business massively. Knowing the best practices for accounting in eCommerce is important, and we’re happy to have provided some helpful methods to follow. However, we understand that many businesses will still feel slightly overwhelmed about managing their accounting – but don’t worry.
Tracking your business’s finances alone takes up a great deal of time, and if you’re working towards new targets and have plans to grow your business, you might be wondering where you’ll get the time to manage everything.
Well, that’s where we can step in. We know how important it is to accurately keep track of your financial data, which is why we offer our expert eCommerce accounting services to online businesses.
How Could We Help Your Online Business?
At DH Business Support, we work closely with clients from all different industries – eCommerce included. Our trusted chartered eCommerce accountants offer a range of services, from bookkeeping, cloud accounting, tax and online business advice, to management reporting.
Unlike most accountants, we keep things simple. We’ll help you work towards your goals, prevent financial stress, and allow you more time to focus on other areas of your online business.
So, save the hassle of having to manage and update your accounts and let us do it for you. We believe all eCommerce businesses could benefit from working with a professional accounting firm like ourselves.
To find out more about how we could help your online business, get in touch with us today!