Are you thinking of running an eCommerce business? Or, maybe you do and you’re just not sure about the eCommerce accounting aspect? Did you know that 76% of U.S. consumers shop online?
In this article, explore a complete guide on the top tips for successful eCommerce accounting. Read on to learn how to make your worries of accounting a thing of the past, and get your eCommerce accounting under control.
1. Cash Flow
Tracking cash flow such as with this eCommerce accounting advisor can help you keep track of your goals. They can take a look at how much you spend, how much you make, and where all of your money goes.
First, take a look at any expenses that aren’t necessary. Any minor costs you can cut down can make a large difference in your overall cash flow.
Be careful with what you offer customers as far as credit terms. It’s the best option to take the money first and foremost.
2. Manage Inventory
Whether you’re using outsourced accounting or not, it’s a good idea to keep track of your inventory. Your inventory can include raw materials that make your goods, and also the products.
Decide how much of each item you want to keep on hand. Only have the amount that you need.
3. The Cost of Goods
This is the amount it costs you for each product you sell. It costs money to make each product whether you’re dropshipping or making them by hand.
For example, say you make a wood frame. Maybe it costs you $2-$5 dollars for the materials, and then you can sell them for $20-$25.
You’ll need to deduct the cost of materials from the amount you sell it for to find out the profit. While it might seem like simple math, when you have a bulk order of them, it can be more difficult to keep track of. If you have employees, that gets deducted from your profit as well.
If you order free shipping, that’ll impact your profits. Offering free shipping long-term can decrease your profits over time.
The main part of accounting tips includes recording all transactions. These transactions can include any refunds, revenue, expenses, assets, liability, and equity.
Transactions are important so that you can file your taxes. As a business, you’re expected to pay taxes required by the state, locally, and the government.
Another reason it’s important is it allows you to keep track of your gross profit. This is how much you earn when you deduct the cost of goods, sales, and operating expenses.
5. Financial Statements
If you have an outsourced accountant, they can help you with this aspect. If you don’t have one, then it’ll be up to you to create financial statements.
The different types of financial statements include shareholder’s equity statement, the balance sheet, income statement, and cash flow statement. Your income statement will show you how profitable your business is over a set amount of time.
While an income statement is great to have, you’ll also need a balance sheet as well. This will show your company’s assets, any debt you owe, profit margin, financial health, and planning for the long-term.
Balance sheets take a look at liabilities and assets to assess your overall wealth. It provides your income statement within this sheet.
Liabilities are what you owe, and assets are the value of what you own. When you subtract your assets from liability, you’ll get your equity. This will help you in planning your long-term goals.
6. What Accounting Method?
You’ll need to choose your accounting method whether it’s on an accrual or cash basis. Accrual accounting is where you keep track of transactions as soon as they happen. Cash accounting is where you keep track of transactions when the money arrives at, or leaves your business.
When you’re first starting out, you might want to choose cash accounting. This will give you a good idea of how much money you have at a time. This option allows you to be taxed on the money that’s in your bank account, instead of money that will be there eventually.
With accrual accounting, it’s a bit harder since expenses that will soon come to be will be shown in your account. It’s not how much money is actually in your account.
Accrual accounting isn’t good for making decisions from day-to-day. It’s not ideal for small businesses since you’re more making decisions based on how much money you currently have. Accrual accounting is better for making long-term goals.
7. Accounting Software
Another option is accounting software. You can even explore different software options that help out eCommerce businesses. There are some you can check out and try for 30 days before you buy them.
When you shop around, make sure that it says it’s a bookkeeping system. Find one that’ll take a look at inventory, costs, and sales.
Avoid those that only give you reports and invoices. You can either sync directly through it, or through Shopify.
8. Consider an eCommerce Accountant
The benefits of outsourcing your accountant include spending more time on your business, and less on worry about bookkeeping. You can easily find an accountant who specializes in eCommerce as well. This can save you time, money, and they can ensure you’re using the right tools.
Exploring All About eCommerce Accounting
Now that you’ve explored all about eCommerce accounting, you should have a better idea of whether you’re going to do it on your own or hire an outsourced account. Would you like to read more business content? For everything from technology to business, check out our other articles today.