As traditional businesses are forced to close due to the epidemic, e-commerce has seen a significant increase. However, this presents a difficulty for e-commerce firms since essential back-office services, such as accounting, may be unable to keep up with the massive growth in company volume. E-commerce is well-known for having a high volume of daily transactions. As a result, it is difficult for them to maintain accounting data, which is typically kept on the selling platform rather than in the bank account.
According to Warren Buffet, "accounting is the language of business." Understanding this language, then, can be the difference between winning and losing for an e-commerce centre. E-Commerce Accounting fundamentally assists in the following areas: Using a company's financial data to increase efficiency and profitability; Planning the long-term goals of the business; Maximizing business tax savings.
There are several measures you can take to enhance your e-commerce accounting procedures and secure the profitability of your client's business.
Record All Transactions
A transaction occurs whenever money is left or enters the firm. It is typically best practice to record all sales, fees, costs, and refunds to gain a comprehensive picture of real cash flow. To guarantee that your business remains successful, you must keep track of six sorts of transactions which are as follows:
- Liabilities: Any unpaid balances on financial debts.
- Equity: An investment into the company's coffers by the owner of the e-commerce site.
- Revenue: The amount of money collected by the firm through sales.
- Expenses: Money spent by the firm on items that keep the business functioning.
- Assets: Cash, equipment, real estate, cars, and other assets owned by the firm.
- Returns and Charge-backs: Money received from a firm by a consumer or credit card company due to a product return or credit card conduct that appears fraudulent.
Invest in a High-Quality Accounting Software
Accounting software will assist in swiftly monitoring accounts, generating thorough financial reports, and making data-driven company choices. Microsoft Excel provides the foundation for software that monitors a company's cash flow.
Other software brands, such as QuickBooks, are devoted to e-commerce accounting. These apps provide free trials to potential customers, allowing them to explore and evaluate which software will work best for their company. Software that makes it simple to import data into your books is essential for e-commerce firms that use portals like Amazon, Shopify, and others. These sorts of software will assist you in saving both time and money.
Integrate Your Accounting Software With Your E-Commerce Platform
Getting accounting software that syncs with your online marketplace is one of the most critical things that all e-commerce businesses must do. This can save you a lot of time from individually recording all of your operations, which might take a long time. Furthermore, it helps you avoid missing any transactions during the upload process and the data with your bank account afterward.
You must also separate your transactions into revenue and costs. It is important to keep track of when money enters and exits your account. Separating them into income and costs can save you a lot of time when determining how much money you have remaining.
Manage your inventory and COGS (Cost of Goods Sold)
When you sell your items through numerous channels, it can be difficult to keep track of your inventory. You must ensure that the appropriate goods are available. So, keep only the quantity of goods you need and never allow your stock to fall below this level.
You must also consider the cost of the packaging required to securely distribute these items. Similarly, ensure that you have an adequate supply in your inventory. COGS (Cost of Goods Sold) information is critical for determining gross profit and creating accurate e-commerce accounting and financial reporting. As a result, you must understand how much money you are generating on each item before factoring in all of your expenditures.
Keep Note Of Any Other Costs
Your expenditures do not stop with the purchase of raw materials or delivery packing. You must disperse your funds in a variety of locations. Make sure to record them in your ledger because they have a major impact on your earnings and cash flow. Understanding them can assist you in reducing these costs, increase your profit, and further help in e-commerce accounting. You may have the following fixed expenses: Rent; Utilities; Insurance; Real Estate Tax; Loan payment interest; Salaries, etc.
Prepare Financial Statements
Businesses of all sizes use accountants or bookkeepers to generate financial statements, while some small businesses prefer to create these statements independently. Regardless of who compiles them, these statements describe the company's financial activities and, as a result, help accountants in making smart business decisions. The four types of financial statements you will need to create for e-commerce accounting are an income statement, a balance sheet, a cash flow statement, and a shareholder equity statement.
The income statement can assist you in determining how well the firm performed over time (a month, a quarter, a year). An income statement depicts a company's financial health in the near term, but compiling a balance sheet reveals more detailed information. This will allow you to see the company's long-term strategy and total equity, which will help you make educated decisions for the company's long-term health.
You may calculate the company's overall capital by subtracting the liabilities from the assets. You can tell your clients that a well-written equity statement is required by all shareholders, which sellers can outsource to writing professionals if they believe it is outside their expertise.
Update The Books As Often As Possible
Accounting data must accurately reflect the current status of the firm to be relevant. Waiting until the end of the month to revise accounting can be hazardous for the firm and tempting to make risky business choices before the end of the month. Maintaining the company's balance sheet regularly will provide you with an accurate picture of its assets, liabilities, and equity at any given moment.
Fortunately, e-commerce accounting software maintains everything up to date automatically, allowing sellers and accountants to access this information whenever they need it. The accounting procedures you use in your organization might differ between your client's e-commerce company's financial success and failure. Even though the procedure might be time-consuming, it is well worth the effort to ensure the company's long-term viability.
Aside from these main elements, there are other intriguing aspects to investigate, such as security measures or built-in BI tools to help you maintain your e-commerce accounting.
Countless companies rely completely on outsourcing accounting firms for a long time. In this way, they have saved a lot of money as well as time. Hopefully, the article was helpful to you. And has helped you show all the positives of outsourcing accounting. For more details or any queries, reach us at email@example.com or 9310165114.