The Importance of Bookkeeping for Ecommerce Businesses

An ecommerce CoA should track both merchant fees (per payment gateway), shipping-out expenses, Warehouse costs, and fulfillment fees as separate sub-accounts of COGS. This enables you to analyze these costs on a standalone basis and provides a more accurate gross profit for purposes of understanding your business’s financial health. We’ve discussed sales tax as an issue for many ecommerce businesses.

• You could have a record sales month, but subtracting the costs could reveal that you only broke even.
• These platforms offer various advantages, such as easy setup and improved search visibility, but they do charge a small portion from each sale you make.
• In comparison to other marketing strategies, it’s a long-term investment that provides unmatched cost-effectiveness.
• You would compare the differences between the two accounts as needed.

As a small business owner, you can do basic bookkeeping and accounting yourself using spreadsheets or online services. However, as your business grows, manually logging transaction information can become very tedious. This is where online services integrated with your eCommerce store come in. Virtual assistant agencies like Wishup provide access to a pool of highly skilled bookkeepers with expertise in eCommerce bookkeeping. They can handle all aspects of bookkeeping, including financial statements, bank reconciliation, and inventory management. Ecommerce bookkeeping helps business owners to track variables affecting SKU profitability.

… but they are still a small component of overall retail employment …

This ensures your hardworking team members get paid on time and have their taxes taken out. You’ll also have useful records to refer to when tax time rolls around and you prepare your annual tax documents. The accounting method you choose is the one you’ll continue to use when you record financial transactions down the road. Before you get started entering numbers on the chart of accounts, you have to decide how you’re going to track income and expenses. This software program will organize your chart of accounts and help you improve your cash flow. This program is ideal for tech-savvy individuals who need the organization and math skills of a software program to help with this task.

A sales order represents a payment made but not necessarily a deduction to your inventory, as you haven’t yet had a chance to fulfill the order. Sales orders are common in retail businesses, where there’s very little time and variation between what customers ask for and what they receive. When your customer clicks “check out” on your website, and enters their credit card information, they’re filling out a sales order.

Balance sheet

You should focus on the tasks you do best and outsource the jobs you really can’t do or don’t want to do. Your cash flow statement helps you understand how much free cash flow your company has at its disposal. The balance sheet highlights your company’s long-term financial health so you can see how well your company is currently doing and how this compares with past years in business.

It enables you to report actual and precise figures when tax time rolls around. If you have read until here, you should have a pretty clear understanding of why using an ecommerce bookkeeping specialist is important in maintaining accuracy of your books. Why is ecommerce bookkeeping so different than other industries?

Top 7 eCommerce Accounting Mistakes

An eCommerce bookkeeper can handle all the financial tasks of an online business. This includes managing payroll and bank statements, sending invoices, and reviewing budgets. E commerce bookkeeping is important for an online business owner. To succeed, the total ecommerce bookkeeping expenditures for an online business should not exceed overall sales. Essentially, bookkeeping involves keeping track of the money that enters and leaves your company. It includes organizing, sorting, and recording the financial transactions of a business.

Rent, inventory, maintenance, income stream, and taxes are all in this statement. But, unfortunately, even with software, it’s easy to spend more time than you have attempting to get your books done. E-commerce accounting is about managing the financial aspects of online businesses, encompassing sales, inventory, taxes, and reporting. It ensures accurate and efficient record-keeping, which is crucial for the successful operation and growth of any e-commerce venture.

Basics of Ecommerce Bookkeeping

But you can also track sales using a reliable accounting tool. Freelancers, contractors, self-employed professionals, and even accountants can use it. You can use FreshBooks for more than just accounting or handling tax returns. Third-party providers like FreshBooks offer invoicing, estimates, payroll services, and more.

• That can complicate things from a bookkeeping perspective because the deposits in your bank account are net sales instead of gross sales.
• Bookkeeping is essential for any business in the eCommerce industry.
• It’s important to choose software that’s designed to meet the needs of ecommerce firms, with features to help you process returns and collect the right taxes.
• It’s not when the money is received in hand or sent out for payment.
• For example, each time that you see a charge for Klaviyo, you’ll know that it should go into your marketing software category.
• An example would be a store selling outdated phone models without taking into account the preferences of tech-savvy consumers seeking the latest features.
• It’s important to make sure any bookkeeping solution you choose, has the ecommerce knowledge you need to get the most from your financials.

Let us know and we’ll pinpoint specific ways you can save money and make more money each month. We’ll set your eCommerce books up so that they are powered by proven https://www.bookstime.com/ processes and can easily be built upon. We take care of keeping your books up to date throughout the month and keep you updated on anything that seems out of place.

The income you get by selling old equipment or warehouse is non-operating income. For example, let’s say your P&L showed a significant drop in profit month over month. Further investigation might show that the added expense is acceptable due to hiring a new staff member.