11 Helpful Bookkeeping Tips for E-Commerce Companies

Across the globe, the eCommerce industry is growing exponentially, with a projected $7 trillion in retail eCommerce sales by 2025. The top-line sales figures may look quite impressive, but without orderly and organized finances, you will not be able to achieve a remarkable performance. Once you decide to manage an online store, then it becomes a necessity to wear multiple hats, like order fulfillment, inventory management, and so on. Without proper knowledge of your finances, you might end up being part of the 41% of the small business owners that do their bookkeeping by hand and are unable to track their sales, refunds, supplier payments, and banking fees.

All eCommerce companies, no matter the size, need to be able to do their bookkeeping. It fundamentally gives you an insight into the company’s financial management, hence allowing you better decision-making with regard to pricing, stock purchasing, and other growth-related matters. Mistakes of a costly nature can be quite an expensive affair; thus, being proactive in preventing them going forward, enabling better cash flow, and setting up your business for success are all you need to do.

How important is bookkeeping to e-commerce companies?

Bookkeeping is the meticulous process of recording, organizing, and analyzing all financial transactions that occur within your online business in eCommerce. Consider it the foundation of your financial well-being, as it offers a precise and transparent representation of the origin and destination of your funds.

Why is bookkeeping important for eCommerce businesses?

For an online store to be successful, bookkeeping is a must. Your business will only achieve success if your customer acquisition costs and operating expenses surpass your overall sales, despite the fact that you have achieved record revenues.

In the eCommerce world, accounting is the mandatory evil that everyone has to do, but knowing the basics can help you focus on strategies that can actually help your business grow. If you have any type of eCommerce store, a budget mechanism is one of the systems that you must create. The reason for this is as follows:

Keep track of transactions

The reason why eCommerce firms need accounting and bookkeeping services is especially true in e-commerce, as firms need to manage a myriad of transactions.

It goes without saying that eCommerce services sell on different platforms, and with the increase in platforms, sales multiply, which goes hand in hand with the eCommerce firm managing dozens or many transactions daily, if not hundreds. An eCommerce business would encounter significant challenges in maintaining a comprehensive record of its transactions in the absence of accounting and bookkeeping services.

Check inventory levels

One additional reason why eCommerce businesses require accounting and bookkeeping services is to monitor inventory management.

Hence, to maintain optimal levels of supply, an eCommerce firm needs to constantly be up to date with the current quantity of stock they possess. An eCommerce business is prone to having a negative impact on the organization due to bad accounting; a surplus or a shortage of inventory are both possible outcomes of such a situation.

Ensure that finances are managed with

eCommerce needs to monitor their earnings and outgoings, for this will result in strong financial management and restraint over expenditure. When eCommerce business owners understand where the funds are allocated, overspending could be handled.

Furthermore, it would be hard for the business to make wise decisions in spending in the absence of having accurate financial records.

Maintain financial discipline

Your substantial eCommerce enterprise necessitates a bookkeeping service. It aids in the development of a budget, thereby enabling you to develop a more effective strategy for future expenditures. Additionally, it may prove advantageous for tax preparation on occasion.

Bookkeeping is essential for the long-term sustainability of a business, as it is essential to maintain accurate accounting records. Businesses are able to effectively manage their cash flow, meet their financial obligations, and plan their investments with the help of accurate bookkeeping.

Bookkeeping entails the verification of receipts, the deposit of payments into a bank account, and the preservation of precise records to ensure that all financial information is readily accessible when required. This comprehensive process can assist you in maintaining financial organization.

Regular and timely payments of taxes

Accounting and bookkeeping create the foundation of eCommerce due to facilitating timely tax payments.

Businesses can guarantee that they are accurately reporting their income and paying the appropriate amount of tax by monitoring their inventory, expenses, and sales.

An eCommerce business would encounter significant challenges in determining its tax obligations in the absence of effective recordkeeping and accounting.

Adherence to regulations

Compliance is crucial in the prevention of money laundering and fraud. Government regulators can assist in the identification and pursuit of criminals who may be employing eCommerce businesses to launder money by mandating that businesses maintain precise financial transaction records.

In order to prevent penalties, eCommerce enterprises are required to submit accurate financial reports to the government on a regular basis. Maintaining exact records of all financial transactions helps the eCommerce bookkeeping company to ensure the correctness of these reports.

Consumers are safeguarded through adherence to government regulations. Consumer prices may increase as a result of fines or other penalties imposed on eCommerce businesses that do not adhere to government regulations. Bookkeepers can assist in reducing the costs for consumers by guaranteeing that eCommerce businesses adhere to government regulations.

Establish a dependable business model

You might think of your company model as the blueprint for how you will make money. It delineates the products or services that you wish to provide, the target audience, and other critical information regarding the operations of your organization.

Bookkeeping aids in the organization of your firm, the preparation of tax returns, and the budgeting of your business. Your organization uses a budget as a financial road map. By establishing a budget, you can anticipate future business expenditures to facilitate growth.

Missed deadlines and minor errors may result from the last-minute tension caused by the effort to identify any discrepancies in your financial statement. It is imperative for businesses of all sizes to avoid errors, and consistent accountancy may prove advantageous.

Accurately predict financial outcomes

A financial forecast is an endeavor to predict the financial performance of your company in the future. Pro forma financial statements are employed to render these forecasts more tangible.

Pro forma statements are comparable to the financial statements that you utilize on a monthly basis to evaluate your organization’s performance. The primary distinction is that pro forma statements are generated in advance for forthcoming months and years.

In the event that you are conducting a financial projection for planning purposes, it is advisable to rely on the income statement, cash flow statement, and balance sheet to generate advance financial statements for the next six months to a year. This should be done with the assistance of a reputable bookkeeping service.

Consider financial forecasting to be a prediction, while budgeting is a strategy. Bookkeeping is a critical component of financial prediction, as it involves evaluating the trajectory of your company based on past performance and other factors in order to predict the future.

Ensure your safety from fraudulent activities

What is the method by which your accounting ascertains whether the items and services for each invoice were received to the appropriate standard? They often fail to do so, particularly as the company expands and more consumers make purchases. In order to prevent the payment of products or services that have not yet been received, the invoice should be “approved,” which signifies that it is prepared for payment. Additionally, this will determine the necessity of an efficient bookkeeping service.

When you have a comprehensive understanding of your small business finances, it is much easier to identify any unusual spending or balance-sheet issues that may be associated with suspicious activity by an employee. Only a dependable bookkeeper can reconcile your balance sheet and evaluate your finances in relation to the monthly budget.

Enhance customer service

If you are like the majority of business proprietors, you likely perceive accounting and customer service as distinct functions. Nevertheless, customer service can be significantly influenced by effective accounting.

The initial step in ensuring that your consumers are delighted and continue to return for more is to provide exceptional customer service.

Accurate and timely financial information from your accounting department is essential for providing exceptional customer service.

There are numerous methods by which good accounting can enhance customer service, such as by reducing the time required to process orders, enhancing inventory management, and identifying sales opportunities.

By guaranteeing that your accounting department furnishes you with precise and punctual financial information, you can concentrate on providing exceptional customer service that will encourage your clients to return for additional services.

Enjoy tranquility of mind

Your bookkeeper will be responsible for the classification and reconciliation of your transactions, the compilation of financial statements, and the management of other bookkeeping tasks on your behalf. This could potentially free up a substantial amount of time and provide business owners with the peace of mind necessary to focus on other critical responsibilities, such as business development.

Another approach that bookkeepers may employ to alleviate the tension associated with bookkeeping is to organize your finances. They may achieve this by monitoring your revenue and expenditures, categorizing your transactions, revising your chart of accounts, and producing your financial statements. This provides you with a comprehensive understanding of your company’s financial situation and the allocation of your funds, enabling you to make more informed decisions regarding their expenditure.

A bookkeeper can also be a valuable asset, whether they are employed in-house or outsourced, as they can offer guidance and advice as needed. They can provide guidance on how to conserve money, assist with bookkeeping concerns, and provide support and peace of mind when confronted with financial challenges.

Simplify E-Commerce Bookkeeping for Success

At Velan, our accountancy services encompass the recording, retrieval, and storage of financial transactions. We will assist you in the following areas: managing invoicing, organizing and recording receipts, preparing financial reports, verifying and tracking invoices, overseeing accounts receivable, managing employee payroll, and paying suppliers and vendors.

Although certain businesses may endeavor to acquire bookkeeping skills independently or employ bookkeeping software, this can result in errors and inaccuracies. Fortunately, delegating your bookkeeping to Velan can mitigate the risk of errors and assist your business in avoiding lost business opportunities and audits. For additional information regarding our e-commerce accounting services, please reach out to Velan.

E-Commerce Bookkeeping FAQs:

What is the definition of eCommerce bookkeeping?

eCommerce bookkeeping is the methodical documentation, organization, and analysis of all financial transactions associated with your online business. This encompasses sales, expenses, refunds, and other financial transactions.

Why is bookkeeping important for my online store?

Bookkeeping helps you make informed business decisions, ensures tax compliance, manages cash flow, and supports business growth by providing a clear picture of your financial health.

What distinguishes accounting from bookkeeping?

Bookkeeping is the daily note-to-remember of financial transactions. Accounting is the comprehensive process of interpreting, analyzing, and summarizing financial data in order to generate reports and make strategic decisions.

What is the most effective method for accounting for sales tax in eCommerce?

Location-specific sales tax regulations exist. It is imperative that you comprehend the tax regulations of the states in which you have a “nexus” (a physical presence or significant economic connection). You must collect, register, and pay sales tax in compliance with these rules. This can be automated with the assistance of accounting software.

What are some of the most prevalent bookkeeping challenges faced by eCommerce businesses?

Dealing with sales tax complexities, managing inventory, managing refunds and returns, monitoring sales from multiple channels, and managing high transaction volumes are among the most prevalent obstacles.