Are you an online seller? Do you feel like you’re constantly playing catch-up regarding your accounting and bookkeeping? If so, don’t worry — you’re not alone. Even so, that doesn’t mean you have to continue feeling overwhelmed. There are a few simple tips that can help make keeping your books a bit easier. So, if you’re ready to take control of your e-commerce accounting, the Walker Hill Accountants will share some helpful tips below.
1. Connect Accounting Software to Your E-commerce Platform
The first step to streamlining your accounting is to connect your e-commerce platform to your accounting software. This way, all of your sales and expenses will be automatically imported into your accounting software, making it much easier to keep track of everything in one place.
Moreover, by integrating your e-commerce platform with your accounting software, you can automatically generate invoices and save time on data entry. It is a huge time-saver, primarily if you sell on multiple platforms.
2. Use Accrual-Based Accounting
We highly recommend switching if you’re not using accrual-based accounting. This accounting method records sales and expenses when earned or incurred, regardless of when the actual payment is made. So, if you make a sale today but won’t receive compensation for 30 days, you would still record the sale in your books today.
It may seem like a small change, but it can make a big difference in the accuracy of your financial reports. And when it comes time to file your taxes, accrual-based accounting will give you a better picture of your business’s true profitability.
3. Keep Detailed Records of Your Inventory
If you sell physical products, it’s essential to keep detailed records of your inventory. It includes tracking the cost of goods sold (COGS) for each product you sell.
Additionally, you’ll need to keep track of your inventory levels to know when it’s time to reorder. It may seem like a lot of work, but it’s essential for accurate financial reporting.
4. Classify Transactions Correctly
When it comes to bookkeeping, classification is vital. Unfortunately, online sellers often overlook the importance of correctly classifying their transactions. But if your transactions are misclassified, it can throw off your entire financial picture.
For example, let’s say you use the same bank account for personal and business expenses. However, suppose you don’t correctly classify each transaction. In that case, it will be challenging to determine how much of your bank balance is available to reinvest into your business.
To avoid this problem, take the time to learn how to classify your transactions correctly. It may seem tedious, but it’s crucial for accurate bookkeeping.
5. Stay on Top of Your Sales Tax
You may be required to collect sales tax from your customers if you sell products online. It can be a complex task, mainly if you trade in multiple states.
We recommend using automated sales tax software to ensure you’re staying compliant. This software will help you determine which taxes you need to collect and file, and it can even automate your filing process.
6. Hire an E-commerce Accountant
Hiring an e-commerce accountant can be a game-changer for your business. Not only will they be able to handle all of your bookkeeping and accounting, but they can also offer valuable insights into your business finances.
An experienced e-commerce accountant can help you save money on taxes, spot financial red flags, and make sound decisions about your business finances. If you’re serious about growing your business, we highly recommend hiring an e-commerce accountant.
7. Use Financial Reports to Make Better Business Decisions
Your accounting software will generate various financial reports that can be extremely helpful in making decisions about your business. For example, the Profit & Loss report will show you how much your business makes (or loses) each month.
You can also use the reports to track your inventory levels, monitor your spending, and see which products are selling well (and which aren’t).
8. Keep Your Personal and Business Finances Separate
Last but not least, keeping your personal and business finances separate is important. It may seem like a no-brainer, but it’s surprising how many online sellers mix their personal and business expenses.
Not only is this bad for your bookkeeping, but it can also lead to problems come tax time. So, if you haven’t already, it is recommended to open a separate bank account for your business. This makes it much easier to track your expenses and stay organized come tax season.
Following these tips can take your e-commerce business to the next level. Of course, accurate bookkeeping is essential for any business, but it’s significant for online sellers. By staying on top of your finances, you can make sound decisions about your business and ensure your long-term success.
What other tips do you have for e-commerce sellers? Share your thoughts in the comments below!
