With the rise in e-commerce, e-bookkeeping has also risen. Bookkeeping can be tedious and time-consuming. It doesn’t take long before you find yourself having to do it every day or twice a day, which can wear on your mental health and stress levels.
E-commerce businesses are seeing unprecedented growth.
As e-commerce business owners transition into this modern age of consumers, many are moving towards online shopping for their products and services. It’s quick, easy, accessible everywhere, and provides an opportunity to gather even more consumer data for future marketing efforts.
This article will give you some of the top best practices for e-commerce bookkeeping. Not only will this help get your accounting tasks in order, but it’ll also make it easier for you to get them done in less time!
This applies for Amazon sellers, Shopify store owners, WooCommerce stores, Etsy sellers, and any other eCommerce platform.
The Importance Of Proper Documentation
Documentation is vital for any business, but e-commerce is essential. Proper documentation will help you keep track of all the financial aspects of your business. This includes transactions, financial reports, accounting transactions, and more.
The more organized you are with your records, the easier it will be to do your bookkeeping in the future. What’s more, proper documentation will make tax time much easier for you as well!
Best Bookkeeping Practices For E-commerce Businesses In 2022
Here is a list of the best e-commerce bookkeeping practices for 2022.
1. Integrate Payment Processors With Your Bookkeeping Software
One of the best ways to streamline the bookkeeping process is to use a software application developed specifically for small business owners who have an online business on top of their brick-and-mortar store, or vice versa.
By integrating popular payment processors into your accounting software, you can better keep track of your accounting while still offering customers the convenience of using their preferred payment method across all sales channels.
2. Systemize Product Types With Specific Labels For Online Orders
It’s important to know where everything belongs within your supply chain so you can allocate inventory accordingly. If one product is selling well, but another isn’t selling at all, it’s helpful to know which product you should be prioritizing inventory for and where that inventory should be stored.
3. Get Tracking Numbers Into Your System As Soon As They Are Available
Suppose a shipping label gets printed early in the morning before your bookkeeper arrives to work. In that case, they can get the tracking number into the accounting system when the bookkeeper logs on. There is no delay when it comes time to record incoming revenue or determine outbound shipping costs later in the day.
4. Consider Dropshipping Businesses Within Your E-commerce Bookkeeping Cycle
As online shopping becomes more prevalent within our consumer culture, dropshipping businesses continue to expand and become more popular due to their ability to offer free and easy online shopping with the convenience of delivery to the consumer within days.
5. Make Use Of Available Data To Help You Keep Track Of Everything
As an e-commerce business owner, you have access to your business bank account and a wide array of data that can be used for tracking purposes—not only your sales and inventory, but also trends in your industry and consumer behavior patterns and preferences.
Keeping track of all this information, and making use of it where possible, will help you gain a greater understanding of what’s selling and what isn’t, which products should be kept in high stock, and which marketing efforts are yielding the best returns, among other things—so that you can make more informed decisions moving forward.
6. Choose The Right Software
One of the best things you can do for your business is choose the right software. Some of the top e-commerce software includes:
While there are many other programs, these are some of the top programs businesses have used in this industry. But before you can choose a program, you need to know what you want from your bookkeeping software. Check the company’s website for a free trial and see how it would work for your business.
You may not be able to find a free trial, but most have a free option that will give you an idea of whether it’s worth paying for. Please also read reviews before buying because not all programs are made equally or will work well with your e-commerce store needs.
7. Maintain Sales Tax Records
Keeping track of sales tax is vital for your e-commerce accounting. You’ll need to know how much you’ve collected in taxes and the amount of money owed to the government. The point-of-sale system should keep track of these numbers, but it will be up to you to file the paperwork if needed. Business income taxes can be filed quarterly.
If you don’t fill out this paperwork on time, penalties or interest fees may be added. These fees will be on top of any penalties for late filings. Set aside time each week to enter your sales tax information into a spreadsheet to make it easier on yourself.
This will help you avoid forgetting important information like filing deadlines or whether or not you’ve paid a merchant account service fee in a specific month.
8. Stay Aware Of Your Cash Position
One of the best practices is staying aware of your cash position. When you start an e-commerce business, it’s easy to get swept up in the excitement and forget how much money is coming in and going out.
So, make sure you don’t forget about your financial statements. Keep track of your financial transactions. This will help you manage payroll and avoid running out of money before the end of the month.
9. Consider Whether Inventory Is Necessary
You may not need to track your inventory if it doesn’t make sense for your business. Inventory is often a requirement, but you can opt-out of tracking it if you think it’s not necessary.
For example, if you sell digital downloads, inventory is probably not the best use of your time because there are no tangible items to track.
10. Understand The Difference Between Inventory And Non-Inventory Items
One of the first best practices for e-commerce bookkeeping is understanding the difference between inventory and non-inventory items. This is a significant distinction in how you handle your finances. Inventory items are products you have in stock and will eventually sell to customers.
Non-inventory items are products that you have no physical possession of but are sold on your website. The books mentioned above are an example of non-inventory items because they’re not physically with you yet.
11. Handle Inventory Properly To Save Time
The first step in e-commerce bookkeeping is inventory. Inventory can be time-consuming, but if it’s done correctly, your bookkeeping will go by much quicker.
To make inventory easier, make sure you have the right equipment. After taking stock of what you have, make sure you set up a system to track your cash flow statement easily. Setting up software like QuickBooks can help with inventory as well.
12. Use An Accounting Method That Suits Your Business Needs
Different organizational needs require different types of bookkeeping. You might just want to use a basic system such as Quicken or QuickBooks when you’re starting. However, as your business grows and things become more complex, it’s important to consider switching to different accounting methods.
If you have a lot of business transactions, for example, you’ll need an inventory management system that can keep track of all this information for you. And if you have several employees who work remotely, a cloud-based system might be best for your business. It’s vital to consider what kind of services your business requires before choosing the right accounting method.
13. Be Prepared To Expand Your Knowledge Base In 2022
Expanding your knowledge base and learning new skills is important for e-commerce companies. The e-commerce world is changing, and you need to be prepared.
Technology is ever-changing, so your best practices will need to change with it. If you keep up with the latest trends in e-commerce, you’ll be able to take advantage of them as they occur.
14. Use Invoicing Software
If you’re looking for best practices for e-commerce accounting and bookkeeping, invoicing is one of the most important. You must keep track of your receivables and payables in an organized manner.
This will help increase your efficiency and allow your online business to run smoothly. Using invoicing software like FreshBooks can make billing a breeze and save you time.
15. Utilize Your ERP Functionality
If you want to make sure you’re following best practices, then be sure to use all the features your e-commerce platform offers. Many platforms these days have specific features just for online businesses.
And even if they don’t have it built-in, chances are there are extensions available that will help you track inventory or automate billing. You can choose from various e-commerce platforms to find the right one for your business needs.
But no matter which platform you go with, be sure to look at what features they have to offer and how you can use those features to improve your e-commerce bookkeeping system.
16. Understand How To File Taxes Properly
Different types of businesses have different tax requirements. If you’re looking for the best practices for e-commerce bookkeeping, then understanding how to file taxes is crucial.
Make sure you understand what needs to be done with your books on an annual basis so that your online business can run efficiently.
17. Keep Track Of Your Employees
One of the benefits of having an e-commerce bookkeeping system is that it can easily keep track of your staff. You’ll have better visibility into their work hours, and it will help you with tax season as well.
This will allow you to quickly see how many hours they worked on specific projects so that you don’t overpay them.
Conclusion
As the e-commerce industry grows and evolves, so do the best practices for e-commerce bookkeeping for e-commerce platforms. Keeping up with the latest trends and best practices will ensure that small business owners maximize their profits and save time and money in the long run.
