Ecommerce Accounting Agency – Get Ready To Grow Your Ecommerce Business
When you ask any eCommerce businessman what is their most minor favorite part of their task? Most will answer “accounting” (though many people love accounting). About 40% of small businesses handle their accounts independently without help. But as the eCommerce business grows, the finances will become more complicated.
The sales, returns, banking fees, supplier payments, and so on – all in-and-out money movements must be categorized, analyzed, and appropriately reported to pay the tax. Without the proper accounting system, you will be overwhelmed with the financial data you have collected till now. Finance needs one’s complete attention since accounting is essential. Hence, let’s know the full details here.
Bookkeeping Vs. eCommerce accounting:
Bookkeeping is the starting point for the accounting practice in which a neat record of financial transactions and documents will be maintained. This bookkeeping aims to describe and organize the current state of finance. Critical tasks in the bookkeeping include:
- Categorizing the transactions
- Account payable and receivables management
- Preparing balance sheet
- Account reconciliation
- Payroll management
On the other hand, accounting analyzes all the financial records produced by the bookkeeper and creates a financial report to understand the current economic and future financial plan. Accounting aims to get complete financial knowledge to make smarter decisions. Critical tasks in accounting include:
- Financial information audits
- Preparation of the entries
- Tax planning
- Financial forecasting
- Risk analysis
- Preparation of the financial statements and reports
An accountant will carefully analyze the company’s finances and find the best way to cut costs, prepare tax reports, and help grow the business. It is essential to understand that you will not be able to do good accounting unless you know accurate bookkeeping, and it’s harder to do proper bookkeeping if you do not have an efficient accounting process.
Everything you should know about bookkeeping for eCommerce companies:
- Recording transactions–The critical aspect of bookkeeping is recording all business transactions. This includes the transactions where the money enters or leaves the company. In the eCommerce business, the customer may buy the product anytime. Hence, the transactions must be recorded at any time.
The types of transactions that should be kept on track are:
- Expense – Money that the company pays to keep the business running smoothly
- Revenue – Money that the company collects from the sales
- Assets – Anything that the company owns, such as vehicles, properties, cash, equipment, and a few more
- Returns and chargebacks – Money returned to the customer or the credit card company since the product has been returned or fraudulent credit card behavior.
- Liabilities – Any outstanding balance of a loan the company has taken
- Equity – Money invested in the company that is not expected to be paid back.
Why should you record all these transactions?
Every single transaction is recorded to file the tax accurately. Every business is expected to pay proper tax to the authorities, so you should keep track of all the transactions. Another main reason you should record the transactions is to determine the company’s profit. Also, you will be able to find the business’s financial health when you do it properly.
- Returns and chargebacks:
When you run eCommerce businesses, you must deal with returns and chargebacks. A return is when the customer wishes to return the product and get a complete or partial refund. Every eCommerce company has a different refund policy. Hence it’s based on your company to decide the refund policy.
If the money is paid to the customer, most of them record it as an expense, but you can record it as returns and chargebacks. But it should be subtracted from the revenue. Also, make sure that you document whether the product is returned to the inventory or just discarded.
A chargeback is when the credit card company asks to return the money to the customer’s credit card because it is a fraudulent payment. Chargebacks usually come with the extra processing fee you must pay the credit card company. You can record this transaction under returns and chargebacks and subtract it from the revenue (but only subtract the amount paid to the customer and not the processing fees).
This return and chargeback will not affect your business unless you have too many of them. This information will ultimately help you improve the quality of the products you sell.
- Tracking inventory – While you run an eCommerce business, you should keep track of the list, monitoring all the products in stock and available for the customers to buy.
- Preparation of financial statements – The task of preparing all the financial statements is essential for all businesses, regardless of size. These statements are generally the result of the bookkeeping process. It will summarize all the financial information about the company and help you make smarter financial decisions.
There are four types of statements: income statement, cash flow statement, balance sheet, and shareholder’s equity statement.
The income statement summarizes the following:
- Cost of goods sold – How much amount it costs to produce or buy a single product that you sell
- Operating cost includes all the expenses the company pays to keep the business running smoothly. It consists of the office rent, monthly wages, utilities, etc.
- Gross profit – It says how much the company has profited from the sales and should be subtracted from the total amount for which goods are sold. This will now help you get the company’s gross profit.
- Net profit is obtained by subtracting the operating cost from the gross profit giving the company’s net profit.
This income statement will provide only a short-term image of the company’s financial health, while you will need the company’s balance sheet for a long-term vision.
What’s the best way for eCommerce bookkeeping?
All the bookkeeping and accounting tasks look like a lot of work. Yes, it’s a lot of work. But you can easily handle it by hiring the services offered by the eCommerce accounting agency. In this digital age, it is easier for businesses to handle finance easily. The agency will offer the best software for comprehensive bookkeeping for the eCommerce business.
Since the tools are digital-based, it is easy to integrate with the eCommerce site and get the reports to look at the company’s performance. Hence it is cheaper to hire the agency’s services and efficiently handle the company’s finance.
Don’t hesitate to use the best bookkeeping for eCommerce companies to stay organized. You can get the report to analyze the finance and develop strategies to help run the business smoothly. You can also stay on top of others, making regular tax payments and ensuring that all business transactions are recorded accurately.
The experts in the agency will handle the accounting tasks and help you cut down the extra costs to boost the profit.