The Beneficial Role Of Bookkeeping & Accounting For DTC Clothing Brands

It Covers:

  • The Role Of Bookkeeping/Accounting For DTC Clothing Brands
  • What Records Does an eCommerce Business Need to Keep Track of?
  • How Can DTC Clothing Brands Ensure The Inventory Accuracy?
  • How To Do Bookkeeping & Accounting For DTC Clothing Brands?
  • Quick Bookkeeping & Accounting Hacks To Save Time & Money
  • eCommerce Bookkeeping & Accounting Key Takeaways
  • Accounting & Bookkeeping FAQs eCommerce Brands Need To Know
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    CHAPTER 1:

    The Beneficial Role Of Bookkeeping & Accounting For DTC Clothing Brands

    For DTC Clothing brands, bookkeeping and accounting are the two important aspects to achieve long-term success.
    Poor cash flow is one of the reasons most eCommerce brands fail.
    However, setting up a solid accounting and bookkeeping system helps resolve this problem. It helps you grow your eCommerce business and avoid cash flow problems.
    In this guide, we will share everything you need to know about bookkeeping and accounting for eCommerce businesses.
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    What Does DTC Clothing Brand Mean?

    A DTC brand refers to “Direct To Consumer”. Simply means, DTC brands make a direct sale to customers. They have complete control over all aspects right from manufacturing to marketing, to selling clothing products directly to the end-users.  

    You can see a significant shift in how businesses reach customers. Before, manufacturers hugely relied on middlemen to get the products delivered to consumers. 

    Now, the time has changed as manufacturers are now stepping toward marketing products online and setting a distribution channel for direct delivery to consumers. 

    The biggest beauty and clothing brands are now shifting towards the DTC business model as a means of reaching customers directly. 

    The Role Of Bookkeeping & Accounting For DTC Clothing Brands

    Among all the online business models, the eCommerce DTC business model is suitable but also complicated at the same time. From inventory management to marketing spending to shopping cart size, eCommerce DTC brands have a lot on their plate to keep up with. 

    As the financial numbers are critically important, bookkeeping and accounting help brands avoid cash crunches, unwanted inventory excess, and more. Let’s discuss one by one both the terms:

    eCommerce BOOKKEEPING

    eCommerce bookkeeping refers to the process of keeping proper track of all financial transactions. It covers everything from purchases, sales, receipts, payments, and all related operating expenses. 

    Having up-to-date bookkeeping matters because it allows one to get a better idea of how the business is performing. Bookkeeping helps you better handle the challenges like cash flow shortages, funds shortages, and tax issues and fines. 

    eCommerce ACCOUNTING

    Ecommerce accounting refers to collecting, analyzing, organizing, and reporting financial data related to business transactions and assets within an eCommerce business. 

    All the financial information that eCommerce entrepreneurs obtain via these procedures are valuable foundations for making future business decisions.

    How Bookkeeping & Accounting Benefit DTC Clothing Brands

    Bookkeeping and accounting are essential for DTC clothing brands as both are more than just a way to keep you organized. Bookkeeping can help you save a lot, drive business growth, and achieve objectives. Below are some of the benefits of bookkeeping and accounting: 

    Bookkeeping & Accounting Prepare You Well For Tax Time

    When it comes to filing taxes, you need to have up-to-date financial records in place. Up-to-date financial records help you give detailed information on your income and expenses. 

    If you will not stay on top of your bookkeeping, it’s quite tough for you to find out the receipts and invoices during tax time. Keeping books updated will surely lessen your stress during tax time. 

    Bookkeeping & Accounting Help You Keep Proper Track of Cash Flow

    DTC clothing brands help you keep proper track of money that is coming in and out of the account. With proven bookkeeping practices, you can bring more visibility to your cash flow and find out areas to save money.

    If you have the support of a professional bookkeeper for the easy management of cash flows daily, you can better track the receivables and payments. 

    Bookkeeping & Accounting Helps You Know How Your Business Is Performing

    Understanding your company's finances requires having access to financial statements including your Profit & Loss Statement, Balance Sheet, and Cash Flow Statement. 

    You may gain an overview of how your firm is doing, check for correctness in the accounting and bookkeeping, and make future decisions regarding expenditure and tax planning by reviewing these records on a monthly or quarterly basis.

    CHAPTER 2:

    What Records Does an eCommerce Business Need To Keep In Track?

    Accurate bookkeeping isn’t just good practice, it helps safeguard your business from various risks.
    Maintaining smooth cash flow is vital, especially in the eCommerce space.
    Keeping up with business records is a tough task with little understanding.
    The whole business responsibility can be well taken care of with accurate bookkeeping.
    In the second chapter, we help you know the records that you need to track time.

    What Records Does an eCommerce Business Need to Keep?

    Accurate record-keeping isn’t just good practice, it helps safeguard your business from various risks. 

    Maintaining smooth cash flow, and a record of cash in and cash out is vital, especially in the eCommerce space. 

    Keeping accounting records is more of a tough task with little understanding of bookkeeping and accounting aspects. 

    The whole responsibility of business with accurate bookkeeping can be taken care of with confidence. 

    In the second chapter, we help you know the records that you need to track time. 

    Keeping Accounting Records Well-organized

    Whether you're a new startup or an established Shopify eCommerce DTC clothing brand, organized record-keeping is essential for the smooth running of your business. Maintaining accurate financial records helps you save money and grow your business. 

    Records DTC Clothing Brands Need To Maintain Are
    Business Expenses:  Business expenses refer to the ongoing expenses you are likely to pay while running eCommerce businesses. It includes costs related to warehousing, shipping, and product distribution. All these expenses are recorded in the income statement.

    Customer List: It includes all the customer and subscriber lists that are available in the form of databases or physical files. 

    Purchase Orders: Refer to commercial documents containing information on product type, product price, and quantity that buyers tend to purchase. This helps in keeping products organized and under control. 

    Accounts Receivable: It is a sum of all invoices that are sent to the buyer but yet not paid. 

    Accounts Payable: It is an outstanding amount of money that vendors and suppliers haven’t paid out yet. 

    By keeping all the above records on the track, you can get the route to unlock many benefits. You can more easily understand how much cash you have or need. 

    Another important benefit resulting from proper record keeping is an easy setting of prices at the right point to cover expenses and meet margin goals. It is equally important to prepare you well for tax payments and audits.

    CHAPTER 3:

    How Can DTC Clothing Brands Ensure The Inventory Accuracy?

    Inventory accuracy is one of the biggest challenges DTC Clothing brands usually face.
    Poor inventory management hurts revenue and customers’ experience as well.
    Because of outdated systems, many of the DTC clothing brands have trouble handling their bookkeeping tasks.
    It’s imperative to bring accuracy to your system for the proper management of bookkeeping tasks.
    This chapter explains the steps you can take into consideration to enhance inventory accuracy.
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    If you want your eCommerce brand to operate effectively and live up to customer expectations, this chapter discusses how to calculate inventory accuracy, the advantages of making inventory accuracy a priority, and actions you can take to increase inventory accuracy.

    Inventory accuracy describes inconsistencies that arise between the quantity and kind of physical inventory. Or say, it is the discrepancy between what is currently available for sale in your inventory and what is in your management system.

    Nobody wants to have an inaccurate inventory because it is problematic and can lead to inaccurate customer orders that could damage your business, slow down your manufacturing line, or make it difficult to sell your stock before it goes out of date.

    Incorrect inventory can also affect your inventory valuation during the accounting phase or cause inventory shrinkage when your supplies are lower than what is reflected in your accounting record.

    The majority of DTC clothing brands strive to be as cost-effective as they can be to fulfil their orders. When it's not being handled or kept in a warehouse, this can cause issues with inventory accuracy.

    Even though achieving inventory accuracy is a challenging undertaking, it can be made simpler with the newest tools, procedures, and bookkeeping/accounting knowledge. 

    In order to increase your visibility to customers, you need to have multiple sales channels to make your inventory tracking quite hassle-free. 

    To help you understand, let's use the following example:

    Imagine you had 1200 t-shirts in stock the first month but only had 700 left by the end of the month.

    How many t-shirts did you ultimately sell?

    How many did you sell on different outside markets?

    How many did you sell during a show?

    Was there a loss of inventory?

    Well. No matter if you sell on your own platform or a third-party eCommerce site, you must make sure you maintain proper inventory.

    Because of this, it's crucial to have a well-organized inventory management system that links all of your sales channels.

    Cloud-based accounting software undoubtedly helps in inventory management, but how can its accuracy be checked?

    You should conduct an inventory count at least once per month, while doing so more frequently will minimize interruption. You cannot just expense the missing or lost items to the IRS if there is a mismatch in counts between your accounting system and the warehouse.

    Maintaining accurate records is crucial for profitability as well as a smooth tax process. ‍

    Pro tip: To prevent difficult bookkeeping and potential tax problems, always keep personal and corporate funds apart.

    CHAPTER 4:

    How To Do Bookkeeping & Accounting For DTC Clothing Brands?

    Managing bookkeeping is a necessary part you have to deal with.
    It helps you better gather, analyze, and manage the data collected.
    If you are selling DTC clothing online, there are ways to build out a solid accounting and bookkeeping system.
    As bookkeeping and accounting are essentials of business success, we help you know how you can do it the right way.
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    Even if you are not extremely skilled at handling finances on your own, it makes sense to outsource your bookkeeping and accounting because it is the only practical way to maintain accurate and well-organized records. 

    For a DTC Clothing brand, you have two major alternatives for accounting: doing it yourself or hiring a pro to do it for you. Having a professional handle your accounting and bookkeeping relieves you of all responsibility.

    You don't have to be concerned about anything getting done right and on time. You may concentrate on other elements of your business, such as product development and marketing, by outsourcing your bookkeeping and accounting to experts.

    Additionally, it is true that learning bookkeeping takes time. Having an expert on your side is considerably more economical than expending the time and effort to learn. You'll be pleasantly astonished by how reasonable and expert their bookkeeping services are with them.

    What Is The Role of a Professional Bookkeeper?

    Having the support of a professional bookkeeper will help you greatly. You can ensure that your financial records are up-to-date, all the transactions are categorized mannerly, and financial reports are handled timely. Simply put, managing your eCommerce books is quite easy if you have a bookkeeper on your side with the right tech stack, solid knowledge, and skills. 

    Set Up Your Cloud-Based Accounting 
    Considering cloud-based bookkeeping and accounting, one needs to keep their business books online. It includes everything right from income records, expenses, and assets. The whole information is encrypted and only accessible to people with the login. This means it offers high-end security to businesses.

    Cloud-based accounting software comes with the tools for invoicing, managing bills, and more. To make everything easy for you, you can make a wise decision of hiring an expert who can better handle your business’s bookkeeping functions. 

    From Cash reconciliations, vendor setup, and charts of accounts to managing inventory value and depreciation reports, an expert can provide clean books that you would be proud to show your parents.

    Weekly, Monthly, Quarterly Bookkeeping Tasks
    In addition, there are tasks that you should do weekly, monthly, and quarterly. On a weekly basis, it is about keeping up to date on your transaction processing and reviewing for necessary adjustments to accounts. This ensures that you are always looking at the most accurate financial data, which is crucial for making any decisions that can affect your business’ growth path.

    On a monthly basis, the most important bookkeeping tasks you have to handle are:

    • Managing smooth Cash Flow.
    • Setting up cash flow forecasts.
    • Inventory management to better manage and forecast inventory. 
    On a quarterly basis, you have to keep an eye on the business’s finances from the previous quarters, set new growth goals, and make sure your reporting is in order. Spending a little time once a month or a quarter to ensure your taxes are in order can also avoid added stress and compliance issues at tax time. To avoid compliance or added stress at tax time.

    CHAPTER 5:

    Quick Bookkeeping & Accounting Hacks To Save You Time & Money

    Bookkeeping and accounting refer to how DTC clothing brands track income and other expenses.
    The business’s financial health depends upon accurate bookkeeping, which further helps drive better financial decisions for businesses.
    Let’s help you know some of the bookkeeping and accounting hacks that help you save money and time
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    Almost every DTC clothing business keeps track of its income and expenses through bookkeeping. Any company's financial stability depends in part on good bookkeeping, which provides data for financial as well as investment decisions.

    It is essential to keep accurate records of all transactions to have good information on which you can make wise business choices. A business keeps track of its income and expenses through bookkeeping. Any company's financial stability depends on good bookkeeping, which provides data for operational, financial, and investment decisions. 

    Bookkeeping Hacks To Keep You Stay Organized & Save Money 

    Keep A Proper Record of All Transactions: To maintain correct bookkeeping, It's essential to start by keeping track of every dollar that enters or leaves the company. Missing tracking of transactions will result in loss statements, which also lead your company to make decisions on false information.

    Keep Your Business & Personal Expenses Separate: It's important to keep track of business spending. It would be impossible for you to determine whether your business is profitable if you combine your personal and business spending. Additionally, keeping track of company costs separately as it aids in tax preparation. Your assets and corporate liabilities must be separated.

    Get Every Business Expense Tracked: The second accounting and bookkeeping recommendation is to properly track your business spending. Money quickly adds up, and before you know it, you are out of cash. To reduce costs, you must constantly monitor your business spending. 

    Additionally, it provides you with a more precise profit margin to evaluate your company. You shouldn't be surprised by higher costs. Always make long-term plans to prevent urgent financial issues.

    Watch out for Invoices & Receivables From Close: The most exciting aspect of your company, income, and revenue, is the topic of the following accounting tip. It feels fantastic to close a deal and give your consumer an invoice. 

    Because of this, you must regularly monitor the status of your invoices and make sure your clients pay you on time. You can accept payments online with cloud-based accounting techniques, which will facilitate speedier payment collection from your clients.

    Automate Bookkeeping with Cloud-Based Accounting: Most of your accounting processes are automated via cloud-based accounting. When and where you need them, you may make invoices, keep track of spending, and obtain pre-made financial reports.

    It is a good idea to have professional support available if you have no idea how it operates. Our devoted team at FreeCashFlow.io handles all of your bookkeeping needs for your internet business. We offer clean books that you would be happy to show.

    Get You Prepare Well For Tax Filing: Make the process of filing your taxes as simple as you can. Taxes, however, are challenging to understand. You have varying tax responsibilities depending on your country and the type of business. To better understand taxes and ensure that you are ready to file your taxes, you must obtain professional assistance.

    CHAPTER 6:

    eCommerce Bookkeeping & Accounting Key Takeaways

    Operating an eCommerce clothing brand comes with a few bookkeeping challenges. Now we’ll discuss some key points in a bookkeeping solution for eCommerce brands.
    By understanding them, you can make the best and wisest decision about how to handle your bookkeeping.
    The key to a successful DTC clothing business is to keep you on top of the business finances. That’s where bookkeeping is the backbone of every business. In sum, setting up a proper accounting system from the get-go can help grow and scale your business. 

    Some key things to do are: 

    • Use cloud accounting methods. 
    • Get your financial reporting in order. 
    • Hire accounting and bookkeeping experts as soon as you can afford to.

    CHAPTER 7:

    Accounting & Bookkeeping FAQs eCommerce Brands Need To Know

    Some of the most frequently asked questions by eCommerce brands on bookkeeping and accounting essentials, how to manage the books, and more.

    What Does Bookkeeping Mean For eCommerce?

    Bookkeeping is the process of recording and managing all financial transactions for your business, including sales, purchases, and payments.

    How To Handle eCommerce Business Books Effectively?

    Cloud-based accounting is the best way to handle eCommerce business books. It allows you to keep your books online for your business and helps streamline work to achieve greater efficiency. 

    What Is Cloud-Based Accounting And How Does It Benefit DTC brands?

    eCommerce businesses usually have a concern over privacy and data security. Cloud-based accounting becomes the best solution for them. The biggest benefit of this accounting method is to allow employees to access financial data on demand. Having real-time access to data helps businesses make better strategic decisions.


    One thing that makes your DTC clothing brand outshine is keeping your books organized.
    Simple – the earlier you do this, the better you will perform.
    Believe me, unorganized books can prove to be a nightmare for your business, especially when the tax season is near.
    If you have an established brand and are looking for a way to prepare you well for tax time, this guide is perfect for you.
    It covers everything you need to make your clothing brand finances easy by choosing a cloud-based accounting method.
    Visit FreeCashFlow.io to better understand accounting and bookkeeping aspects.

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