All You Need to Know About E-Commerce Bookkeeping
E-commerce for businesses comes with numerous benefits, including being your own boss, working at your own schedule and running your business from anywhere you want. If you want your e-commerce business to succeed, you must keep track of your financial records, and keeping track of various financial transactions requires you to understand the importance of bookkeeping.
Implementing an accurate bookkeeping system is a crucial part of any e-commerce business. To manage your e-commerce business, you should understand everything that is happening on the financial side. Failure to analyze your financial records could hinder your business from achieving its objectives.
So why is bookkeeping an important part of every e-commerce business? And what should you do to ensure your business reaches its full potential? Keep reading to find out:
Why Is Bookkeeping Important?
Bookkeeping is a crucial yet sometimes neglected practice in the business world. Organising your financial statements, journals, ledgers, and income tax records is important for the success of any business. Each of these documents has its own benefits and its availability can help you understand everything that you need to know about your business and how it is doing on all levels based on numbers.
So why exactly is bookkeeping important?
Business’s Financial Health
Bookkeeping is essential because it helps you to take full control of your company’s finances.
Bookkeeping shows you exactly how you spend money in your business. You can view any unpaid invoices. You will know how much you owe; how much money is in your business and what e-commerce trends you should embrace.
You’ll be able to make timely payments and receive payment for products on time, as well. Striking the right balance between cash inflow and cash outflow will keep your ecommerce business running.
Tips for E-Commerce Business Owners
Whether you are selling your products through Amazon, eBay, Etsy, Shopify or your own e-commerce store, here are some important tips to make commerce bookkeeping easier and more meaningful.
1. Separate Business and Personal Finances
This sounds like a no brainer, but make sure to keep your personal and business finances separate.
If you keep personal and business finances in the same account, you might be tempted to spend cash that you need for new business products. Additionally, you might confuse business expenses with personal purchases.
The right thing to do is to open separate bank accounts for your personal and business dealings.
This will help you keep track of your business transactions as they occur.
If you need to spend business money on personal items, simply make a bulk transfer to your personal account say once a fortnight to ensure your bookkeeper doesn’t have to handle too many small transactions.
2. Use The Right Bookkeeping Software
The kind of bookkeeping software you choose will depend on exactly what you want to use it for. Good bookkeeping software options offer various levels and the ability to be accessed from any device (iPad, mobile phone, laptop) wherever you are.
Many small businesses use online bookkeeping software to speed up jobs, provide you with useful insights into the financial health of your business as well as cutting down the chances for human data-entry errors. Good examples include:
Xero can help pull transaction data straight from your point-of-sale (POS) system, invoicing software, and banking statements. It dramatically speeds up bank reconciliation and credit card information, automatically paying bills. View your cash flow and follow up on outstanding invoices. Monitor your sales and spending and track specific parts of your business.
QuickBooks allows you to track your business’s profitability, any unpaid invoices and lets you follow your earnings and expenses over time and plan for ways to improve it in the future. Profitability measures let you easily and quickly track transactions and determine how much your business earns on inventory.
With accurate bookkeeping, you can tell how much your business is making in terms of income and track your spending to ensure that you have enough cash on hand to cover your business expenses. Proper financial records make it easier for you to analyze the financial state of your small business and determine areas that need improvement.
3. Use an Accountant
If you find bookkeeping quite challenging or it takes up a lot of your time, then it’s recommended to hire a professional bookkeeper.
Outsourcing is cost-effective since you will only need to pay for a few hours of work each month rather than paying a regular salary. With professional bookkeeping services, you will get the work done by professionals so you’re confident that everything is done properly.
With professional bookkeeping services, you can simplify data entry, consolidate data, create comprehensive financial reports, and automate the recordkeeping process.
4. Stay On Top Of Your Sales Invoicing And Tax Deadlines
Even if you have an in-house bookkeeper, they will still need you to stay on top of your sales invoicing and tax deadlines, as they simply won’t be able to perform their tasks without knowing your outgoings and income.
As soon as any job is fully completed, create and send out invoices to ensure the income keeps rolling in, thereby keeping your bank account balance healthy and allowing you to make payments to suppliers on time.
Invoicing your customers on time is critical to business success because that is where the money is.
There are several different taxes businesses are required to pay throughout the year, and proper bookkeeping helps you to know how much is due. Keeping on top of your tax deadlines will also help you to prepare for the next financial year and enable you to consider what your next strategies are.
5. Time Tracking Software for Employees
Time tracking software for employees allows workers to log in and out on their computers or mobile devices. That does not only save them a lot of hassles, but it also makes it easier for you by automatically tracking PTO, overtime, etc.
You can find cloud-based time-tracking software created for almost all industries. Pick one that is compatible with your current bookkeeping software and running payroll will be a breeze, as well.
Bookkeeping is the key to long term business success. It will help you to avoid making costly mistakes that could spell doom for your business.
By keeping on top of your e-commerce business finances, you can get valuable insights into the operations of your business. This will enable you to make wise decisions that will help to improve your bottom line.
Bookkeeping can save you time, money and stress. If you want to implement a proper bookkeeping process, a bookkeeping professional can help.
Bookkeeping and accounting can be overwhelming, so consider hiring professional bookkeeping services. It makes perfect sense to hire a bookkeeper if you think paperwork is costing your business. With a professional in charge, you will be getting more time to run your e-commerce business the way you thought it would be.