Running an ecommerce business takes more than just great ideas, products, marketing, and inventory. You also need an ecommerce accounting system to follow the money. How much are you spending? What are your profits? Are you within your anticipated business budget? Is the government happy with your business? Ecommerce accounting uses well-known processes for keeping track of your financial data and business transactions, and staying up to date on taxes, payroll, and profits.
Whether you’re just starting your ecommerce store or have been at it for a little while and are realizing that you need help tracking your business finances, this ecommerce accounting guide will get you going in the right direction.
Ecommerce accounting empowers you to judge the financial health of your business and make more accurate financial projections as your business grows.
What does ecommerce accounting involve?
Ecommerce businesses are built on transactions and inventory. You make sales. You ship goods. You purchase and refill inventory.
The basics of ecommerce accounting begin with a system for recording and reporting your transactions, which includes purchase orders, invoices, expenses, and taxes.
But it goes much further than that. Accounting firms will then take that data and use it to prepare financial statements so they can analyze and report on the financial health of your business.Ecommerce companies also require some specialized attention due to the fundamentals of the business model.
Think about what happens when you make a sale in your ecommerce store. That means the customer uses their credit card and submits payment to your payment processor. What are all the ways that sale affects your finances?
- Your payment processor has received money, but it’s not in your bank account yet
- Sales taxes are incurred, possibly from a different state or country
- Inventory declines
- Credit card and/or payment processor fees are…
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