What Is Ecommerce Accounting?
A Simple Guide for Beginners:
Keeping financial records for your company is not an easy task, especially as it continues to grow bigger. A large amount of financial data needs to be recorded, and if one lacks financial knowledge and does not have all the right tools available, accounting can become difficult and tedious. This is a simple guide to help beginners learn all about ecommerce accounting and how choosing the right outsourcing service can help with your order fulfillment.
Accounting Introduction
Accounting is the practice of analyzing recorded data, making a forecast, and making the appropriate financial decisions. Financial forecasting, risk analysis, tax planning and reporting, financial information audits, preparation of financial statements, reports, and models are all key aspects of accounting.
Requirements for ecommerce accounting
One can choose to do cash basis accounting or accrual basis accounting, but in either case, you will need these three things:
Business bank account
Golden rule of accounting- keep personal and business finances separate. Have a separate business bank account and create a business account in any payment apps you use.
Business tax ID number
Businesses need to have a 9-digit EIN (Employer Identification Number). This number is the identifier for the business when filing tax documents. This number can be requested from the IRS.
Accounting software
Using an accounting app or software is the most efficient way to tackle these tasks. It can make expense management, sales recording, and other bookkeeping tasks much simpler and less time consuming.
5 Important Tasks of Ecommerce Accounting:
You will need to complete the key accounting tasks that come with b2c fulfillment:
Categorizing transactions
The first task involves categorizing transactions into expenses and income. Most of it can be done for you by one of the various apps and programs available. Categorization helps in estimating regular/monthly expenses, revenues, and one-time expenses.
Staying on top of taxes
Ecommerce business owners need to stay up to date with two types of taxes- sales tax and business tax. Correctly charge the customers with the sales tax and keep a clear record of all these sales taxes. If the company owes more than $1,000 worth of taxes by the year-end, they need to pay quarterly.
Differentiating between chargebacks and customer returns
A chargeback is a payment dispute where the customer claims the transaction was fraudulent and demands a refund. Categorize these as "Returns and Allowances. "As for store returns, initially record it as an expense under accounts payable. Once the product is received back, subtract the refund amount from revenue and categorize it as "Returns and Allowances."
The benefits of outsourcing ecommerce accounting
Accounting in an ecommerce business can get a little complicated, so it is often beneficial for these companies to leave the task upto reliable accounting firms, opting for outsourcing their accounting. Here are some of the benefits of outsourcing your accounting:
- Experienced personnel
You won’t have to spend time and money training your employees in bookkeeping and business finance. Hiring professionals means they come with a wide range of experiences and knowledge in the accounting field. This will decrease the probability of mistakes and oversights as well as allowing your employees to focus on other tasks.
- Efficiency
Outsourcing your accounting saves a lot of time for senior management which can be better utilized making decisions that will grow the business.
- More informed decision making
The qualified personnel of the company you outsource your business’s accounting tasks to will present you with your financial statements and records. This increases the efficiency of your management team in making decisions as well as increasing the quality of these decisions.
Accurate accounting is essential to keeping your b2b fulfillment business running, making sure you have trained professionals taking on these tasks is crucial. Wrongly recorded data can lead to big issues down the line. Outsourcing your accounting to a credible company that can handle the recordkeeping for your ecommerce company will help you grow and manage your business.
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