A Guide to Ecommerce Bookkeeping for Business Owners

The e-commerce industry is on rapid growth with promising projections for e-commerce sales. This surge highlights the increasing significance of eCommerce in the worldwide economy.

However, the journey to success in eCommerce isn’t just about launching a business. The landscape is competitive and demanding, particularly in areas like eCommerce bookkeeping, which is especially crucial come tax season. Thus, launching and managing a small business is often a juggling act, consuming vast amounts of time, even for seasoned entrepreneurs.

Establishing a solid bookkeeping system is significant for eCommerce entrepreneurs. Such a system enables them to effectively monitor inventory levels, track product sales, and assess profits accurately. When tax season rolls around, having precise figures readily available streamlines the process of generating authentic financial reports.

So, let us get into the ultimate guide for e-commerce business owners on how to do bookkeeping and hire a bookkeeper who knows the industry’s ins and outs.

What is Ecommerce BookKeeping?

Before we get to the ins and outs of e-commerce bookkeeping, you must understand its basics. E-commerce bookkeeping is all about keeping track of the money coming in and going out of your online business. It’s like organizing and recording your business’s financial transactions in a digital format.

When you run an e-commerce business, your bookkeeping needs are a bit different from those of a regular retail store. Instead of paper records, you can use digital tools and software to track and manage your finances easily.

With e-commerce bookkeeping, you can easily keep tabs on your sales, expenses, and profits. This helps you stay organized, meet tax requirements, and make smart decisions for the future of your business.

In short, e-commerce bookkeeping is essential for keeping your online business running smoothly and ensuring its financial health.

Why is E-commerce Bookkeeping necessary?

We are sure you must be thinking about why e-commerce looking is essential. What’s the purpose? Good e-commerce bookkeeping services are essential for online business owners. In order to thrive, your business expenses shouldn’t exceed your sales.

Knowing the basics of eCommerce accounting can help make your business profitable. It’s important for every online business to have a reliable bookkeeping system.

Here’s how e-commerce bookkeeping can benefit you:

Managing Finances

Having a clear and concise understanding of cash flow is essential for business owners. It essentially prevents overspending and maintains financial stability. Through e-commerce bookkeeping, owners can maintain accurate records of all financial transactions, enabling them to manage their business finances effectively.

Keeping Records

With rapid eCommerce growth and high volumes of transactions, it becomes important for businesses to record every sale or transaction. This practice provides invaluable insight into the overall profitability of the business. Implementing e-commerce bookkeeping ensures that business owners can maintain a record and securely store all transactions, facilitating better financial management.

Understanding Profitability:

Determining the profitability of products or SKUs involves analyzing various factors, including pricing, advertising costs, staffing expenses, and conversion rates. E-commerce bookkeeping provides business owners with the tools to track these variables effectively. With this, businesses can gain a deeper understanding of SKU profitability, enabling them to optimize their operations and maximize profits.

Inventory Tracking

E-commerce businesses must sustain optimal inventory levels to meet customer demand while minimizing extra stock or shortages. Accurate inventory tracking is crucial for achieving this balance. Without proper records, businesses risk facing inventory issues that could affect operations. E-commerce bookkeeping services play a vital role in helping business owners monitor and manage inventory levels efficiently.

Facilitating Decision-Making

Access to accurate financial data empowers e-commerce businesses to make strategic choices that drive growth and profitability. By using e-commerce bookkeeping, businesses gain valuable insights into their financial health and inventory management. It makes an easy way for them to make well-informed decisions that propel success.

How do you do bookkeeping as an e-commerce owner?

As an owner of an e-commerce business, organizing your finances is a major factor in the success and growth of your venture.

Bookkeeping ensures that you have a clear understanding of your financial health, facilitates compliance with tax filing, and enables informed decision-making. Here’s a detailed guide on how to do bookkeeping as an e-commerce business owner:

Establish a Bookkeeping System

Select a reliable accounting software tailored to the needs of e-commerce businesses. Construct a chart of accounts that shows the rundown of specific transactions and categories relevant to your e-commerce operations, such as sales revenue, cost of goods sold, advertising expenses, and shipping costs.

Record Transactions Accurately

Record all sales transactions, including product sales, discounts, and returns, to accurately calculate your earnings.

Alongside, keep track of all expenses related to your e-commerce business. This can include advertising costs, inventory purchases, shipping fees, and software subscriptions.

Additionally, categorize transactions correctly within your chart of accounts to ensure accurate financial reporting and analysis.

Manage Inventory

You can utilize inventory management tools or features within your accounting software. With that, you can track inventory levels, monitor stock movement, and reconcile inventory counts. Document all inventory-related transactions, including purchases, sales, adjustments, and write-offs.

Reconcile Accounts Regularly

Make sure to reconcile your bank accounts regularly so that your accounting records match your bank statements. Additionally, reconcile credit card accounts, PayPal accounts, and other financial accounts associated with your e-commerce business to maintain accuracy.

Generate Financial Reports

Profit and loss statement: Prepare regular profit and loss statements to track your business’s revenue, expenses, and net income over a specific period.
Balance sheet: Create balance sheets to provide a snapshot of your business’s financial position, including assets, liabilities, and equity, at a given point in time.
Cash flow statement: Generate cash flow statements to monitor the inflow and outflow of cash within your e-commerce business, helping you manage liquidity effectively.

Ensure Compliance

Stay informed about tax obligations relevant to e-commerce businesses, including sales tax, income tax, and VAT (value-added tax), and ensure timely and accurate tax filings. Maintain organized records of all financial transactions, invoices, receipts, and tax documents to facilitate compliance and audit readiness.

Seek Professional Assistance if Needed

If managing your e-commerce bookkeeping becomes overwhelming or time-consuming, consider outsourcing bookkeeping tasks to a qualified professional or accounting firm specializing in e-commerce businesses.

Tips To Keep Your Bookkeeping Accurate

Here are some easy ways to avoid mistakes in your bookkeeping:

Use special accounting software: This kind of software makes it easy to collect, store, and report on your finances. It saves time and reduces errors.
Consider hiring an accountant: If you’re not great with numbers, fret not. An accountant can handle your bookkeeping tasks and keep everything up to date.
Check your accounts regularly: It’s important to look over your accounts often, like every three months or every month. This helps make sure everything is correct and detects any mistakes quickly.
Understand sales tax: Sales tax rules can be tricky, but it’s important to know them. This way, you can avoid fines and fees by following the rules.
Use a chart of accounts: This is a system that helps you organize your finances. It’s important to track your budget, especially as your business grows.
Keep your bookkeeping consistent: Whether you use one method or another, make sure you stick with it. Consistency helps prevent mistakes and ensures your records are accurate.

Why You Should Hire an E-commerce Bookkeeper

Running an online store can be challenging. Many business owners struggle with the money side of things. They might need to learn more about keeping financial records or using the right tools.

An experienced e-commerce bookkeeper is someone who knows their stuff when it comes to online businesses. They’re experienced and understand all the ins and outs of bookkeeping for e-commerce.

They can easily handle tasks like tracking sales and expenses and preparing financial reports. Plus, onboarding an e-commerce bookkeeper frees up a lot of time for business owners. This means they can focus more on growing their business instead of worrying about finances.

So, if you are experiencing high growth, dealing with complex transactions and have time limitations, it is the right time for you to hire an e-commerce bookkeeping service.

How and Where to Hire E-commerce Bookkeepers

When it comes to hiring e-commerce bookkeepers, you have several options to consider. Whether you’re looking for in-house employees or seeking assistance from bookkeeping services or freelancers, there are multiple avenues to explore.

But let’s talk about the two most popular choices for e-commerce bookkeeping:

Virtual Assistance Agencies

Virtual assistant agencies like Bookkeepers.com offer a convenient solution for accessing skilled e-commerce bookkeepers. These agencies maintain a pool of highly trained professionals specializing in e-commerce bookkeeping.

It brings cost-effectiveness, as you only pay for the services you require. Additionally, you can scale up or down your bookkeeping support as needed.

These services allow you to interact with your bookkeeper through email, phone, or video conferencing. This facilitates seamless collaboration and access to support when needed.

Furthermore, virtual assistance agencies often have established processes and procedures in place, ensuring that your bookkeeping tasks are performed efficiently and accurately.

Freelancer Platforms

Freelancer platforms offer a wide range of options for hiring e-commerce bookkeepers. Websites such as Upwork, Freelancer, and Fiverr host numerous freelance professionals specializing in bookkeeping services.

Dedicated bookkeeping service providers also exist on freelancer platforms, offering specialized expertise in ecommerce bookkeeping.

When hiring through freelancer platforms, thoroughly vet candidates, review their work history and client feedback and clearly communicate your expectations to ensure a successful partnership.

Final Thoughts

Effective bookkeeping is crucial for success in the eCommerce sector. It empowers business owners to monitor spending and revenue, facilitating informed financial decisions crucial for growth.

Whether you handle bookkeeping on your own or take the help of a certified bookkeeper, learning the ins and outs of your business’s financial flow is a stepping stone towards bookkeeping success.

At Bookkeepers.com, we provide exclusive eCommerce bookkeeping services tailored to your business needs. Our proficient virtual assistant is equipped to assist you with all aspects of your business activities.

Give us a chance to understand your financial landscape and drive your business towards success with confidence and clarity. Contact Us Today

FAQs

What is e-commerce bookkeeping, and why is it important for online business owners?

E-commerce bookkeeping involves recording financial transactions in online businesses. It’s crucial for owners to track finances, ensure tax compliance, and make informed decisions.

How often should e-commerce owners update their bookkeeping, and what happens if they don’t?

Bookkeeping should be updated monthly to avoid errors in financial reporting, missed tax deadlines, and difficulties in tracking business performance.

What are common mistakes in e-commerce bookkeeping, and how can owners fix them?

Common mistakes include account reconciliation errors and misclassifying transactions. Owners should double-check entries and maintain detailed records to rectify errors.

How can technology and software help streamline e-commerce bookkeeping?

Various tools and software automate data entry and generate reports, simplifying financial management for e-commerce businesses.

Is hiring a professional e-commerce bookkeeper worth it? How can owners find one?

Professional bookkeepers offer expertise, time savings, and accuracy in financial reporting. So, it is completely worth it. Owners can find one through research, referrals, and freelancer platforms.