Accounting for ecommerce 101: Getting your books in order

If you’re overwhelmed with running accounting apps, know you can hire professional accountants to help. Give them access, and they can work inside your software solutions. Meanwhile, you can log on when you need to and track progress as it happens. Both chargebacks and customer returns aren’t technically revenue. But the funds can hit your account and cause balance sheet issues and liabilities if not recorded properly.

• Alternatively, you could opt to use an accrual-based accounting system.
• However, it’s just a fraction of what accountants actually get up to.
• But merely having an ecommerce business is not enough for success.
• McKinsey and CompanyAccounting software solutions can help you manage transactions, whether they’re happening spontaneously or on a set schedule.
• You’ll need to deal with issues like tracking inventory, sales tax, financial reports, and merchant fees.
• Or, track the right metrics and use your books as an asset to better grow your ecommerce business.

Ensure that you control your inventory tightly, so you don’t have too much stock waiting to head out the door. And pull money out of your checking account into savings tools, so you’ll always have some on hand in case of an emergency. With strategic management, you’ll stay in a solid financial position.

Accrual accounting

While additional ecommerce bookkeeping types can make life easier for your customers, keep in mind that they’re less straightforward from a bookkeeping perspective. If you receive a payment via cash or check, the sale won’t be fully recognized in your books until you deposit that money into your bank account. From calculating taxes on online sales to inventory management to figuring out shipping logistics, running an online store comes with a whole host of challenges and considerations. Using technology to integrate with your online stores , marketplaces , payment processors , or your other apps, can significantly reduce your errors and save you time on bookkeeping. Harnessing the power of automation here allows you to pull the data directly from your platforms into your books on a real-time basis.

Here are the most important reasons why bookkeeping is essential for ecommerce entrepreneurs. At Pilot, we have a team of expert bookkeepers using unique tools who can handle the most difficult e-commerce bookkeeping situations.

What do ecommerce business owners need to keep track of?

Many https://www.bookstime.com/ platforms have complex shipping and listing fees that make it hard to calculate your profit margins with any level of accuracy. They may provide financial statements, but this still requires detailed analysis and manual data entry, which can lead to human error if you aren’t familiar with ecommerce bookkeeping. Historical data may not be readily available, so it requires detective work to track down transactions for a particular period. ECommerce entrepreneurs, however, have different business needs. For example, they need to track customer returns at a far greater rate than businesses selling products in brick-and-mortar stores. If not tracked properly, returns can throw off your sales, inventory, and sales tax records in one fell swoop. Even an experienced accountant will recommend using accounting software that can accurately calculate and track the impact of returns rather than relying on manual entry.