Managing financial reports is essential to smooth running a successful e-commerce business. Accurate financial reporting provides insights into the business’s health, helps make informed decisions, and ensures compliance with tax regulations.
It involves preparing, analyzing, and presenting financial findings to business owners, investors, creditors, and regulators. Accurate financial reporting can help e-commerce businesses make informed decisions, monitor their financial health and comply with legal and tax requirements. As such, any business success will depend on financial data. Read more to understand how financial reports help manage an e-commerce organization.
Choose an accounting system
Which kind of accounting system does your company use? You must have a reliable accounting system to manage financial reports for your e-commerce business effectively. Several options are available, including cloud-based accounting software like QuickBooks, Xero, or Wave, or you can opt for traditional desktop-based accounting software. But consider usability, scalability, features, and pricing factors when choosing an accounting system that best fits your business needs. Besides, some software can be custom-made with features like tracking sales, expenses, inventory, and generating financial reports.
Set up your chart of accounts
You want something that simplifies tasks, and you will enjoy using it. Now that you have an accounting system set up a chart of accounts specific to your e-commerce business. A chart of accounts lists every account you will use to categorize your financial transactions. It facilitates organizing your financial data by date and time and generating accurate financial reports. Main accounts for e-commerce businesses include sales revenue, cost of goods sold (COGS), marketing expenses, shipping expenses, payment processor fees, and taxes. All company accounts being in one place will help save time and ensure all capital is utilized correctly.
Record financial transactions
There is no major or minor expenditure in business. Thus, ensure every financial transaction is accurately recorded in your accounting system. This includes sales revenue, refunds, expenses, and other financial transactions related to your organization. Be sure to enter the data immediately as you receive it and consistently to maintain accurate and up-to-date financial records. If you are using an e-commerce platform like Jambo Shoppe or Jumia, incorporate it with your accounting system to automate the recording of sales and expenses.
Reconcile bank accounts and payment processors
Sometimes you may have recorded your financial transactions wrongly with your bank. You may have done it because you were swamped and didn’t notice. To avoid this mistake, regularly reconcile your bank accounts and payment processors to ensure that your financial records match the actual transactions. This involves comparing the transactions recorded in your accounting system with your bank statements and payment processor reports. Any discrepancies should be looked at and resolved promptly to maintain accurate financial reporting and save yourself from the insanities that come along with the misreported transaction.
Generate financial reports
How is your e-commerce business doing? Financial reports provide vital insights into the financial performance of your e-commerce business. Major financial reports for e-commerce businesses include profit and loss (P&L) statements, balance sheets, cash flow statements, and sales reports. These reports help you understand your revenue, expenses, profitability, cash flow, and other key financial metrics. Besides, financial reports help to measure the success of a business. Therefore, review these reports regularly to make informed decisions and identify improvement areas.
Monitor taxes and compliance
Every business must comply with tax regulations, whether online or in physical operation. As such, your e-commerce business must stay compliant with tax regulations. Keep track of sales tax, value-added tax (VAT), and other taxes applicable to your company and ensure that you are collecting and remitting them correctly. Use your accounting system to generate reports for tax filing purposes and consult with a tax expert to help you comply with tax laws and regulations.
Proper financial reporting is necessary for managing the financial health of your e-commerce business. You can apply the abovementioned steps to effectively manage your financial reports, gain insights into your business performance, make informed decisions, and ensure compliance with tax regulations. Therefore, you must have a financial expert as you learn vital information about financial reports. You can sign up for an online class and learn at your pace. Modern programs are flexible, and you can even try this website for a better study experience with outstanding support to help you accumulate more skills.