Any business owner knows the importance of meticulous bookkeeping and accounting. How else can you know what’s going on with your business?
Accounting and bookkeeping are two essential factors in running a business that can make or break your success. Many businesses fail in the first few years due to cash flow issues. All owners must consider their accounting options, even e-commerce businesses.
Today we’ll be looking at what e-commerce accountants are and why you might need one to keep your business thriving in the long run.
What is an e-commerce business?
An e-commerce business is simply one that sells goods or services electronically, ultimately over the Internet. Any transactions are digital expenses rather than tangible transactions, and they can be any of the following:
- Business to business (B2B)
- Business to customer (B2C)
- Customer to business (C2B)
- Customer to customer (C2C)
You can sell anywhere online, with some businesses choosing to operate through their own websites while others opt for marketplaces like Amazon, Shopify, eBay, and Etsy.
What is e-commerce accounting?
E-commerce accounting is the process of bookkeeping and looking over all the financial information of an e-commerce business. It involves keeping detailed records of everything that goes on within the business so you can use it for future reference and future planning.
Accounting is one of the most important parts of any business, but many owners fail to complete this area of the business. In short, this is often because there is so much that goes into bookkeeping that many tend to cut corners or skip vital steps to have time for the other areas of their business.
That’s where an accountant comes in. Instead of you having to do all the work yourself, you’ll be able to focus your efforts on everything else you need to do while an accountant takes care of your financial information. They can also offer the following services:
- Managing budgets
- Payroll for employees
- Recording returns and credits
- Generating and analysing financial reports from selling platforms
- Monitoring trends in your cash flow
- Managing expenses and recurrent costs
Most accounting tasks for e-commerce businesses are very similar to those of regular businesses, but there are some extra rules for e-commerce businesses that you’ll need to recognise and adhere to that might not apply to businesses not operating through e-commerce channels. This is where many find e-commerce accountants to be most beneficial because the last thing you need is to get in trouble by not knowing all the rules!
What’s the difference between regular and e-commerce accounting?
As we’ve mentioned above, regular and e-commerce accounting is often very similar and there’s a lot of overlap. However, there are a few vital differences including;
Charting of accounts
E-commerce often requires a more flexible chart of accounts to categorise the range of transactions that are unique to online sales, such as digital transactions, global sales, and online marketing efforts. These are going to differ from regular accounting, so you need an accountant who knows exactly what they need to keep track of – and an e-commerce accountant will offer much better insight as they specialise in online sales.
Stock management
A regular accountant might be in charge of your stock and its listing prices, and an e-commerce accountant might offer the same services. However, as e-commerce businesses often sell through multiple channels, it’s often more difficult to track inventory and therefore can be difficult to manage without a specialist. Many online businesses find stock management incredibly helpful, especially when they don’t need to deal with it themselves.
Payouts
E-commerce businesses often receive payouts from multiple different sales channels which can be difficult to keep up with, especially when the sales channels all have different payout rates. For example, Etsy might pay you at the end of the month you complete orders while Amazon could have a couple of months of pushback. To keep on top of your finances, you’ll need to know when and where all your payouts are coming from, and an accountant can take the pressure off your shoulders.
Sales tax
E-commerce businesses might have more taxes to deal with, especially if they’re selling globally rather than just locally. For example, there may be international VAT and GST obligations you have to abide by to prevent getting into trouble, and accountants can help with these to make sure everything you’re doing is above board. They can also help navigate diverse sales tax regulations and help you keep on top of your payments.
Final thoughts
E-commerce accountants are incredibly helpful for businesses operating online. They can help with cash flow management, sales forecasting, and long-term planning, which can take some pressure away from new business owners. Many owners wonder whether accountants are a worthy expense for their business, but we highly recommend them as soon as you have a team and are finding it difficult to spread yourself across every aspect of the business. Bringing an accountant on to help you can not only remove some stress from your shoulders, but it can also help your business grow and thrive in a competitive market.
