Accounting can be a difficult concept to grasp, but it’s a necessary process for any business to succeed. As a growing e-commerce business, operations can be difficult to manage in itself—but staying on top of your accounting records is a crucial task as well.
Accounting processes should be established from the onset, which is why many budding businesses employ a small business accountant as soon as they open. Getting your own accountant may seem like a costly step in the beginning, but a lack of one shouldn’t stop you from starting on the basics to keep your e-commerce business afloat.
To help you handle that task, here are three basic e-commerce accounting tips that all SMB owners should know.
Track your cash flow
It is an important part of accounting to compute for and take note of your cash flow. By keeping tabs on your business’ transactions, you can analyze and make assumptions as to how your business is doing. With this data on-hand, you can make certain adjustments to how you run your business, optimizing cash flow and ensuring you are able to enjoy as much profit as you can.
While it seems like an incredibly complicated process to do, the simplest way to achieve this is to create a separate bank account just for business transactions. This way, money flow can be tracked easily and safely—allowing you to see just how much is going in and out of your business.
By setting a bank account just for your business, you can also ensure that your business isn’t running out of money. Through it, you can plan ahead for recurring expenses—such as vendor payments and employee salaries—allowing you to cycle money around at the appropriate times to not have any money issues in the long run.
Keeping tabs on your business inventory
For e-commerce businesses that deal with physical products instead of services, it is crucial to take stock of your inventory on a regular basis. More than simply counting the number of finished products you have on-hand, counting your inventory also considers the materials you may need to create the product itself. Your product inventory is the lifeblood of your business—if you’re running out at the worst time, then it could mean the end of your business.
Keeping track of your inventory is a big part of e-commerce accounting, as this considers the assets you have on-hand that are yet to be “liquidated.” With the data this gives you, you can adjust your marketing strategies to open up your cash flow, allowing you to prioritize moving money around rather than stocking it up on inventory.
Keep a good record-keeping ethic
One of the most basic mistakes that a small business can make is to disregard the importance of keeping records. Not only can it help you consolidate your business books, but it also helps you stay out of trouble when you get audited by the CRA or the IRS.
Some of the most basic records to keep track of include the occasional receipts and bills, as well as the more regular things like, bank and credit card statements, revenue records, and monthly account statements of your digital monetary accounts.
Accounting can be a headache to deal with, which is why having a good process from the beginning can help give you an easier time as you grow bigger. If it gets too complicated to handle or if you just need a helping hand, then consider hiring an e-commerce accountant for your business.
At the E-commerce Accountant by New Wave, we listen, plan, and implement solutions to help you minimize the tax and increase the profit of your online business. Get in touch with us today and let us help you with all your accounting needs.