Over the past years, the e-commerce business has become a booming industry. Many entrepreneurs have started utilising digital platforms in selling their goods or services. Some sellers have even taken advantage of popular e-commerce websites like Amazon, Shopify, and eBay. Their ultimate goal is to sell their products as quickly as possible and generate more profit. This is where e-commerce accounting comes into the picture.
Unfortunately, online entrepreneurs are presented with a unique set of challenges when it comes to accounting. Because of this, they must come in prepared and ready for these financial obstacles. In this article, we will share four common accounting challenges in the e-commerce business so help you overcome them:
1. Inventory management
Inventory refers to all goods or products held by a business for selling in the market to earn a profit. It may only involve counting or listing your items or stocks in various production phases, yet there’s still more to this stage than you might expect. The truth is that managing inventory for your e-commerce business can be challenging—from tracking what you have to checking how much they’re worth down to locating where they are stored. This is why your inventory management must go hand in hand with effective accounting practices to fully control your stocks and cash flow.
2. Data entry and analytics
When it comes to your e-commerce business, you will be dealing with lots of data and pieces of information. These include your list of stocks, local sales tax, seller fees, inventory quantity sold, shipping costs, and customers’ details, among many others. As the manual entry of these can be quite overwhelming for you, it’s best to use automated tools or software for efficient and streamlined processes. In fact, using data analytics will also help with your accounting practices and leave no room for errors. Ultimately, robust accounting reports will help you come up with sound business decisions.
3. Tax liability
Even when you’re running an e-commerce business, whether you own a retail store or are an influencer, you can’t get away with taxes as they are part and parcel of life. On top of this is your sales tax that you’re responsible for paying in your jurisdiction. However, the problem is that this tax in the e-commerce business has become complicated now more than ever. For this reason, you must be well-acquainted with the policies and regulations in your country, and be sure to comply by paying your tax obligations. If you are not well-versed in this process, it’s best to work with the experts at The ECommerce Accountant to help you every step of the way!
4. Seller fees tracking
Keep in mind that most e-commerce platforms charge entrepreneurs a flat monthly rate for using their sites to sell their goods. Some seller fees even include charges for listing, transactions, advertising, and order fulfilment. That said, you must be able to track and monitor your required fees and ensure you settle them on time. In this case, you can use online calculators to crunch the numbers yourself or hire an accountant to do the job for you.
At this point, we’ve covered the four common accounting challenges that e-commerce businesses inventory management, data entry and analytics, tax liability, and seller fees tracking. Be sure to consider all the valuable steps discussed above to know what to do and how to overcome them. Likewise, working with an e-commerce accountant can make a difference in your online business’s success. With all these in place, you can have robust accounting experience that will give your e-commerce brand many high returns in time!
The Ecommerce Accountant provides e-commerce accounting services in Australia to help entrepreneurs reduce tax and increase profit. If you are looking to rise above any accounting challenges for your e-commerce business, we are here to help. Book your FREE strategy session with one of our e-commerce specialists today!