Running a business is by no means easy because you need to be hands-on, especially if it's an online business. However, there's not much difference between running a brick-and-mortar store and an online business, especially because there are certain practices that both kinds should do. One perfect example of this is bookkeeping.
Bookkeeping is done to keep track of all the financial data of a business, and it also helps you determine your profitability and other performance standards. However, eCommerce bookkeeping is slightly different because of its standards and practices. This is especially true for Shopify businesses because they have various operations and needs. As such, one must know the best ways to make bookkeeping easier, such as:
#1 - Use an Accounting Software
First and foremost, you must use good accounting software, especially if your business has grown. While you may have used spreadsheets, upgrading and using accounting software is time. This software can help you manage your business accounts, payments, expenses, and even taxes.
There is numerous accounting software in the market, so it's a matter of finding the right one for you. Depending on your business size and needs, you should choose Shopify accounting software with all the features you need.
#2 - Review Financial Reports Regularly
As a business owner, it's your responsibility to monitor your financial data. Since Shopify accounting software has plenty of reports, it's your job to review them regularly. You can easily do this by looking at the reports the software has prepared.
However, don't just check the reports for the numbers only. You need to review it to check for errors and inconsistencies thoroughly. Also, check the numbers against your expectations and goals. To help you do this, you can filter and sort your reports so you can quickly identify the errors and inconsistencies.
#3 - Reconcile Your Accounts Immediately
Errors in your records may arise when you manually enter your billing and payment details. This happens especially when there's a lag between the time you receive and enter the data and your supplier or the payment gateway providing incorrect information.
Reconciling your accounts is essential to help you identify these errors. It also lets you check your financial data and see how your profit and loss statement will reflect. You should reconcile your accounts regularly to keep your files and records up-to-date and avoid mistakes in your accounting system. This, in turn, will help you plan your financial goals.
#4 - Address Returns and Chargebacks
If your business has a return policy, you should keep track of returns and chargebacks to avoid any problems. Shopify accounting software gives you the tools to help you process returns and handle chargebacks. You can also do this manually by creating a separate folder for returns and chargebacks so you can identify them quickly.
#5 - Have Fraud Prevention Measures in Place
Bookkeeping's primary purpose is to help you keep track of your financial data and be aware of any problems that may arise. However, it can't protect you from fraud. This is why you should have fraud prevention measures in your business. You should also regularly update these measures to ensure they're effective.
For example, you can use an extra security layer when entering your financial data using passwords and security codes. You can also use third-party apps that can help prevent fraud.
#6 - Engage in Tax Planning
Tax planning is an integral part of running your business. While this is true for all companies, it's especially true for eCommerce businesses because they have to pay taxes, especially the value added tax (VAT) or the goods and services tax (GST).
Like other businesses, you should know how to determine your VAT threshold to avoid paying taxes. You should also be aware that you need to submit tax returns monthly.
Bookkeeping doesn't have to be complicated because the right tools are all you need. Accounting software is a must-have, especially if your business has become successful and is growing. Beyond that, you should keep an eye on your financial records and have contingency plans if anything goes awry.
The ECommerce Accountant provides top-quality services for bookkeeping for Shopify. We understand the importance of keeping business records, so our professional bookkeepers will ensure you’re updated when needed. Simply go to our website to book a strategy call!