Having an eCommerce website is incredibly value-adding for business owners. By utilizing your online presence, you can transact from almost anywhere in the world, with very little upkeep beyond your product supply. In order to fully utilize it, however, you must be aware of the full spectrum of processes that keep your eCommerce business afloat.
Any business type—be it retail, consulting, or drop shipping—should be well-equipped with essential eCommerce accounting knowledge in order to minimize tax and maximize profit. Accounting tasks for any business can be tedious, which is why it’s crucial to have a proper accounting process in place from the onset.
In order to properly formulate your eCommerce accounting process, you should know the basics of what makes it run. To help you in that regard, here are three accounting tips all SMBs must know to guide you in running your business.
Know the difference between “bookkeeping” and “accounting”
Although commonly misconstrued to be the same, there is, in fact, a difference between the two. Bookkeeping is basically the process of documenting financial transactions and is part of the accounting process. Accounting or accountancy, on the other hand, is how a business organizes, measures, and communicates its financial and nonfinancial information.
Understand the importance of inventory management
Inventory—also called “stock”— is your goods and materials for sale. Inventory management, on the other hand, is your approach to storing and selling your stock. To keep your business running properly, you should always ensure that you have enough of the right goods while also attaching the right price for it.
The best approach for this is to utilize one of the numerous inventory management systems available online. Through this, tracking your stock can be done instantaneously and with only a small room for plausible error. If you’re capable of connecting this with your POS system, then it will streamline the entire sales process—giving you more room to breathe and focus on other aspects of your business.
Manage your orders, invoices, and receipts
Orders refer to either your purchases from your suppliers or your clients’ purchases from you. An invoice—also known as bills or tabs)—on the other hand, is a document issued by a seller to a buyer that represents a transaction, showcasing the stock, their quantities, and their prices. Lastly, a receipt is a document that acknowledges that a sale has been made—specifically that a seller has received payment from a buyer.
Through proper management of these, you can create a basic system to help you track your money flow. Beyond this, however, it provides a check-and-balance system to help you avoid making any accounting mistakes later on.
Having an eCommerce website is a great asset for your business, but only if you have the appropriate systems and processes backing it up. Without a streamlined accounting process in place, your work won’t just be more tedious and difficult, but it could lead to numerous errors that will make things difficult for you, especially when you’re creating those end-of-year reports.
If you’re looking for a stress-free way to deal with your accounting process, then the help of an experienced eCommerce accountant is your best option. Get in touch with us now and book a strategy session to give you some insight as to how we can help you.