Building an online empire as a budding eCommerce owner involves juggling multiple responsibilities, so it’s natural to drop a few processes as you struggle to dedicate your efforts to every aspect of your business. While some mistakes serve as stepping stones that help sharpen your skills and further your experience as an entrepreneur, errors in the accounting side of things can snowball into a costly problem for your eCommerce business!
It helps to have an overview of the possible mistakes that can compromise your business in more ways than one, so you can ensure you’re driving your eCommerce store on the right path to success. With that in mind, here is a list of common eCommerce accounting mistakes you should avoid from the get-go:
Common eCommerce Accounting Mistakes that can Cost Your Business
Mistake #1: Failing to Prepare Your Books Until Tax Time
Accounting is a continuing process that requires you to track your income and expenses throughout the year. This means that you have to prepare your books long before tax time arrives, so your dedicated accountant or bookkeeper can properly organise your financial information for tax purposes.
If you fail to prepare your books early, you risk making inaccurate documentation with your finances, as reading through your financial information at year’s end is not the same as tracking your business income and expenses regularly. To that end, preparing your books continually will help you identify issues early and take remedial actions before they turn into bigger problems.
Mistake #2: Neglecting to Track Inventory or Sales Data
If you’re selling goods or services online, it’s important to accurately track your inventory and sales data to avoid dealing with costly profit loss issues. For example, if you don’t track your inventory levels and sales data, you might inadvertently purchase more inventory than you need for a particular season, which means you’ll likely end up with inventory you can’t sell.
Inventory tracking is important to determine how much stock you need to carry, while sales data will provide you with information on how your customers are reacting and behaving in real-time.
Mistake #3: Forgetting to Check if You're Tax Compliant
Skipping tax compliance might seem like a mistake that would only affect you during tax time, but it can have a lasting impact on your business. For example, you can’t claim your business expenses on your tax return if you haven’t kept track of them properly throughout the year,
Similarly, you could face interest and penalties from the IRS if you fail to submit a tax return on time. If you’re serious about running an eCommerce business, you’re going to have to make tax compliance a top priority, regardless of what stage your business is in currently.
Mistake #4: Overestimating Your Monthly Revenue
It’s easy to overestimate how much revenue you’ll make each month, especially if you’re a new eCommerce store owner. This is when you might be tempted to invest in more inventory than you can sell, resulting in a loss of profits in the long run.
As a rule of thumb, account for the costs that the business incurs as it’s directly tied to the revenue your store is generating. This will ensure that your financial projections are accurate enough to be reliable business planning tools.
Mistake #5: Skimping Out on Monthly Financial Reports
The key to running a successful eCommerce business is by having the right financial reports and data points in your possession. By regularly scrutinising your financial information, you’ll have a clearer idea of where your business is headed in the future. This is why it’s important to appoint a bookkeeper or accountant that can help you monitor your financial status monthly.
The Bottom Line: The Importance of Enhancing Your Accounting Strategy and Operations for Your eCommerce Business
Running an eCommerce business involves learning new tricks and strategies to keep pace with the latest industry trends. To that end, you have to make sure you’re prepared to cope with any financial issues that arise.
As such, it helps to have a solid strategy in place to ensure things are running smoothly, particularly when it comes to accounting. From failing to prepare your books to neglect to track inventory or sales data, these common eCommerce accounting mistakes can incur costs you can’t afford to shoulder.
That’s why you need to learn about the accounting mistakes you should avoid, so you can focus your attention on the strategies that will help you grow your eCommerce business.
Where Can You Find the Best ECommerce Accounting Services in Australia?
If you’re looking for a reliable and affordable accountant in Australia, we’re your best option. We offer various services that can improve your venture's profitability rate, so get in touch with us today for a free consultation!