Managing finances is one crucial step in business development, and not everyone is equipped with enough information on how to get started. If you do not plan to seek the assistance of an accountant, you should at least familiarise yourself with the basic information.
If you’re new to the e-commerce business, here is a quick guide on what you need to know:
1. On e-commerce accounting services and tools
Today, there are many ways to help make your business accounting more manageable. Consider the following:
A. Using bookkeeping and accounting software - Business owners can now use accounting software to simplify the process if they wish to handle it themselves. This tool has features that can cater to your business needs, including automation of reports and analysis, profit and loss, debtors and creditors, and more.
B. E-commerce accountant or tax attorney - The traditional and trusted method is by hiring the services of the experts. They are knowledgeable about the collection, analysis, and financial reporting when it comes to business. Moreover, they can give you recommendations on how to improve your overall financial health.
It is highly recommended that you work closely with your tax attorney or accountant at least once a year to make sure that you are doing your reports and taxes correctly.
2. On the accounting methods
Below are two ways to do the accounting for your business:
A. The accrual method - This is the accounting method required for large companies. In this method, even if you haven’t received the payment nor have paid for an expense yet, you are obliged to record any income and expense information accredited for the month. With this, you pay your taxes based on the anticipated fund instead of the actual.
For example, your agency recently finished a project for a client and sent a billing to them for the month of August. Even if you don’t receive the payment in the same month, it will fall under your record for August. You are also expected to pay your taxes accordingly.
B. The cash basis method - This is the most widely used method of accounting, especially for small businesses. In this method, you record your income and payment as is, and pay for your taxes based on your actual funds.
For example, if you were billed for Internet use in January, but you decided to pay in February, that expense record will fall under the report for the month of February.
Although most small businesses use the cash basis method, they are free to use any of the two because each has its own set of advantages and disadvantages. As a taxpayer, it is always best to seek assistance from an accountant or a tax attorney to know which is best for your business.
3. Important guidelines for smooth financial operations
Here are some tips on how to avoid future financial headaches for your business:
A. Consult and plan
Having a plan is always essential for any project, especially for businesses that are just starting. Before you start your e-commerce business, it is vital to sit down and consult with a financial expert about your financial plans. This includes determining how much you will need to start the business and where you’ll get your business capital.
In this phase, the financial expert will help you determine which method of accounting you should implement for your business and if there is any software you can use to keep track of your business performance.
B. Start small
If what’s stopping you from progressing is the lack of resources, remember that you can always go with what you can afford at the moment. Keep an eye on affordable alternatives, whether it is office furniture, gadgets, or product packaging. It is safer to stick with the budget to avoid any unnecessary debts. Furthermore, you can always upgrade later when your business is stable.
C. Double-check expenses
When your business starts to get better, it can be tempting to invest and buy more things to improve your current setup. However, before you do so, don’t forget to check your fund and compare it with all the expenses you need. See the bigger financial picture before you make any important decisions so that you can avoid future problems.
Knowing the importance of proper money management is the key to success for any businesses. Once you learn the basics, and as your business grows, you can seek the assistance of professional accountants to help your company grow.
If you need online accountants in Australia, you can always rely on us. We are an e-commerce accounting firm that is dedicated to helping online entrepreneurs minimise their tax and increase their profit. Get in touch with us today to find out how we can help!