Everything You Need to Know about E-Commerce Accounting

Growing an e-commerce business is not an easy feat. Everything, from logistics to operations to accounting, has to be done correctly. In terms of accounting, it is important to keep note of your profit growth.

If you're just starting out, here are a few things to keep in mind about e-commerce accounting. This crucial key component in every business isn't easy, but it is needed for you in the long run.

Here is everything you need to know about e-commerce accounting.

What Is E-Commerce Accounting?

E-commerce accounting is mainly the same as accounting for regular businesses. The main difference is that e-commerce companies are able to connect to the Internet to streamline their accounting process.

E-commerce accounting is crucial for any business. The main aim of accounting is to provide information about the financials of the business. Whether you have a simple storefront or an online business, accounting is still necessary.

Use accounting processes to help you determine the financial health of your business. The company's financial health will determine the success of your business.

E-Commerce Accounting vs. Bookkeeping

Differentiating between accounting and bookkeeping can be tricky, but they could be used interchangeably. The difference between the two is the number of details involved in a particular process.

For example, if you are a bookkeeper, you may be responsible for creating financial reports. On the other hand, an accountant has a deeper understanding of accounting processes and could perform a more detailed review of the financial statements.

Bookkeeping is mainly focused on entering transactions in a ledger. These transactions are usually grouped into larger categories, such as sales or purchases. An accountant takes these transactions and breaks them down into specific details. The accountant may also classify transactions based on the tax rules.

Why Do You Need E-Commerce Accounting?

1) To Understand Your Sales Tax Better

Anytime that you have a sales transaction, you have to pay sales tax. Sales tax is calculated on the total price of the item. The total price includes the cost of the item and any taxes that were included. The sales tax is calculated at a specific rate, which is determined by your location.

If you are located in a state that has different tax rates, you need to take this into account when you are calculating sales tax. It is possible to keep track of sales tax rates on your own, but accounting software can do this instantly.

2) To Make Sense of Inventory Management

Inventory management is another function of accounting. Managing inventory is a complex process. It can be difficult to keep track of how many items you have, how many are sold, and how many are in your warehouse.

If you sell the same item in different sizes, or you sell different products in the same size, it will get even more complicated. Inventory software will help you manage your inventory.

3) To Keep Track of Large Transactions

Large transactions are a perfect example of accounting in action. This is where e-commerce accounting becomes more complicated. Large transactions can mean a variety of things.

The large transactions could be large sales or large purchases. At some point, you will have to troubleshoot a situation. When you are ready to find an accountant, it is imperative that they have experience in e-commerce accounting.

Conclusion

As you can see, e-commerce accounting isn't as straightforward as it sounds. You have to be able to accurately track sales, manage your inventory and keep track of your finances. But with e-commerce accounting, you can simplify your business process, reduce costs and save money.

Find an accountant for an e-commerce business to help you grow your own. At The ECommerce Accountant, we aim to help you with any of your financial concerns through modern solutions. Get in touch with us today to learn more.