When setting your business up for success, taking the right steps to ensure all your accounts are aligned is crucial. That's why organizing your eCommerce chart of accounts is a critical part of business operations.
The great thing about eCommerce businesses is that you have the freedom to sell anything you like, from services to retail items. When it comes to physical products, you must operate with an inventory-based business. However, things can go south rather quickly if you fail to consider the relationship between your finances and inventory management.
When you neglect proper accounts tracking, you fail to see how much capital you've spent on unsold inventory, which could cause major problems to businesses of any size. To remedy this, working with an eCommerce accountant is beneficial to achieve a well-maintained and organized, accurate chart of accounts.
What Does a Chart of Accounts Do?
In essence, an eCommerce chart of accounts lists all individual accounts in the general ledger. Here, you'll find a list of your company's transactions, liabilities, revenue, expenses, equity, assets, and more.
Liabilities will include your accounts payable to various service providers you work with, as well as salaries, suppliers, and taxes. As for expenses, a list of costs will be included and how your business has been spending in a specific period of time.
These are only a few factors included in a chart of accounts. But there's no denying that the information presented in this data will help you find pain points in business operations that could help you maximize your company's potential.
What Can You Do With a Chart of Accounts?
Calculate Profitability: An eCommerce accountant can help gather the data needed to calculate your business's profitability. Knowing the gross margin of your business is a crucial data point for an eCommerce business because it enables you to assess the amount of profit you receive alongside the total cost of the product.
Calculate Cash Flow: There's no doubt that cash flow plays a vital role in an eCommerce business's success. Having reliable and consistent cash flow allows you to meet expenses and continue operations to help forecast your business's investments. By calculating your cash flow, you can better understand the impact of sales on your balance sheet, allowing you to divide your finances into important points.
How Do I Start My Chart of Accounts?
A common mistake of business owners is to handle their finances to "save" money and resources. However, with all the complexities involved around business finances, it's much smarter to work with an eCommerce accountant to ensure that all financial points are considered.
Working with an eCommerce accountant will allow you to view all your finances, enabling you to find areas of improvement and where you can maximize your business's growth. Not to mention, you may also find areas where you can reduce expenses to help focus on high-value business moves.
The Bottom Line: To Produce High-Performing Products and to Flourish in the Competitive Landscape, You'll Need to Have a Chart of Accounts
Having a well-maintained, accurate, and updated chart of accounts allows eCommerce businesses to gather insight that would help them facilitate the planning process for their company's expansion.
With this business model, you'll enhance the efficiency of your business, empowering leaders and members to make smart decisions that will help bring their business — big or small — to the top.
How Can We Help You?
Managing your eCommerce business's chart of accounts can be incredibly overwhelming, but thankfully, The ECommerce Accountant is here to help.
Our team provides eCommerce accountants and business advisors to help your brand flourish in the competitive eCommerce market. Call (07) 5504 1999, and start taking control of your business's finances today!