Congratulations! You've finally started the business venture you've been dreaming about. Now that profit is rolling in, and expenses are rolling out, it's now time for you to face what most business owners dread — that shoebox filled with receipts you've been collecting for months.
If you find yourself scratching your head, not knowing what to do with the mess, don't worry! Having an effective eCommerce accounting system would do that trick.
The reason many businesses fail within the first few years is because of poor financial management. For this reason, you want to avoid this mistake completely so that your business can thrive. However, you can only do this with a well-managed system so you can keep track of your company's financial health.
As a solution, many business owners get eCommerce accounting services to help them with this taxing task. Because with a proper accounting system, you'll be able to avoid issues when tax season comes.
We understand that, as business owners, you may already be swamped with job orders and tasks. Because of this, you might think that setting up an accounting system can be intimidating, but it's not impossible at all.
This article is our quick accounting primer that will help you jumpstart your business's accounting system. Let's dive in!
Always Separate Your Personal Finances From Your Business Account
One of the biggest mistakes newbie business owners do is to use their personal account for their business's financial needs. Even if you're the sole proprietor of your company, using your bank account is extremely unethical and can lead to confusion when you need to do bookkeeping, accounting, and taxes for your business.
If you set up your business as a limited liability company, having a business account is a necessity. This is because your business is an entity unto itself and required to have separate books and accounts.
If you're still confused about how you should manage your business's finances efficiently, it's best to get eCommerce accounting services so that you can properly organize your business's finances. Doing so will benefit you in the long run, eliminate financial issues, and help you when tax season arrives.
Cash or Accrual Accounting?
As a business owner, one of the most significant decisions you'll make when you're setting up a business account is what method you want to use — cash or accrual.
When you choose cash accounting, all transactions are recorded only when funds actually change hands, which is when you take, give payments, or spend. For instance, if you provide services to someone but don't receive their payment until months after, you should record that income on the month you get paid.
On the other hand, accrual accounting involves transactions that happen as soon as they occur. So if you have income from services made in September, it would go to your September book, even if you don't get paid until February.
But if your annual sales are less than $5 million, you can freely choose whatever accounting method that best suits your business. If you want to see changes in business income and debts but doesn't show cash reserves, accrual accounting is your option.
However, this could lead to cash flow problems. So naturally, cash flow accounting is much better, so you stay on top of the comings and goings of your money for the long haul.
The Bottom Line: Accounting Services is Crucial to Maintain Your Business's Financial Health
Now that your business is up and running, you're constantly receiving revenue and putting out money for expenses. Because of that, it's time to take accounting and bookkeeping seriously to avoid any hiccups in your business's financial journey.
Getting eCommerce accounting services can be a massive help for a business like yours so that you can focus on what really matters and help your business grow. At the same time, you leave all the numbers and finances to credible accountants.
Why Choose The ECommerce Accountant?
Accounting, Bookkeeping, and everything in between can be tricky to deal with, but thankfully The ECommerce Accountant can take the load off your back when it comes to your company's finances.
We are a team of credible business advisors for online stores and influencers. So if you're looking for bookkeeping or eCommerce accounting services, give us a call at (07) 5504 1999 and book a free strategy session today!