In today's digital age, e-commerce has become an integral part of our daily lives. With the rise of online shopping, it has become more important than ever to keep track of our e-commerce expenses. Whether an e-commerce business owner or an individual shopper, staying on top of your spending is crucial to avoid overspending and staying within your budget.
Why Businesses Need to Track Expenses
E-commerce has revolutionised how people shop, as they can purchase anything from the comfort of their homes with just a few clicks. However, it is easy to overspend when shopping online, especially when you cannot see and feel the products you buy. Tracking your e-commerce expenses helps you stay within your budget and avoid overspending. It also allows you to identify fraudulent transactions and dispute them immediately.
Categorising E-commerce Company Expenses
Categorising expenses simplifies the tracking process and lets you see where your money goes. Here are some common divisions for e-commerce business expenses:
Cost of Goods Sold (e.g., materials, labour, and shipping)
Marketing (e.g., Facebook ads, Google AdWords, and SEO services)
Shipping (e.g., postage, packaging materials, and shipping labels)
Office Expenses (e.g., rent, utilities, office supplies, and equipment)
Payment Processing Fees (e.g., credit card processing fees)
Professional Services (e.g., accountants, lawyers, and consultants)
Taxes (e.g., sales tax, income tax, and payroll tax)
Expenses to Prepare as an E-commerce Business
Website development and maintenance: A user-friendly and aesthetically pleasing website is essential for drawing on new clients and keeping existing ones. This covers the price of developing the website, paying web designers and developers, and paying ongoing maintenance costs.
Inventory management: Tracking items and ensuring the company has adequate inventory to complete requests need inventory management software. The intricacy of the inventory system and the firm's size will determine how much the inventory management software will cost.
Payment processing fees: E-commerce businesses must have a payment gateway to accept customer payments. Payment processing costs might change depending on the payment gateway and transaction volume.
Shipping and handling: Costs associated with shipping and handling for e-commerce companies may rapidly increase. This covers the price of the supplies used for packaging, shipping costs, and any extra charges for expedited shipment or foreign purchases.
Marketing and advertising: E-commerce companies must invest in marketing and advertising to attract customers and drive sales. This includes the cost of social media ads, email marketing campaigns, and other forms of advertising.
Customer service: For e-commerce enterprises, offering top-notch customer service is crucial. This comprises recruiting customer care people, customer service management software, and any extra costs associated with outsourcing customer support.
Taxes and legal fees: E-commerce companies are subject to different tax laws and regulations. This includes employing an accountant or tax specialist and any legal costs related to establishing the firm and safeguarding intellectual property.
Final Thoughts
Tracking your e-commerce expenses is essential to staying within your budget and controlling your finances. By setting a budget, creating a spreadsheet, and using a fraud-protection payment method, you can prepare yourself to track your e-commerce expenses.
The ECommerce Accountant is an e-commerce business advisor you can trust for your accounting needs. We specialise in helping businesses manage their finances and
ensure they stay within budget. Contact us today!