Most Ecommerce businesses use WooCommerce to build their stores. If you are one of them, you may notice that it needs significant improvement when it comes to analytics and financial data. Although these aspects are not the platform’s strong point, you can still have accurate financial numbers by setting up a functional WooCommerce accounting system.
Why Are Accounting and Bookkeeping Vital for WooCommerce?
Regardless of the platform you are using to run your Ecommerce business, knowing accurate financial numbers is crucial to maintaining a profitable and sustainable store. Accounting and bookkeeping are essential for monitoring profit, incoming cash flow, outgoing cash flow, operating expenses, assets, liabilities, customer acquisition cost, and cost of goods sold (COGS). Tracking all these financial data can help you determine and project the financial health of your business.
What Is the Best Cloud Accounting Software for WooCommerce?
Businesses decades ago used paper ledgers to record figures and maintain their books. Thanks to technology, you now have the option to use accounting software. Consider cloud accounting applications like Quickbooks and Xero to make accounting and bookkeeping tasks hassle-free. Here are some things you can do with cloud accounting software:
Easily create inventory and cash flow forecasts
Make informed, data-driven decisions around funding, hiring, and inventory
Detect and prevent potential cash flow problems early on
Understand sales patterns
Determine top and bottom-performing products
Reduce the risk of incurring tax fines and penalties
How Do You Integrate WooCommerce with Xero?
Integrating WooCommerce with Xero lets you sync your orders, sales, and inventory data in real-time. As a result, you can track payments, monitor inventory, create purchase orders, and run bank reconciliation reports.
Since everything is fully automated, you minimise the risk of human errors. Additionally, you can integrate WooCommerce and Xero via other platforms and even through manual data entry.
What Are Some WooCommerce Accounting and Bookkeeping Tips?
As mentioned before, although WooCommerce offers many benefits, accounting data isn’t one of them. Luckily, effective WooCommerce accounting is possible by following these best practices:
Create a Bookkeeping Process
Accurate financial data is necessary for making data-driven business decisions. For this reason, you need to create a monthly bookkeeping process. This is especially important if you sell large volumes of products.
Set up Financial Reports and Dashboards
Building a financial dashboard containing all the necessary information that shows the financial health of your business is sustainable. Although the KPIs vary depending on your WooCommerce business, here are some KPIs that are worth including in your dashboard:
Average order value
Customer acquisition cost
Gross margins
Incoming cash flow
Operating expenses
Outgoing cash flow
Revenue
Profit
Stay Updated with Tax Deadlines
Take note of all upcoming tax filing deadlines to save you from the hassle of cramming and paying costly fees. To get started, use Xero or any cloud accounting software, then streamline your workflow by installing WooCommerce App Extensions. Afterwards, create a bookkeeping process and set up a financial dashboard.
Conclusion
Handling accounting and bookkeeping seem intimidating, but they don’t have to be such a struggle for online store owners like you. You might be tempted to resort to DIY with data entry and spreadsheets, but remember that this process is time-consuming and demands a low margin of error. Remember that you could end up paying for tax penalties from any input mistakes or missed deadlines. Because of this, it’s best to hire skilled accountants for your online business.
If you are struggling with your financial numbers, our accountants for ECommerce business can help you. At The ECommerce Accountant, we can assist you in knowing and understanding your financial figures, monitoring your progress, and increasing your profit. Book a free strategy session today!