Accounting software, such as Xero, enables small companies to save time by simplifying and automating numerous daily bookkeeping and accounting processes. It allows companies to automate invoicing, create required reports, monitor their company's profit and cash flow, and prepare taxes, among other things.
To get the most out of your accounting software, though, you must ensure that it is set up and tailored to your business's requirements. Here are some recommended practices for an eCommerce business to maximize its use of Xero:
Keep Your Business and Personal Accounts and Transactions Separate
When operating an eCommerce company, keeping track of your business and personal expenditures, spending, and deposits on a spreadsheet may not be enough. Furthermore, utilizing the same bank account for personal and commercial activities may waste time and resources if your company develops. It may also lead to errors if you need to give different accounts of the information.
Monitoring and comprehending the flow of your company's cash and transactions is essential for assessing its performance and ensuring that all invoices and expenditures are paid on time. Keeping your company's banking separate will make the process simpler for you.
Set Up a Monthly Accounting System
Ecommerce bookkeeping is critical for having an accurate view of your company's finances to make educated business choices and prepare for the future.
Ecommerce with Xero makes accounting simpler by automating the process. The program assists you in recording transactions, sending invoices, making payments, preparing financial statements, and other tasks. You will be able to evaluate and learn from the recorded data if you create a monthly accounting method for keeping your chart of accounts up to date.
Reconcile Transactions While Using Xero
When you link your bank account to Xero, transactions are automatically imported to the platform every day. These are known as unreconciled transactions. The bookkeeper is responsible for allocating or coding each of these transactions in Xero by giving the appropriate account code or matching the transaction to an outstanding accounts receivable or payable invoice. The transaction is deemed reconciled after this allocation is completed.
The accuracy of your financial reporting is dependent on reconciling all unreconciled transactions. As a result, it is critical that you reconcile your transactions as often as feasible.
Make An Inventory Flow
If your company keeps inventory, install an inventory system that integrates with a shopping cart and Xero. Many small eCommerce organizations spend on inventory when bought rather than assigning it to the balance sheet and transferring the appropriate percentage of inventory when items are sold. That results in erratic profit that is unrelated to sales. An inventory system will enable the company to align its cost of items sold with its sales. It will also track inventory amounts and help with month-end stock assessments and the allocation of landing goods expenses to inventories.
There are many inventory systems to examine, and the most excellent match for your company is determined by the firm's needs.
Set up Your Accounts Chart in Xero
To classify and record your company's transactions, utilize Xero's chart of accounts. This method enables you to track any transactions and identify where the business is earning and spending money. It also helps with report generation and financial reporting.
When you set up the company's accounting in Xero, it comes with a default chart of accounts. You may, however, import a chart of accounts from another accounting system or create a unique chart.
It is critical to have a unique chart of accounts for your company. A customized chart of accounts guarantees a consistent coding system with clear guidelines and comprehensive explanations suited to your company's requirements. Consequently, even if multiple individuals are in charge of adding transactions, Xero will appropriately record your data.
Final Thoughts
When it comes to producing financial reports for the company, eCommerce companies face a slew of extra challenges. Aside from handling foreign currency and inventories, companies in the Ecommerce sector must also handle accounting concepts such as supplier deposits and unearned revenue or when a customer pays for the goods before delivery. It is best to deal with a bookkeeper or accountant specializing in this industry to guarantee your company has proper financial records.
Make your life hassle free and free from headaches by working with the best knowledgeable Xero bookkeeper for an Ecommerce business. At The Ecommerce Accountant, we make sure to help you find time and focus on your store rather than working on those bookkeeping chores! Book your free 30-minute discovery call today at 0755041999!