Ecommerce accounting can get complicated quickly. Luckily, much of it can be optimized. Improve your cash flow, save time and eliminate human errors with the best bookkeeping software for online stores. Automate transactions, eliminate human errors and optimize your ecommerce business finances.
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The administration for a successful ecommerce business can get complicated quickly. From a lot of transactions a day to managing returns. And if your online store sells on marketplaces or uses Google Ads, you are probably met with international tax rules.
You can hire an accountant, but even then there are ways to make ecommerce accounting easier, like with bookkeeping software. Every online business can profit hugely from smart accounting.
Benefits of ecommerce accounting software
Your financial administration is the heart of a healthy business. Your ecommerce business can have towering sales, but if your marketing and operation costs are exceeding them, you are getting nowhere fast. A simple record of your incomes and expenses is a blueprint of your company’s financial health.
If you keep up with your ecommerce accounting, you can see how your store is performing at any time. This also means you will be one step ahead of any problems that may arise, such as cash flow shortage or towering advertising bills.
Your administration is the heart of a healthy business.
Secondly, tax season will be less of a headache. Good tax planning not only saves you valuable time, it can also save you money. By working with accounting software that is made especially for ecommerce businesses, you get the right financial reports and can maximize your tax benefits.
Moreover, doing your accounting can give you valuable insights. Aside from staying on budget, you can see how each sales channel performs, the profit margin for products, what sells and what does not. Good accounting can help inform your strategy and future investments. And most importantly, it can predict your cash flow.
Administration of your online shop: mutations
When doing the administration for your online store, there are some things to look out for. First of all, part of it is probably automated already, such as invoices to customers. And if shoppers pay online in advance, managing debtors will be limited too. Even still, ecommerce accountancy can get complicated.
You might have to match invoices with the transactions.
For ecommerce sellers, each order has different types of expenses, from packaging to shipping. There is also the risk that the customer will return the order. Additionally, your invoices often do not match transactions at the bank. This can be due to deductions from payment service providers and exchange rates. Moreover, your payment service provider may couple multiple payments in one transaction per day.
To make sure your ecommerce administration is in order, you will have to match the mutations on your account. This means you have to couple the customer’s invoice to the payment they made, for example. Most cloud accounting software programs can help automate this process. You can also check if your payment service offers a downloadable file of all orders. You can import this file into your bookkeeping software.
Another aspect where finances of ecommerce businesses get tricky, is international payments. Your online shop is not limited to customers in your home country. And if you sell on marketplaces like Amazon or use Google services, you are already doing business internationally. In other countries, tax rules may differ.
Within the European Union, ecommerce sellers can register, file and pay VAT-taxes for multiple EU-countries via just one member state. This system is called One Stop Shop (OSS). For other countries, ecommerce companies may have to register for a foreign VAT-number and file separately.
On marketplaces you have international payments.
Another part that is unique to online sellers, is inventory management and stock finance. Buying and managing inventory can get costly. From renting storage to inventory management software and of course buying products. For ecommerce business owners it can be difficult to get the right amount of inventory on hand without overstocking. And if your shop grows, you want your stock to grow with it.
Stock administration can help with this problem. This way, you know exactly how much to buy and at what moment. There are even special inventory management software programs to take this out of your hands completely.
You know what to buy and at what moment.
Moreover, there are short-term loans available to finance your stock. If you are just building up your inventory or growing fast in a short amount of time, stock financing can help you keep up the momentum. With these loans, you maintain ownership of the products. The stock also serves as collateral, making it lower in risk.
Accounting software for online retailers
Because online stores have some unique challenges, ecommerce bookkeeping software can make things easier. Even if you are a small shop which does not sell crossborder, a simple bookkeeping program is very beneficial. You can link it to your ecommerce platform and automate order administration, for example. Matching invoices or preparing your taxes can also be largely automated and save you a lot of time.
For online sellers administration software is always recommended because you can gain more insight into your business. These programs can supply you with some extra data that makes it easier to find the profit margin per product, the performance of sales and marketing channels or your Return On Investment (ROI).
With software you gain more insight into your business.
When choosing an administration tool, first make sure you can pair it with your ecommerce software. Do you also sell on marketplaces like Amazon and eBay? Often you can link these to your administration software as well. More importantly, you want your payment service provider to be linked.
Key numbers for your ecommerce businesses
When looking at your administration once a month, there are some numbers you should keep a close eye on. The first is your net margin per order and lifetime value. The net margin is what money an order brings in after you deduct costs of marketing, customer service, packing and shipping.
Good accounting software will give you a clear idea of your cash flow. Lifetime value refers to repeat purchases. Often, a customer comes back a second time, making the value of one order significantly higher. This means you can invest more in acquisition to grow your business, for example.
Additionally, look at the performance of your different sales channels. Are you overly dependent on one channel? Then consider investing more into other channels to minimize business risk. Is a channel performing badly? You may either have to change it or even say goodbye to it, freeing up resources for other purposes.
Is your business overly dependent on one sales channel?
Additionally, look at your sales numbers. What is selling a lot and what is not? Are there moments during the year your sales are going up a lot? This firstly impacts your stock keeping. Maybe you want to expand your product range with successful categories. In addition, you will know what your peak moments are. You can play into this with marketing campaigns, for instance.