Guide to E-Commerce Bookkeeping_ Best Practices and Common Mistakes to Avoid

1. Guide to E-Commerce Bookkeeping: Best Practices and Common Mistakes to Avoid Statista reports that the eCommerce market volume is projected to reach $6.35 trillion by 2027, with a projected amount of 5.29 billion users. The eCommerce market’s expected growth unlocks plenty of opportunities for businesses to capitalise on this substantially lucrative industry. However, for e-commerce businesses to maximise their revenue, they must establish sound practices associated with bookkeeping for e-commerce to avoid costly mistakes and hidden expenses. With an increasing number of tractions in the online space, it’s easy for businesses to overlook potential deductions, lose track of expenses and revenue, and end up paying higher taxes. E-commerce businesses must proactively establish best practices for bookkeeping to ensure long-term profitability and growth. These bookkeeping practices should help them with regulatory compliance, identify cost-saving opportunities, avoid common bookkeeping mistakes, and reduce financial risks. Let’s explore the best bookkeeping practices and mistakes to avoid for eCommerce businesses. What is E-Commerce Bookkeeping?

2. E-commerce bookkeeping is the process of recording financial transactions, tracking and managing financial data, and maintaining accurate and up-to-date financial records. You might wonder whether the structure of bookkeeping for e-commerce is really that different. The basic bookkeeping structure for all businesses remains the same as they have assets, liabilities, income, equity, and expenses to cover. However, the breakdown of each category and technology needed to track and record all financial tractions dramatically differs from any brick-and-mortar business. What E-Commerce Businesses? are the Best Bookkeeping Practices for In every industry, businesses must follow a set of guidelines and standards to produce good outcomes. This is especially true for the bookkeeping and accounting fields. Now that e-commerce is one of the fastest-growing industries, business owners often fail to track the best practices and use them to make more revenue. For a successful online business, you should follow the following e-commerce accounting best practices: ● Maintain accurate record of financial data ● Track your inventory ● Monitor your cash flow ● Follow the updated tax laws ● Reconcile your accounts regularly ● Keep relevant documentation ● Review all financial reports and records regularly to know the business’s financial performance and position. What E-commerce Bookkeeping Mistakes to Avoid? Neglecting the above-discussed bookkeeping practices can lead to negative consequences. Let’s explore the common mistakes in bookkeeping and how e-commerce businesses can avoid them: Tracking inventory manually Efficient inventory management constitutes one of the crucial parts of bookkeeping and accounting. With inventory levels that are too high, you can’t use your capital elsewhere. However, when inventory levels are too low, it can result in stockouts and lost sales.

3. One of the biggest challenges any business, whether online or offline, faces in inventory management is tracking inventory levels. Tracking inventory can be difficult, particularly for businesses with large and complex inventories, especially when done manually. Manual tracking can lead to several accounting mistakes, making it difficult to decide where to allocate available resources. Moreover, stockouts can damage businesses’ relationships with their customers. Tips to avoid this accounting mistake Tracking inventory across multiple channels can help keep your online business and books on track. Look for professional accounting and bookkeeping services using a multichannel inventory tracking approach to help you minimise mistakes and control products, prices, and profits. The right multichannel inventory sync tool will be a hub for all your sales channels and bookkeeping and accounting software. Multichannel e-commerce businesses find it easier to automatically match existing products and catalogues and update inventory in bookkeeping and accounting platforms for refunded or cancelled orders. Such tools will prevent inventory-related bookkeeping mistakes, help forecast demand, make informed inventory decisions, and avoid understocking or overstocking. Recording expense inaccurately Proper bookkeeping and accounting practices require e-commerce businesses to maintain accurate expense records, as expenses can directly affect their bottom line. You can face the following problems when not recording expenses accurately: ● Difficulty in producing accurate financial statements and, thus, making uninformed decisions. ● Errors in tax filings ● Giving vital stakeholders the wrong impression about the business’s financial health. Tips to avoid this accounting mistake The best thing you can do to avoid this bookkeeping mistake for your e-commerce business is to avoid entering expenses manually into a spreadsheet. In addition, you should open a business bank account specifically for expenses and connect the account with an accounting platform to align every expense. Another tip that can make bookkeeping for ecommerce relatively easy is using an e-commerce automation tool that can aid in automatically tracking expenses and fees across all your sales channels.

4. Reporting sales at random intervals Many ecommerce businesses fail to set a proper schedule for reporting their sales, resulting in problems with their accounts. E-commerce business owners failing to post-sales regularly find it challenging to track income and expenses. It further leads to errors in financial statements and tax returns. Tips to avoid this accounting mistake Online businesses should create a proper schedule to report their sales. Instead of sticking to a manual posting schedule, invest in accounting and bookkeeping services that leverage accounting automation software. Such professional services can help keep you organised by regularly posting transactions from every sales channel, regardless of sales volume. Spending without a budget A budget is a guiding light as it tells businesses how much money they can spend in a given period. However, if you skip creating a budget, you will spend more than you should. You can miss essential payment deadlines, leading to fees and penalties. In addition, you might accidentally overspend on something and not have the money to cover vital expenses, leading to significant financial problems. Tips to avoid this accounting mistake Of course, creating a budget is easier said than done. It will be best to start by tracking your monthly revenue and fixed and variable expenses. Deduct all tracked expenses from your monthly revenue to know the remaining cash balance and plan where else you can realistically allocate spending. Final Words Bookkeeping and accounting are critical aspects of running a successful ecommerce business. Tracking all expenses, revenue, and other financial data and maintaining accurate financial records can help business owners make informed business decisions, comply with tax laws, and secure financing for growth. Moreover, by incorporating the best ecommerce accounting practices, you can avoid the above-discussed bookkeeping and accounting mistakes.