When you ask any e-commerce business owner what the most disliked part of their work is, most of them would pick “accounting”. Small business owners deal with their books without any professional help. But this is a compromise. As your e-commerce business grows, your finances become more complex. Sales returns, payments to suppliers, bank charges, all deposits and withdrawal movements must be appropriately classified, analysed and reported to the tax authorities.
Without a proper accounting system, all the financial data you are dealing with can quickly be overwhelmed. But we expect you to pay full attention. Because accounting is essential, but it’s hard to learn and implement. This guide will explain everything you need about e-commerce accounting without destinations and twists.
Table of Contents
- What is e-commerce Accounting?
- What do I need to start accounting for an e-commerce store?
- Why Accounting and Bookkeeping Are Important for E-Commerce?
- Summing Up
What is e-commerce Accounting?
E-commerce accounting refers to collecting, analysing, organising, and reporting financial data related to business transactions and assets within an e-commerce store.
The financial information that e-commerce entrepreneurs obtain through these steps will be a valuable foundation for future business decisions.
Accounting consists of three main tasks:
- Bookkeeping (recording and tracking business transactions).
- Reporting.
- Submitting tax returns.
What do I need to start accounting for an e-commerce store?
1. Trade tax identification number.
If you are a company or partnership, you will need to obtain an Employer Identification Number (EIN) from the IRS.
2. Business bank account.
The separation of business and personal finances is the first golden accounting rule. Open a commercial bank account exclusively for e-commerce stores. Set up a business version of a popular payment app (such as PayPal).
3. Accounting software.
With the accounting app and online services, you can save time on sales entry, expense management, reporting and other accounting tasks. For those managing larger financial portfolios, like private equity funds, specialized private equity accounting software can further streamline operations by handling complex calculations and regulatory requirements.
Why Accounting and Bookkeeping Are Important for E-Commerce?
You can maintain compliance and avoid deficits by understanding the accounting basics of your e-commerce business and setting up elementary systems and processes.
- Good bookkeeping is the foundation of a financially stable and viable business.
Whether you sell your products on Shopify, BigCommerce, Etsy, or Amazon, you need a sound system for managing your finances. Here are some of the main benefits of building a solid accounting process.
- Accounting helps you build a financially stable and reliable business model.
Accounting is the foundation of a robust and viable business. If you have a system that tracks all your transactions and expenses, you can get clear insights into how your business is always working. When paying an employee, contractor, or tax invoice at the end of the month, you can’t stand the nasty surprise.
- Accounting helps you predict the future of your business.
Once you know the numbers, you can make forecasts that predict the future activity of your company. Therefore, you can plan better and work smarter.
- Good bookkeeping ensures proper preparation of tax returns.
A solid accounting process can save you time and headaches on your annual tax return. Maintaining financial records allows us to act per federal and state tax laws and comply with all relevant sales tax regulations.
In addition, you can work with your accountant to save taxes by planning. If you wait until the last minute, you may not have time to do all your tax planning to maximise your deductions.
Summing Up
There are numerous e-commerce accountants out there who are willing to help you out in dealing with the complexities of your financial statements and accounts. It is just that you need to find the right candidate with relevant experience. You can ask your friends and colleagues to refer the right candidate to you. The Accountants recruited through references are more reliable and trustworthy as you ready have contact in between.
If you are completely clueless and new to the hiring procedure, contact us at 123financials. We have a dedicated team of Accountants and recruiters to help get the perfect match for your firm. Always remember the accountant who will take care of the most sensitive sector of the business; you must never rush the recruitment.
