eCommerce bookkeeping makes it easier to understand the ins and outs of your business — if you know what you’re doing. While standard bookkeeping practices provide a good starting point, they may not always apply to the unique needs and challenges of your eCommerce store. And when you make hundreds or thousands of transactions each month, it may look great for the bottom line, but it puts even more pressure on you to track your financial data accurately.

In this article, you’ll learn exactly why eCommerce bookkeeping is so important and how automation can completely transform the way you think about the success of your business.

When you think about eCommerce bookkeeping, your mind probably goes straight to sales numbers. More sales mean more money, right? Maybe, but maybe not. In reality, bookkeeping covers a wide range of metrics, including sales, returns, operating expenses, and so on. If you’re not tracking these numbers down to the penny, you won’t be able to make informed business decisions with confidence. It also means that you can’t track your real profits, regardless of how many products you sell.

To better understand the nuts and bolts of eCommerce bookkeeping, check out these key components:

● Sales - Sales revenue refers to all of the income your business generates from selling goods or services online. Effective bookkeeping requires the accurate recording of each and every sale you make. Even if you sell a product for just a few cents, you need to account for it.

● Expenses - Expenses are all the costs associated with running an eCommerce business. Naturally, this category can be quite complex and covers a broad range of costs, from shipping costs to the fees charged through different selling channels.

● Inventory - Even if you don’t house your own inventory, you need to track the quantities you have at any given time. Running low on popular items or overstocking slow-selling items could really hurt your bottom line.

● Taxes - eCommerce bookkeeping should account for different types of taxes, like sales tax, VAT, and business income tax. This ensures that you stay on the right side of tax laws and avoid getting into any hot water with the government or tax authority in your region.

● Financial Reports - Financial reports can include many of the aforementioned components, but they also go beyond these categories to give you the “big” picture of your business's health. Some common financial reports may include profit and loss statements, balance sheets, and cash flow reports.

Looking past the basic elements that make up bookkeeping for an online business, it’s important to understand exactly what eCommerce bookkeeping can do for you:

● Financial Analysis - Keep records of your financial transactions to identify new trends, opportunities, and challenges.

● Cash Flow Management - Manage your cash flow by understanding where every dollar is going.

● Tax Preparation - Prepare for taxes in less time and reduce the penalties associated with erroneous information or late tax filing.

● Investor Relations - Provide potential investors with accurate financial records to evaluate the profitability and investment potential of your business.

As you might already know, eCommerce bookkeeping (particularly if you rely on manual data entry) comes with unique hurdles and challenges. Some of these challenges include:

● Complex Tax Regulations - If you sell your products across state or national lines, you may find that the territorial tax laws can complicate the bookkeeping process.

● Large Sales Volume - Selling a lot of products is never a bad thing, but when it comes time to sync a lot of data, manual bookkeeping becomes extremely impractical.

● Currency Conversions - If you sell in multiple countries, you’re going to have to deal with different currencies, and these currency conversions can greatly impact your financial data.

● Inventory Management - Sales can happen at any time of day or night, so managing your inventory in real-time can prove challenging.

Is automating your eCommerce bookkeeping really necessary? It’s a fair question. If you have a very small operation with relatively few transactions, you may not see the need for automation. You can just pop open an Excel spreadsheet once or twice a week, enter the data from your sales channel, and then review the information to get key insights into your business.

But when you make a lot of sales or operate across multiple sales channels, manual data entry is almost impossible. Not only are you far more likely to make costly errors, but you’re also going to spend countless hours pouring over the numbers to ensure the accuracy of your books. It simply doesn’t make sense when there are quality automation tools to make your life easier.

So far, you’ve learned the basics of eCommerce bookkeeping. You’ve also learned a bit about why it matters and how automation can play an important role in the bookkeeping process. Now, take a look at some strategies to take your bookkeeping to the next level:

● Use Trusted Software - It may sound like a no-brainer, but you really should invest in bookkeeping software that is trusted and dependable. Providers like QuickBooks and Xero offer you the ability to see the big picture, while third-party applications can take these services even further with the automated importation and categorization of financial data.

● Integrate Sales and Inventory - You may think of sales and inventory as two disparate parts of the same system, but this isn’t the best way to look at these metrics. They need to work together seamlessly for the sake of your business. Make sure to automate the syncing process between sales and inventory data so that you can prevent stocking issues and capitalize on sales opportunities as they come up.

● Employ Real-Time Analytics - Getting useful data in real-time gives you a competitive edge over businesses that fail to leverage automation. When you have immediate access to financial data, you can anticipate trends, monitor your cash flow, and make better decisions going forward.

Automation can take an otherwise tedious task and turn it into a genuine value-add for your business. By choosing the right software and following the strategies outlined in this guide, you can streamline your bookkeeping and spend more time focusing on other parts of your business. If you’d like to learn more about improving your eCommerce bookkeeping with automated syncing and reports, be sure to check out ConnectBooks today!

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