E-commerce entrepreneurs understand the unique challenges faced by businesses when it comes to bookkeeping. Keeping books for an online store requires specialized knowledge due to the complexity of and volume of transactions, e-commerce-specific workflows, and multiple platforms and financial documents to manage.
Overview of Bookkeeping for E-commerce Businesses
In a nutshell, bookkeeping for e-commerce companies involves keeping accurate records of all financial transactions. Nevertheless, e-commerce bookkeeping poses some distinct challenges.
Keeping Track of Many Small Transactions
Normally, e-commerce platforms process a large number of small transactions. Tracking each transaction and/or monthly totals and balancing accounts requires meticulous attention to detail. Manually recording each transaction would take too long and be impractical. In some cases, automated accounting solutions help group expenses and revenues into certain categories and match them to their respective accounts. In other cases, integrations can cause a big mess in the books, and monthly manual entries are the recommended approach.
Payments from Various Channels
Credit cards, debit cards, mobile wallets, and wire transfers, among others, are some of the payment methods accepted by e-commerce businesses. The processing fees, chargebacks and refunds have protocols that are specific for each payment method used. A bookkeeper needs to be aware of the requirements of different payment processing types and workflows in order to manage them correctly and accurately. These can be incredibly detailed, and there’s a lot of room for error within the complexities if not managed properly. E-commerce businesses generally use different online channels like their site, online marketplaces, or social media platforms to sell their goods. This complicates bookkeeping since sales from each channel have to be recorded independently.
Managing Inventory
Keeping track of the stock of physical items sold in e-commerce businesses can be hard because they deal with a high volume of transactions daily. Some bookkeeping software provides inventory management features such as monitoring stock levels, recording sales, issuing purchase orders, and more. I personally don’t recommend using QBO for a perpetual inventory system, but the software works well for a periodic inventory management system.
Review Reports Regularly
Examining financial reports regularly is essential to gain insight and ensure accuracy. Some recommendations:
- Monitor sales figures for revenue, profits, and costs every month.
- Make data-driven business decisions based on analysis of sales reports on best-selling products, popular customers, seasonal trends, and other key metrics.
- Ensure that all invoices are paid on time by reviewing accounts receivable aging reports weekly.
- Compare bank statements with accounting records each month to detect any differences between the two.
