Bookkeeping Best Practices for eCommerce Businesses
As an eCommerce business owner, keeping track of your finances is crucial for your success. Knowing your sales and inventory numbers is the key to making informed business decisions. Accurate financial data will give you a better understanding of your business's overall health and will help you identify areas for improvement. In this article, we will provide you with bookkeeping best practices for eCommerce businesses.
Hire a Bookkeeper or Accountant that is an expert in these types of businesses
If you are not an accounting expert, consider hiring a bookkeeper or an accountant with experience in eCommerce businesses. They can help you set up and maintain your financial records and ensure that you are following best practices.
Choose the right accounting software
Choosing the right accounting software is essential for eCommerce businesses. QuickBooks and Xero are excellent options and have the ability to integrate with many eCommerce platforms including Shopify. These accounting software programs can help you manage your inventory, expenses, and revenue.
Keep your books up to date
Keeping your books up to date is essential for accurate financial reporting. Work with your bookkeeper or accountant to update your books on a weekly, bi-weekly, or monthly basis. This will help you stay on top of your finances and make informed decisions.
Stick with Accrual Accounting
Accrual accounting is the best accounting method for eCommerce businesses. It recognizes revenue and expenses when they are incurred, regardless of when they are paid. This method provides a more accurate picture of your business's financial health.
Maintain proper inventory reporting
Inventory management is critical for eCommerce businesses. Use third-party apps such as OneSaas to import all sales and inventory into your cloud accounting software. QuickBooks Online is a good inventory management system, but if you need a more robust system, third-party inventory apps like SOS are a great choice.
Setup fraud prevention measures
Protect your business by setting up fraud prevention measures. Keep a close eye on your bank accounts, payroll, and expenses to detect any anomalies or suspicious activities.
Review your financial statements often
Reviewing your financial statements such as the Profit and Loss statement, Balance Sheet, and Cash Flow statement regularly will help you detect if there are any misclassifications of expenses if all sales were imported correctly and if you are making money.
In conclusion, following these bookkeeping best practices will help you manage your eCommerce business finances effectively. If you need additional help or guidance, consider speaking with an expert in this industry or book a time to chat with us. We are happy to help you secure the future of your growing business.
Article by Jennifer Walsh, CPB
Jennifer Walsh has been a bookkeeper for over 20 years and she's loved every minute of it. She loves helping business owners reach their financial goals so they can live the life they love, without having to worry about the numbers.