Bookkeeping is a crucial aspect of any business and e-commerce businesses are no exception. Keeping accurate financial records not only helps you stay compliant with tax laws but it also gives you insight into the financial health of your business.
Cash and Accrual Accounting
In cash accounting, income is recorded when it is received and expenses are recorded when they are paid. This method is best for businesses that have a low volume of transactions and operate on a cash basis.
Accrual accounting records income when it is earned and expenses when they are incurred, regardless of when the money is received or paid. This method is better for businesses that have a high volume of transactions and operate on a credit basis. E-commerce businesses typically use accrual accounting because they often have a high volume of transactions and operate on a credit basis.
Keeping Track of Income and Expenses
When it comes to income, e-commerce businesses need to keep track of all sales including the date of the sale, the product or service sold and the amount of the sale. It is also important to keep track of any discounts, refunds or returns.
It is also important to keep track of all expenses including the date of the expense, the vendor or supplier and the amount of the expense. Common expenses for e-commerce businesses include the cost of goods sold, marketing expenses and shipping and handling costs.
Inventory System
It is essential to maintain an inventory system. For e-commerce business this system will be digital and record product availability and pricing. Keeping an accurate inventory system ensures that you are able to track the value of your inventory and it helps you make informed decisions about ordering new products and adjusting prices.
Keeping Track of Taxes
E-commerce businesses are subject to the same tax laws as traditional brick-and-mortar businesses therefore it is important to stay informed about the tax laws that apply to your business. Make sure to keep track of all sales tax collected and all taxes paid.
Ask For Help
It is always best practice to seek the help of a professional accountant. They can help ensure that your financial records are accurate and up-to-date and they can provide valuable insight into the financial health of your business.
They can also help you identify areas where you can cut costs and help you create a budget and financial projections for your business allowing you to gain an insight into the financial health of your business and make informed decisions that will lead to success.
Francis Fabrizi
Accountant
Keirstone Limited
