As an ecommerce business owner, accounting and bookkeeping is a somewhat painful necessity.
Go without accounting and bookkeeping in your ecommerce business and you’ll run into the following problems:
- Inaccurate financial records
- Cash flow miscalculations
- Lost or miscalculated inventory numbers
- Miscalculated or misinformed business data
- Infrequent bank reconciliation
- And more.
The “headache” of ecommerce accounting and bookkeeping pales in comparison to the colossal risk you add to your business if you don’t take care of your financials properly from the start.
And if your books are a mess, you can still take action to get them back. Got months or years worth of unreconciled books?
I can help.
As your Top Rated® Online Bookkeeper who serves ecommerce businesses across Maryland, N. Virginia, DC, Delaware, Pennsylvania & now nationwide, let me rescue your books, right now.
10 Ecommerce Accounting Basics
#1. Use ecommerce accounting software
What’s the worst mistake you can make with ecommerce accounting? Try to piece all your financials in an excel spreadsheet and do calculations with your computer calculator.
Do yourself a huge favor and get ecommerce accounting software.
If you use Shopify, then you can find dozens of ecommerce accounting software apps in their app store.
Unsure of which one to use? Choose a free one or pick out a 30-day free trial and give it a go, or, I can recommend some that most of my ecommerce clients are using.
You can also book your FREE financial analysis with me to discuss exactly how we can use individual ecommerce accounting software to support your exact ecommerce accounting needs.
#2. Track and measure cash flow
You know it. I know it. Business owners know it.
Cash flow is the lifeblood of business. Without it, your business closes it’s digital doors, stops selling product, and you go back to working your J-O-B.
Get a separate bank account for your business. Filter all business related cash through this bank account.
Most believe that more cash in then out means you’re successful. On the surface, yes, you’re succeeding.
You ought to keep track of the “timing” of your cash.
If you’re on track to do $1 million in revenue next month… but you can’t pay your employees, vendors, etc, this month, then you’re going to, either stretch the trust of those relationships, or lose those employees, customers, vendors, and more.
When your cash flows in and out of your business it matters and you need an expert to have a handle on proper accounting.
This is why having a Master Bookkeeper and Expert Ecommerce Accountant who understands advanced ecommerce accounting principals and software and all of its functions is so imperative to your business success. Go ahead, click on the button below for your FREE, Financial Analysis and get a hold of your ecommerce business right now!
#3. Define minimum inventory volume
You don’t want to run out of inventory…
…but you also don’t want to store too much.
If you’re managing your own inventory, take the time to determine what a good minimum inventory volume is for your business.
If you’re drop shipping, then understand that your manufacturers, vendors, etc will have to make decisions based on your sales volume. Help them out and keep track of your inventory volume so that you can sell more product and increase revenue without unnecessary hiccups. And that’s where I come in. I ensure EVERYTHING is tidy and makes sense through the most accurate reporting in the industry.
#4. The cost of goods to sell
Business is about more than selling. It’s about managing the cost of good against how much you sell them for.
You could sell a product for $100 each…
…but if it cost you $150 to acquire the product, then you’re losing money each time you sell.
Similar to the cost to acquire a customer, your cost to sell a product matters.
As the Top Rated® Expert Bookkeeper and Master Accountant who knows how to manage advanced ecommerce accounting software I can assist you with this. Click below to find out.
#5. Calculate expenses
Including what we’ve already mentioned in this article, make sure you are able to calculate your business expenses.
From inventory down to your website hosting fees… and everything in between:
- Loan interest
- Property tax
- And more
If you aren’t able to track and measure this against your cash intake, you put your business at risk.
At the core, cash in vs. cash out is the basic business metric.
How you track, measure, and optimize your expenses vs revenue is where the margins make you more.
You aren’t able to optimize your business if you’re not already tracking the cash flow (in and out).
#6. What is your “break-even” sales metric to acquire and sell goods?
What does it cost you to acquire a customer? Do you know this metric? You can if you utilize ecommerce accounting basics like the advice in this article.
If it costs you $150 to acquire a paying customer, then you want to at least get your Average Order Value (AOV) to be $150.
This means that you’re paying $0 to actually get a customer to buy the first time.
Every purchase of that acquired customer after that first one is majority profit (depending on your business margins, etc).
It’s near impossible to make a profit on acquiring customers… even the best in the ecommerce business break even on their acquisition.
Where do you make the profit?
Lifetime Value (LTV). Sell more products over time to earn back or make profit over your acquisition costs.
#7. Track and measure gross revenue vs. net profit
You see it all over the internet…
“We did $100 million in revenue this year.”
Great. What is your net profit on that gross $100 million?
It is possible to make more profit on an annual 6-figure run rate than an annual 9-figure run rate.
It’s all about fixed costs, costs of goods, acquisition costs, etc against the volume of sales you make.
Have you ever heard this phrase before?
Scale devours cash.
If you scale properly, you don’t put your business at more risk because you manage margins properly.
Get ecommerce accounting and bookkeeping help so you can grow your business and secure your future.
#8. Select proper tax rates
Your customers will buy from all over.
This means you must set up the proper tax rates to stay compliant.
Thankfully, your ecommerce platform should be able to take care of this for you.
What do you do when you export your weekly/monthly reports and need to enter it all into your ecommerce accounting software?
Do you want to spend the hours taking care of this instead of finding new products to sell, growing customer LTV, or other pulling “big lever” revenue tasks?
This is why an online bookkeeper and accountant whos is familiar with ecommerce like me, can help you keep your financials in order.
Books a mess? It doesn’t matter how far behind you are, stop delaying. Contact me right now, I’m standing by.
#9. Plan for tax payments
Most people like surprises…
Unless it’s a tax surprise. Then…not so much.
Taxes are unavoidable.
That’s why it’s imperative that you plan for your tax payments BEFORE you need to make them.
Save time, money, and energy with taxes and get help from a Master Bookkeeper.
If you don’t, then the nights and weekends you give up in order to do taxes is on your shoulders. And who wants to spend weekends working on that?
Don’t carry that weight alone.
Get help from a Master Bookkeeper and your Expert Accountant right now.
#10. Get familiar with your financial balance sheet
Do you know your assets, liabilities, and equities?
If you don’t have a report of these in front of you weekly/monthly, you are putting your business at risk. This is why an Expert Bookkeeper is so helpful. They can put this asset, liability, equity report together for you instead of you spending the hours to determine, define, and discover this information in your own business.
Get familiar with your assets, liabilities, and equities so that you can make better, informed financial decisions. Click below and call me, today!
Here’s what we covered in this post:
- Use ecommerce accounting software
- Track and measure cash flow
- Define minimum inventory volume
- The cost of goods to sell
- Calculate expenses
- What is your “break-even” sales metric to acquire and sell goods?
- Track and measure gross revenue vs. net profit
- Select proper tax rates
- Plan for tax payments
- Get familiar with your financial balance sheet
If you want to make your ecommerce accounting and bookkeeping easy, then get the help of a Master Bookkeeper and Expert Accountant today.
Start with your FREE financial analysis and get your business cash flow under control.
As your online bookkeeper and accountant with over 15+ years serving clients throughout the DMV, who serves ecommerce businesses throughout Maryland, N. Virginia, DC, Delaware, Pennsylvania & now nationwide, let me rescue your books, today. Click below to get started.