Running an e-commerce business means managing a number of moving parts to ensure successful operations. From producing high-quality products to ensuring adequate stock levels and timeous deliveries. These are only some of the operational aspects of running a successful e-commerce business. But, business growth and regulatory compliance requires that you also nurture a winning administrative and accounting side of your business.
Accounting for e-commerce businesses
Proper tax and accounting makes a big difference to your bottom line and your stress levels. Having accurate financial data is key to making smart business decisions.
With an optimized system in place, businesses can keep track of inventory levels and the accompanying cash flow to fund operations at all of their locations.
We look at five essential accounting practices that your e-commerce businesses should prioritize to streamline operations, optimize financial management, and drive growth.
1. Ensure a reliable bookkeeping system
Accurate bookkeeping is the foundation of financial management. Having compliant financial records for your e-commerce business means ensuring that all transactions including sales, refunds, expenses, and inventory purchases; are recorded accurately and promptly.
2. Implement accurate inventory management
As an e-commerce business, you know that oversight of your stock on hand is crucial to delivering on sales. Inventory management forms a great part of maintaining profitability and meeting customer demands. It is essential to know when certain items are running low within your business so that you can restock in time to keep operations running smoothly, for this reason, one of the most important things you can do in your e-commerce business is implement a comprehensive inventory tracking system that allows you to monitor inventory turnover, identify slow-moving or obsolete items, and optimize purchasing decisions.
3. Ensure you’re making use of data automation
E-commerce businesses have a number of transactions taking place at the same time. If your business is big enough you could possibly process thousands of sales, returns and exchanges in one day. This would not only impact stock numbers, but also affect your financial records – which forms a crucial part of making accurate tax submissions to the IRS.
Imagine having to keep track of and cross-reference all sale reversals in your bookkeeping and financial record platforms. This would be a tedious, if not impossible task. For this reason, it is advisable to implement sales management and inventory management tools that can be integrated with your accounting software. This way everything is recorded as sales, returns or refunds happen.
4. Data protection
Of course, with the digitization of data, it is imperative to ensure tight controls and processes that protect your business’s financial data. Making use of reliable accounting software such as NetSuite and QuickBooks will give you peace of mind as it comes with built-in data protective measures. But, as an e-commerce firm, it is crucial that you consult with the experts on implementing robust cybersecurity measures, including encrypted connections, firewalls, and secure payment gateways, to safeguard customer and business data.
5. Ensure tax compliance
Complying with tax regulations is essential for e-commerce businesses to avoid penalties and legal complications. Consult with your CPA and stay informed about sales tax requirements and understand the tax rules and requirements within the state you operate. If you are an e-commerce business that operates across states, you may be liable for apportionment of multistate taxes. It is important to consult with CPA to help you navigate complex tax issues and take advantage of available deductions or exemptions, especially when running a multistate e-commerce business.
At Fusion, our CPAs are trained to set up e-commerce accounting software to best serve the needs of your e-commerce business and help you keep books clean for a smoother tax filing process. Contact us to discuss the best accounting approach for your e-commerce business.
This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive