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How Can E-commerce Companies Use QuickBooks To Track KPI's?

Some estimates claim that by the year 2021, e-commerce sales around the world will reach $4.9 trillion. As an e-commerce entrepreneur, you probably want to get as much of that $4.9 trillion as you can. Proper tax planning and accounting may help you achieve your goal by giving you a clear picture of where your money is going to help you make accounting decisions. These informed choices might lead your e-commerce company to long-term profitability - that's where QuickBooks comes in. QuickBooks is a comprehensive accounting software. It can be used to track cash flow, count inventory, and understand the cost of goods sold.

How E-commerce Companies Use QuickBooks to Track Their Cash Flow

Cash flow management is usually a key aspect of an e-commerce company CPA role. Traditionally, cash flow is calculated by determining the amount of cash that is available at the beginning and end of a set period. Cash flow and profitability are not the same. A profitable business may not have the cash to pay its bills. Conversely, a business may meet all its financial obligations but not be turning a profit. Using QuickBooks may make it easier for your or your e-commerce company's CPA to track cash flow and provide a series of reports and projections. To set up a cash flow projection, using Quickbooks, follow these steps:

1. in the “Company” menu, choose “Planning & Budget”

2. click on “Cash Flow Projector”

3. select “Next.” Then choose the accounts you wish to review. Make any necessary adjustments to the beginning balance. Click “Next”

4. determine your projection method and make weekly adjustments to the “Cash Report Summary.” Then click “Next”

5. choose an existing account or input an expense description with the corresponding amount. After making weekly adjustments in the “Business Expense Summary.” Select “Next”

6. make adjustments to your accounts payable expense. Select “Finish Projection”

7. print your cash flow projection or save it as a PDF

Our e-commerce business accountants recommend working with an expert to set up these controls. So, if you are new to operating accounting software or you want to get started with professionals - our team here at Fusion CPA is here to help.

QuickBooks and Inventory Management for E-commerce Companies

For your e-commerce company to be scalable, sustainable, and profitable, you or your e-commerce company's accountant should have a firm grasp on inventory management. Failing to monitor your inventory could lead to overselling or overestimating your e-commerce company's inventory needs. QuickBooks should also make handling your inventory easier. When you purchase or sell products, inventory quantities can be set to automatically update, so you know when to reorder and what to reorder. It also has the functionality to help track what you have ordered if you set up vendor categories. Then, once all categories are in place your e-commerce company’s bookkeeper can organize the contact information of several vendors into one place to make reordering easier.

Use QuickBooks to Track the Cost of Goods Sold

The cost of goods sold is the cost of labor and materials used to create goods or offer a service. Knowing the cost of goods sold usually helps you analyze and estimate your bottom line. If the cost of goods sold rises, your company’s net profits may decrease. An increase in the cost of goods could be beneficial from a tax planning standpoint as it usually means you will have increased expenses and lower tax liability. However, there may be less profit for you or for shareholders. When your e-commerce company sells an item, you or your CPA can run QuickBooks’s “Transaction Journal Report” on the invoice or sales receipt. This will present the Sales/Accounts Receivable transaction and the Inventory/COGS transaction to determine the cost of goods sold.

Get Practical Advice from E-Commerce Company Financial Advisers

We understand the e-commerce market is growing and we at Fusion CPA are committed to helping e-commerce companies succeed. We do this by offering strategic tax planning, tailored financial advice, and accurate bookkeeping services. Our team of experienced accountants offers expert insight on maintaining a balanced inventory. We can show you how using software like QuickBooks may help you maintain visibility across multiple warehouses and multiple channels. Learning financial and tax strategies may save you money while growing your e-commerce company. So, let’s talk. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!

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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. 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.