Ecommerce Accounting 101 + Best Practices

Driven by the convenience of online shopping and the limitless reach of digital storefronts, of course. We form your U.S. business in any of the 50 states and ensure it stays 100% compliant. You might also want to use ecommerce accountant CFO services from Lyfe Accounting to help you with your business needs. Accounting and bookkeeping assistance comes in many forms, including software, CPA professionals, and bookkeepers.

• There’s no shortage of accounting options for ecommerce businesses, from high-tech software platforms to your classic neighborhood accounting firms.
• Accrual basis accounting is the method required by generally accepted accounting principles (GAAP).
• The same is true for customer service, causing teams to struggle to keep up with inquiries, complaints, and order tracking requests.

Remember, good accounting practices are crucial for understanding your business’s financial health and making informed business decisions. Accurate accounting helps track cash flow and understand the financial health of the business. This allows you to make better decisions and stay compliant with regulations. Additionally, good accounting practices can reveal areas where the business can cut costs and increase profits. Inventory management in ecommerce accounting deals with the accurate recording and tracking of stock levels. It is vital to link inventory levels with financial data to gauge product performance and to strategise for reordering and markdowns.

Try doola free today – your all-in-one solution for bookkeeping, tax filings, and business tools. Work closely with your accountant to create realistic budgets and financial forecasts, giving you a roadmap for future growth and expansion. Make sure you understand your tax obligations and collect and remit the correct amount to stay compliant. Keep a close eye on your cash flow — how much money is coming in and going out.

Store chargeback.

Zoho Books is a comprehensive platform for managing your bookkeeping tasks and organizing your transactions. It provides a single, secure location to handle your company’s bills and invoices, reconcile bank statements, and control spending. Accurate bookkeeping is a baseline requirement for all business planning and operations.

The process becomes more intricate when considering the customer acquisition cost and the impact of returns on profitability. Another key difference between traditional and e commerce accounting is the volume of transactions. If you’re not keeping track of your records in an organized way, you can’t back up the information reported in your books.

How to track inventory in ecommerce bookkeeping

Returns and chargebacks are two unfortunate types of transactions that ecommerce entrepreneurs need to deal with. If you don’t enter and categorize them correctly, you could soon find your balance sheets out of whack. These tasks together give you the financial information you need to make sound business decisions. Bookkeeping is the work of recording your transactions and keeping track of your money. If you run an ecommerce business, here’s a rundown of everything you—or your bookkeeper—needs to stay on top of. Our account management team is staffed by CPAs and accountants who have, on average, 11 years of experience.

Categorize returns and chargebacks in your books

As companies prioritize digital transformation, demand for skilled accountants continues to rise. A high volume of transactions can put a strain on systems and lower store performance. Complete disruptions in service can lead to significant downtime and lost sales opportunities. In most software, your POs will generate AP entries in the accounting system. AR, on the other hand, represents the money that your customers owe you for products they purchased on credit. Your SOs confirm these sales and initiate AR entries in the accounting system.

Differences between eCommerce accounting and business accounting

By comparing COGS to your selling prices, you can assess your pricing strategies. As you identify areas for potential cost reductions, you can optimize your pricing to maintain profitability and competitiveness. Selling online requires you to process payments through an integrated payment provider or external software. There’s often a fee for each payment processed, which needs to be tracked and accounted for. The last in, first out accounting method assumes the inventory acquired most recently was sold first.

We help eCommerce businesses master their finances.

The best way to prepare for the feast-and-famine cycle is to keep a budget. Once you create a budget for your online business, it takes some monitoring and tweaking to make sure you stay within it. Here are some budgeting tasks you should expect to handle on the regular. Knowing how to read an income statement is a must for every entrepreneur and startup founder. Your eCommerce accounting income statement will tell you how much revenue you’re generating.