Bookkeeping is an essential component of an e-commerce business. With an online store, your business’ products will be available 24/7/365 to a wide array of customers. With the internet, you can cast a wide net, reaching a large audience and fulfilling drop-ship orders while you maintain a small physical footprint.
While setting up a website and store are critical steps, your store won’t gain traction if you don’t engage in financial planning. At Marshall Jones, we have compiled tips for bookkeeping to ensure your e-commerce business’ success.
Essential Considerations for E-Commerce Bookkeeping
E-commerce bookkeeping can present challenges for business owners. When you understand how these challenges can affect your e-commerce bookkeeping, you can select the best solution for your business.
1. How to Account for Alternative Payment Methods
While most of your customers will make their payments via credit cards, you may also decide to accept other payment types. If you go this route, you may want to equip your e-commerce platform to track these sales. Along with credit cards, payment types may include checks, cash and gift cards, especially if you sell in person, too.
Though this can make purchasing more convenient for your customers, accepting alternative payment forms may make your bookkeeping more complicated. Payments made via check or cash, for example, won’t appear in your books until you deposit this money in your account.
2. How to Document Merchant Fees
When you choose an e-commerce platform to host your online store, you will likely need to pay merchant fees. Using one of these platforms for your e-commerce business can offer benefits from a quick startup to simple search optimization. However, in exchange for these perks, the platform will take a cut of each of your sales.
That can complicate your bookkeeping, as deposits in your bank account will be net sales rather than gross sales. In your e-commerce bookkeeping, note the gross sale, then record the difference between the gross and the net to document your merchant fees.
3. How to Track Inventory Across Platforms
Another challenge you may face in e-commerce bookkeeping is tracking your inventory across platforms. Many e-commerce services offer built-in inventory tracking, making it simple to record and manage your online inventory. However, if you use multiple platforms for selling your product, these platforms won’t track your inventory changes from outside sales.
As such, it is essential to have a central place for keeping up with inventory. An outsourced bookkeeper can use your information to establish an accurate record of sales, restocks and returns in your books.
4. How to Record the Cost of Third-Party Tools and Refunds
You may use third-party tools to process payments, which can also complicate your bookkeeping — particularly when it comes to exchanges and returns. If someone returns a product, for example, did the third-party e-commerce platform track it? Or, did your business bookkeeping record the return?
Additionally, you likely won’t recoup the merchant fee your business paid, even if a customer returns an item. The merchant fee then becomes a loss, which you must reflect in your books.
The Importance of Tracking Inventory Cash Flow
Cash flow is the amount of money that comes in and out of your business yearly, quarterly and monthly. Knowing how much money passes through your business will allow you to maintain a healthy profit margin.
A cost-effective, organized inventory is one of the most crucial aspects of accounting for e-commerce companies. Maintaining inventory means more than stockpiling the items you want to sell. It also entails keeping track of your cash flow.
The costs listed on your document for inventory cash flow should exclusively relate to your stock. You may want to list expenses including the cost of purchasing a product in your inventory, the cost of manufacturing and the cost of maintenance. For example, if you have merchandise that needs to stay frozen, your expenses would include maintaining and running the freezer.
You should be tracking your actual sales and any inventory losses. Losses may result from damage, spoilage and theft. Though you can take measures to prevent these, you should still be ready to deal with them if they occur.
How to Master Bookkeeping for E-Commerce Businesses: What to Do Daily, Weekly and Monthly
You can master bookkeeping for your business by following our e-commerce bookkeeping tips for daily, weekly and monthly tasks.
Daily Bookkeeping Tasks
Every day, take the following financial steps:
- Maintain a paper trail, including your paper and email receipts.
- Keep track of invoices.
- Read and archive relevant emails.
To claim legitimate business expenses and get your full tax benefit, you must be able to support your business expenses via receipts, emails and invoices.
Weekly Bookkeeping Tasks
Every week, take the following financial steps.
- Note variable or new expenses: If you have variable or new costs, keep an eye on these monthly to ensure they align with your expectations.
- Track your cash flow: Track how much money you have in the bank and what expenses you need to cover for your business.
Monthly Bookkeeping Tasks
Every month, take the following financial steps.
- Pay attention to expenses: Each month, review your spending, so you can think strategically about how it fits in your business and how you may be able to increase profitability and cut costs.
- Look at your business as a whole: Evaluate your business from a holistic perspective to get an idea of the bigger picture and understand how everything is going. Review your sales, income, expenses and cash position for a comprehensive view of your business.
Looking for an Outsourced E-Commerce Bookkeeping Solution? Contact Marshall Jones
At Marshall Jones, our bookkeeping services involve recording, retrieving and storing financial transactions. We will help you handle billing, record and organize receipts, prepare financial reports, track and verify invoices, oversee accounts receivable, handle employee payroll and pay suppliers and vendors.
While some businesses may attempt to learn bookkeeping themselves or use bookkeeping software, this can lead to inaccuracies and errors. Fortunately, outsourcing your bookkeeping to us at Marshall Jones can lower the risk of mistakes and help your business avoid lost business opportunities and audits. Contact us at Marshall Jones to learn more about our e-commerce accounting services.