Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Hearing the word accounting leaves our brains in tangles. The thought of crunching numbers is enough to give us a headache. We see piles of receipts and stacks of books and long nights staring at our computer screens, trying to make sense of where the missing penny can be found in the sea of business transactions.
As if accounting isn't enough to complicate things, now we have a new beast to conquer: eCommerce accounting. The thought of it makes us want to pack up and leave the eCommerce world even before we get started.
But accounting for eCommerce is still the same accounting. If you let Unloop guide you through this article, you'll find it's a lot simpler than you think.
A Simple Definition of Accounting for Ecommerce Business
Ecommerce accounting is recording business transactions of an online business.
The above definition still means traditional accounting and follows the same bookkeeping process, financial statement generation, and reporting. But the data collection happens online. If it isn't online, it's converted to an electronic format.
One fundamental tool that is needed for online business accounting to work is the software. Several of them have become efficient instruments for accounting data collection and processing. Below are some of the accounting software used by most eCommerce businesses.
- Quickbooks
- Xero
- Freshbooks
If you're an eCommerce business owner, starting an accounting system for your online venture has to start with investing in one of these accounting software. So if you want to get more information about these tools, go and check out our list.
Facets of Ecommerce Business Accounting
Since accounting for eCommerce is still accounting, the same functions still apply. Therefore, your business’s internal system should have these three facets to ensure you get a functioning accounting arm for your eCommerce business.
Bookkeeping
Bookkeeping is the accounting task of recording transactions. This act of keeping books follows the accounting cycle. So the first thing bookkeeping needs to get running is business transaction data.
In an eCommerce setting, data will be collected from you via electronic means. Most of the time via a spreadsheet file. But there are other means. Several examples are .PDF file scans and extraction or migration from other accounting software and online marketplaces.
Once data collection is done, the bookkeeper handling the eBusiness accounting software will start creating or managing the chart of accounts. Then, they will classify and record the transaction and their equivalent amounts. The bookkeeper's work will end with a trial balance, and if all numbers check out, the process will proceed to the next step.
Financial Reporting
Bookkeepers and accountants can both prepare financial statements. Your bookkeeper can give those to you when you request it, which you can use to make your business performance interpretations. But only the accountant can make specialized analysis based on these statements' figures.
Accountants will analyze your financial statements and recommend what financial strategies you should implement next to maximize profits.
Financial statements are only composed of three:
- Income Statement
- Balance Sheet
- Cash Flow Statement
If you want to get deeper into the discussion of financial statements, you can check it out here. Otherwise, if you want to keep financial statement analysis out of mind, you need to hire an accountant or a team of qualified experts who has access to them that can interpret your statements' numbers for you.
Tax Filing
Another fundamental facet of accounting is tax filing. This is done by an accountant. They ensure that tax returns are filed on time and in the right amount to free your business of any tax penalties.
Ideal Ecommerce Accounting Services That Simplify Your Business’s Numbers
Just like traditional accounting, You can also hire an eBusiness accounting service for your online store. But if you're new to the online selling game and have little to no idea what to look for when shopping around for a service, then note these service features.
Seamless Data Onboarding - You're busy, and your competition won't wait. Accounting systems can take time to set up, so you'll want to have a seamless onboarding wherein you give them all the financial data you have, and they'll do the rest. In addition, you'll want a service that knows how to integrate accounting software with your online store for a seamless and synced recording.
Inclusive Bookkeeping Services - Subscribing for the accounting software alone doesn't entitle you to a bookkeeper. The software is but a means to do bookkeeping. So you'll want to get an accounting service with both the software and the bookkeeper running the transaction through.
Consistent financial Statement Generation - In some cases, asking a bookkeeper to create a financial statement may cost you extra. Instead, find a service that can give you a consistent and accurate financial statement, whether you need them or not, so you can save money and time.
Bank Reconciliation - You'll want an accounting service that includes cross-referencing the books' numbers into your business account's figures. Because reconciling both can be a tedious task, but it is tremendously important that the numbers on the books match the money in the bank. That's how you know everything is recorded accurately.
Tax Filing - Paying taxes is another addition to the time-consuming task an eCommerce business owner must do. Keeping up with the updated tax policies, the forms, and the filing deadlines is complicated that can take you hours or days to figure out. You can solve this problem if you hire an accounting service to handle this for you.
Extra Mile Support - If an accounting service does the extra mile and offers you more than the bare minimum, it’s worth giving a shot. For example, providing sales tax support and eCommerce key performance indicators data are several services that add value to your business and help you manage it effectively.
Simplify Your Ecommerce Accounting Support With Unloop
Unloop caters to all the services mentioned above and more. We are a team of experts who know accounting software and are adept at bookkeeping. The best part is we know how eCommerce businesses work. Talk to us at 877-421-7270 for more information about our eCommerce accounting service offerings.