Any excellent ecommerce business owner knows that sales and revenue must be the primary focus. From the business's infancy to maturity, owners must channel their efforts to activities that yield a better bottom line.
But generating more business revenue is a challenging endeavor. Too often, entrepreneurs are left to deprioritize efforts in other aspects of their business, such as accounting and bookkeeping. As a result, they're more likely to commit mistakes.
That's why Unloop is here to inform ecommerce business owners about the common pitfalls they unknowingly fall into. Furthermore, this article will offer a practical solution that lets entrepreneurs go all out in pursuing profitability.
1. Not safekeeping business financial records
One thing any ecommerce small business owner often fails to do is to ensure all business financial records are well kept. A lot happens in a business, and oftentimes the owner fails to look over every receipt or financial document.
Storing financial data in tangible form has its merits. Still, in most cases, they are more vulnerable to being misplaced or lost. The only backup available is having several photocopies of each document which is time and resource-consuming.
In the digital age, it's unthinkable to lose data. That's why those who have migrated to online bookkeeping make sure all their business's financial data are synced to the cloud.
2. A lack of a filing system
A lack of a filing system is a common pitfall in safeguarding business financial records. An ecommerce business owner tends to have different types of business-related receipts and bills that are both tangible and virtual.
3. Poor transaction recording
When the lack of accounting and bookkeeping filing systems affects the safekeeping of financial records, accurate recording fails. Proof of business transaction is needed before anything is recorded, or else the IRS will come knocking.
As a result, transaction recording becomes distorted because some expenses that are supposed to be covered by the business cannot be recorded.
To solve this issue, you can:
- Be proactive in creating electronic copies of your receipts.
- Store them in folders inside a dedicated hard drive.
- Invest in accounting software.
A major problem for online sellers, accountants, and bookkeepers that relates to transaction recording is balancing the business’s bank accounts. If the books and the bank accounts don't match, there's a whole set of problems you have to deal with.
It will be a breeze to solve this problem by incorporating online bookkeeping software to sync your business bank account. Then, monitor your accounts with a team of expert accounting services.
4. Not investing in online bookkeeping software early
Some ecommerce business owners still prefer old-fashioned "books." They or their bookkeepers still handwrite journal entries and fill out ledgers or spreadsheets. This is problematic, especially in a world increasingly reliant on virtual bookkeeping.
An ecommerce business may have difficulty keeping up with competitors using the time-consuming, manual method. So it's better to go virtual and invest in online bookkeeping software as early as possible.
5. Not having a certified public accountant on call
Some of us think that we don't need a certified public accountant (CPA) at the early stages of our business. It doesn't seem necessary if you're simply selling online.
But there's plenty of value in having someone you can call when encountering an accounting or bookkeeping mishap. So find your CPA as early as possible or hire one from an accounting firm.
6. Not distinguishing a small business owner's income
Ecommerce sellers selling in marketplaces such as Amazon will be at a loss whether their business is making money if they have no on-call accounting expert to call.
Often this gets thrown under the rug, and ecommerce business owners just withdraw cash from business accounts as needed. This may cause harm to their online business. So it's important to understand revenue, profit, and equity fully to know what is yours for the taking.
7. Not tracking what others owe and what the company owes
After all the withdrawals, a time will come when the business bank account may become overdrawn. The business owner may think they still have enough, but there will be unpaid receivables and plenty of payables that demand payment.
To avoid running short on cash, business owners need to track what is owed to the business and what it owes to others. Even their own debts to the business have to be tracked carefully. A reliable bookkeeper can help with this.
8. Not distinguishing between contractual and regular employees
Treatment for contractual and regular employees is different in the accounting books. This is because contractual employees fall under a different expense than regular employees, which falls under the 'salary expense' account.
Failing to identify this can skew the business financial statements and give inaccurate information about profit.
Be sure to draft different contracts for regular and contractual employees. Then, make these documents available to the accountant and bookkeeper so they can identify them for you.
9. A lack of tax planning and tax preparation
It's a challenge to pay taxes. That's why many ecommerce small business owners tend to put it off. This can be the case for those who suffer losses or breakeven.
Small business owners with little revenue may be given exemptions or breaks. But if they're not doing any tax planning and preparation, it's unlikely they’ll know about tax laws that serve an advantage.
To solve this problem is to be proactive about learning your business taxes. Also, go back and read pitfall #5 again.
10. Breakdown in communication between accounting and bookkeeping.
Many internal and external accounting problems stem from a lack of communication. The usual scenario is that ecommerce small business owners are always out of reach and busy, so the bookkeeper is left in the dark about how the entrepreneur is developing the business.
A solution is to have a platform where the ecommerce seller, their bookkeeper, and accountant can collaborate easily.
Online Bookkeeping Services Will Reduce Startup Pitfalls
A lot of the pitfalls mentioned above are rooted in a single problem: time. So to solve these problems, it only makes sense to get online accounting services that will look after the accounting and financial aspects of your business. This is what a bookkeeping and accounting service can do for you.
Accurate Bookkeeping Service
These professional bookkeepers are trained to handle complex business transactions. They'll record every financially-impacting activity to reveal the true health of your business. So give them every financial data, and they'll take care of the rest.
Use of Online Bookkeeping
Outsourced bookkeeping firms use online accounting software such as Quickbooks Online (QBO) and Xero to record transactions fast. So if you have already transitioned your business to online accounting software, it'll be quick to hand it over to experts.
Network of Accountants
Hiring an online bookkeeping service firm lets you access a team of accounting experts. As a result, you are offered tax services where the online financial firm taps into its network to help file your business sales and income taxes.
This will be handy in case you don't have your CPA or private accountant to do it for you.
Financial Reports and Analytics Generation
A professional bookkeeper can generate different reports. For example, you can have financial statements that will give you detailed and accurate information about your monthly expenses, income, assets, liabilities, and capital.
Decision making will be much easier because you won't have to exert effort. Instead, an outsourced professional bookkeeper will help you see how your equity plays out in the bigger picture of your company.
Accounts Payable and Payroll Service
Part of the online bookkeeping service is ensuring all bills are accounted for and ready to be paid. Then, all it needs is a go-signal from you.
Accounting for employee salaries won’t be a worry for you by hiring an online bookkeeping service. This means you or your staff can focus more on identifying the employment nature of each worker within the company.
Accounting Software Cloud Backup and Sync
You won't have to worry about losing your financial transactions. Virtual bookkeeping services will monitor your transactions to ensure they are backed up in the cloud-based accounting software.
These professionals also ensure that your business bank accounts are properly synced to the accounting software. As a result, manual bank reconciliation will be a thing of the past.
Partnering up with an online bookkeeping firm will help you solve one of the most vital components of an efficient accounting and bookkeeping system: communication.
You can have a responsive team of experts and you can discuss numbers. In addition, they'll be proactive in making sure you or your staff are well informed and reminded of what else is needed for them to hand you an accurate financial and analytics report.
Your Small Business Bookkeeping Services on Autopilot
Imagine yourself not thinking about accounting and bookkeeping in the course of your day-to-day business. That's what online bookkeeping services can do for you. It will make you feel like you're sitting in the cockpit with your hands behind your head, watching your business's accounting glide through the clouds because it's on autopilot.
Ecommerce bookkeeping services like Unloop will take care of your business's financial recording needs. We can be your outsourced accounting department, so all you need to do is click a button and make important decisions.
Talk to us if you're ready to make your accounting system fly. Call us at 877-421-7270 or check out our online bookkeeping service.