Every business needs a reliable bookkeeping system. This system is meant to help owners make critical decisions that can eventually lead to business growth. Unfortunately, a lot of small business owners don't understand the value of bookkeeping, which leads to their business’s early demise. Proper record keeping and accounting are essential in running a business.
Ecommerce accounting will require licensed professionals. However, bookkeeping is much simpler, and even an ecommerce business owner can do it. If you are interested in handling the bookkeeping of your online store, you can learn bookkeeping by following these simple steps.
Bookkeeping for Ecommerce Business Owners
Unlike accounting, which requires a degree and licensure examinations, everyone can be a bookkeeper. You become a qualified bookkeeper after attending a few training sessions and learning about financial statements like income statements, cash flow statements, and balance sheets.
If you wish to effectively handle the finances of your company, make sure you comply with these guidelines.
Establish a Bookkeeping System
Deciding on what bookkeeping system to use is crucial in the early stages of bookkeeping. Forgetting to record a transaction, losing a receipt, or making the same entries for the same transaction can lead to misinterpretations of your financial data, which can negatively affect your business decisions.
Establishing a bookkeeping system will help you stay consistent. You can choose to record your transactions manually. However, modern times require modern solutions, and utilizing bookkeeping software is best to ensure all your financial transactions are recorded, organized, and stored.
Some of the best bookkeeping software for ecommerce are QuickBooks and FreshBooks, which not only record transactions and supply financial statements but also double as accounting software. It does take some time to integrate your operations and fully understand how the software runs. Therefore, we recommend using free trial versions of the software to see if it suits your bookkeeping needs.
The other method is to use a spreadsheet. You can write your business transactions in a notebook or use a computer to record financial data. Although this method is tedious, time-consuming, and more prone to errors, it is still an effective way to start tracking the money that goes in and out of your business.
Record All Financial Transactions
Recording financial transactions may sound easy, but keeping them consistent and accurate may be challenging as time goes on. As your business grows and more transactions occur, you must find an efficient way to keep up. Here are some tips to help you properly record your transactions.
Use One Accounting Method
It’s simpler to maintain track of your business finances if you record everything properly. There are various things you can do to be sure you are maintaining your records. First, use the same accounting method for all your bookkeeping entries. For the cash accounting method, you record financial transactions when you receive or spend money.
On the other hand, there’s the accrual accounting method where you record your accounts receivable and accounts payable before you physically receive or pay the cash. This means that you can already record the transactions even if the money does not reach your accounts yet.
The cash accounting method is much simpler to do, and so it’s good to adopt in the early phases of your small business. But as your business grows and expands, accrual accounting will better tell you the overall financial health of your company.
Double-Entry Bookkeeping for Ecommerce
Another practice you should do for proper ecommerce bookkeeping is double-entry bookkeeping. A business transaction happens in two ways, and both should be recorded for accuracy. For instance, in inventory management, you should record the acquisition of a product as a drop in cash and an increase in inventory.
Alternatively, when someone buys from your business, you should record it as a decrease in inventory and an increase in sales. The ideal method to monitor your company's cash flow is using double-entry bookkeeping.
You can also record transactions in a journal, but the rise of bookkeeping software makes using a general ledger or using the journal method obsolete. However, you can still use this as a backup record in urgent situations.
Post Transactions to Ledgers
Your ledgers are the heart of bookkeeping. Without them, you won’t have proof of the transactions that happen in your business. Regular updates will give a clear view of your cash flow and will help with your accounting.
Have Separate Ledgers for Your Accounts
The success of ecommerce bookkeeping is in organizing and categorizing your accounts. Your business's finances come from many financial transactions. One can start small by generalizing records for online sales or records in inventory tracking, as long as it gives you a full and clear view of the money that goes around inside your business.
As your business grows, here are some of the accounts your bookkeeping should cover:
- Account payables
- Account receivables
- Cost of sales
Post and Analyze Ledgers Regularly
Updating your ledgers depends on the volume of your transactions. You can update ledgers daily, weekly, and on a monthly basis. Regardless of how often you post on your ledgers, you must be consistent to avoid getting overwhelmed when the accounting period comes.
After all these updates, consult with an accountant to create financial reports for your small business. From here, you can see if your business is growing positively, if you need to enact strategies to improve further, or if you need to change any processes that aren’t working.
Ecommerce Bookkeeping Services at Unloop
If bookkeeping is confusing for you, then getting expert help is the best thing you can do for your business. Unloop has the services you need. Here are some of what we include in our ecommerce bookkeeping services:
- Providing you with monthly financial documents like income statements, cash flow statements, and balance sheets.
- Integrating your business to cloud-based bookkeeping and accounting software like QuickBooks Online or Xero.
- Customizing analytics and KPIs that are tailored to your business.
- Accrual accounting methods for all of your financial reports, plus FIFO and WAC methods for inventory and COGS.
- In-depth customer service via Slack.
Bookkeeping and accounting are two essential parts of running a business, but most business owners only see accounting as essential. Bookkeeping seems like a menial task that’s only around for keeping records of financial transactions, but it’s the basis of accounting as it keeps your business balanced and helps you make critical business decisions.
For more business-related services, visit Unloop. We offer services on accounting, forecasting, payroll, and taxes. So book a call with us now and talk to our experts to see what we can do for your business.