eCommerce accounting can be tricky, especially for beginners and when done manually. It will consume a lot of time and might have plenty of errors, leading to poor financial management. Hence, you can opt for automated software to make your accounting job easier.
eCommerce accounting software helps business owners to simplify their financial management system. You can learn and master all tasks involved in accounting by using the ideal software. Below goes a guide on how you can use eCommerce accounting software to ace accounting for your eCommerce business.
The first step to using eCommerce accounting software is to set up the software and create business accounts. Evaluate the options available in the market and then select the most suitable eCommerce accounting software for your business. Once you have set up your selected software, it’s time to create your account. At this point, consult with an accountant or financial advisor to ensure that you accurately set up your accounts and categories (income, sale and so on).
Financial accounts refer to the business’s bank accounts, credit cards and accounts on different online payment apps. Once you have created the account on the eCommerce accounting software, connect all financial accounts to the software. This will allow you to automatically import and track your financial data and transactions without requiring manual labor. The automation process will also ensure the addition of accurate data.
As you pay for expenses from your account or your account receives payment, enter the transactions correctly into your eCommerce accounting software. Some businesses also directly add records of sales and expenses as they happen and do not wait for the money to leave or reach the bank account. Whichever accounting method you use, be sure to accurately record the date and amount of income and expense category for each transaction. Don’t mix between the two categories, as it can mess up your balance sheet.
Although the data recording procedures are automated, you should regularly review and adjust your accounts to ensure that your financial records are up to date. This may involve comparing your eCommerce accounting software to your bank statements and correcting discrepancies (if any).
A good understanding of finances is crucial for the seamless operation of the business. If you don’t know how much money you currently have and how much money is on its way, you won’t be able to tally the numbers against your foreseen expenses. It will prevent proper business planning and expansion. Cash flows provide insightful financial information about the business. They display the sales, incomes and expenses, which will help you plan your finances better.
You should consult a professional to set up proper taxes when offering several products and services, but eCommerce management software can help you out.
You need to track all your sales and profit as the transaction happens and way before tax time. This will inform you of any inconsistencies and give you time to correct the same. Also, remember that there are different income and sales taxes at the local and state levels. The eCommerce accounting software will help you by storing and displaying financial records as and when needed.
Once you have set up your taxes and know your tax liabilities, be prepared to make the payment. Calculate the payable tax amount and keep it aside. Do not wait till the last minute to calculate the tax amount, as there might be a shortage of money, and you will not have much time left to arrange the remaining fund.
The balance sheet will show you how your business is doing on the finance front. You can see your current assets or cash in the bank, your liabilities or due payable and the equity or the difference between assets and liabilities. Higher liabilities than assets indicate negative equity and a bad phase for the business. If your balance sheet shows negative equities, quick improvement is needed.
Use your eCommerce accounting software to generate financial reports, like profit statements, loss statements, balance sheets, and cash flow statements. These reports help you understand your business’s financial health and identify any areas where you may need to make adjustments.
Many eCommerce accounting software programs offer budgeting and forecasting tools that can help you plan for your business’s future financial needs. Use these tools to create a budget and forecast future income and expenses.
Read the steps discussed above thoroughly to gain an in-depth idea of how to become skilled at eCommerce accounting using the software. Follow this guide one step at a time and master accounting without overwhelming yourself.