Ecommerce Accounting Guide for Business Owners 2023

A chart of accounts is essentially the breakdown and structure of your financials. For example, a merchant cash advance received from Shopify Capital should be treated differently than a traditional loan. It’s important to find a bookkeeping solution that understands these nuances or you will likely lose out on potential tax deductions. There are MANY ecommerce financing options out there – Shopify Capital, Stripe Capital, ClearCo, Ondeck, Ampla, Wayflyer, and the list goes on. The way these financing instruments work are different than standard loans and can often impact the accounting and tax treatment. This is so important that we will categorically state that if your accountant doesn’t understand this, it’s time to find a new one.

Square, Stripe, and PayPal all charge transaction fees on sales. Platforms like Shopify have their own payment gateways that charge a merchant fee. Each solution comes with a different offering for collecting and tracking data. Here are the essential features that eCommerce businesses need. We are experts in both accrual and cash basis accounting methods and we are happy to follow whichever method you prefer. Given our expertise within eCommerce, we have seen that the majority of eCommerce companies use the accrual based bookkeeping method.

We integrate with your sales channels and tools so everything’s in one place.

Because eCommerce businesses use a wide range of software, they need to be able to pull all your financial data and integrate it into one central location. Your eCommerce bookkeeping system should track the financial costs of returns, refunds, and exchanges. These fees are taken out for each purchase so they show up as net sales instead of gross sales. Gross revenue is the total amount of sales without deductions.

A great inventory management system can solve all the complexities that an ecommerce business experiences with inventory. And the first step of understanding those nuances is knowing the difference between bookkeepers and ecommerce accountants. The terms are often used interchangeably, but they’re not the same thing. That can complicate things from a bookkeeping perspective because the deposits in your bank account are net sales instead of gross sales.

Looking for a fulfillment solution?

You’ll be guided step by step – reviewing cleared transactions, outstanding transactions, real-time account balances, and any discrepancies. Accrual accounting – The accrual accounting method prompts businesses to record each sale or expense as it happens, whether your accounts reflect the money or not. Our e-Commerce accountants and bookkeepers are well-versed in implementing fully managed solutions for small business owners and organizations. We use Quickbooks Online because it is standard in the industry, and the online platform means our ecommerce accounting team can get access to your books more frequently and efficiently. You can read more about why we like QBO here and here on our blog. When doing the administration for your online store, there are some things to look out for.

While there’s value in getting expert help and advice, make sure you have a solid understanding of your numbers, no matter who you have managing your finances. They also provide a great resource for potential investors who can see the financials of your business over time. You can calculate COGS by adding the cost of your inventory to the purchases made during a specific time period.

How to Scale While Saving Time and Money

Nothing lends more credibility to your business’s success than well-documented books. Finally, you want to be marketing your e-commerce bookkeeping eCommerce accounting services in all the right places. We’ll get to know your business, goals, budget, and accounting needs.

While they are both subtracted from your business’s total sales figures, they should be recorded separately. It’s crucial you collect sales tax if your business operates or has a presence in a US state where sales tax is mandatory, which is most states. The presence of your https://www.bookstime.com/ business in a state is known as nexus, and you must collect sales tax for every nexus you have. Try Shopify for free, and explore all the tools and services you need to start, run, and grow your business. You worry that this money will be coming out of your cash flow.

Gain an eCommerce Accountant with digital expertise

If you are just building up your inventory or growing fast in a short amount of time, stock financing can help you keep up the momentum. With these loans, you maintain ownership of the products. The stock also serves as collateral, making it lower in risk.

We are dedicated to the success of your eCommerce business. Your Xendoo team is always available by live chat, email, or phone call. I have more time to run my store effectively, and the expertise and guidance to keep me compliant. You’ll know when you can afford to move, when to stock up and how quickly you can afford to hire, all from clear bookkeeping. It’s amazing how the right paths clear up with sound bookkeeping.