Ecommerce Accounting Guide for Business Owners 2023

e-commerce bookkeeping

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.

Vetted each month by 2 levels of eCommerce bookkeepers

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 e-commerce bookkeeping 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.

These shipping fees may not be included in the costs of goods sold (COGS). It helps reduce billing errors by ensuring your account balance is up to date. It also helps save time because integrated systems don’t require manual data entry, making it easy to access your accounting records anywhere. More payment options can translate to more customers and revenue.

Need help catching up your books?

On top of that, many payment processors (including Stripe) don’t refund the merchant fee you paid just because a customer returns the item. So that fee becomes a loss for your business and has to be reflected that way in your books. When you send products https://www.bookstime.com/ to customers, you pay shipping fees. The shipping fees that customers pay, may be more or less than the actual cost of shipping depending on location, weight, and more. Shipping fees are one of the most common eCommerce accounting struggles.

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

Receive fast, accurate financials

Whether your store is a small business or a big one, there will be challenges. But, unfortunately, even with software, it’s easy to spend more time than you have attempting to get your books done. Most platforms, however, will only collect sales tax from customers. Instead, they deposit it into your bank account and the rest of the sale, so you must get that money to the proper tax authority.

e-commerce bookkeeping

Due to this, many financial reports and documents focus mainly on your inventory, but there’s much more. Many ecommerce platforms offer features to help you keep track of important information you need for bookkeeping, like inventory and sales taxes. While it won’t file your taxes for you, it can help you track your tax obligations and collect the right amount. If you have a high-performing e-commerce business, you need to stay on top of your payments coming in and money going out.

What are the best bookkeeping practices for ecommerce businesses?

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.

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.

Fast, Accurate Financials

It’s most suited to businesses in the $1-25 million revenue range. Read on to learn more and find links to dig deeper and master your company’s finances. Having a solid team of bookkeepers and accountants by your side ensures smooth sailing. In this blog, we will talk about some common accounting-related challenges and explain how using bookkeeping services for small businesses can help. Virtual assistant agencies like Wishup provide access to a pool of highly skilled bookkeepers with expertise in eCommerce bookkeeping.

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