eCommerce Accounting Tips
eCommerce is a noble and fulfilling occupation. You’re building your own dream while helping make others’ dreams come true. But, like every other enterprise, you need to keep your finances straight. Doing so will make your business run more smoothly and make every business process more efficient. Here, then, are a few helpful tips to streamline your eCommerce accounting methods.
Render Unto Caesar…
It is, perhaps, commonsensical that one’s business and personal finances should be kept separate. Nevertheless, like common sense generally, its good medicine and you can’t die of an overdose. Using business money for personal expenditures is never really a good idea, especially if your business is incorporated, which the intelligent thing to do is typically. A failure to sufficiently separate the business and personal could cost you your corporate status and make life very difficult during tax season.
Keep the Receipt
Careful recordkeeping is vital to the success of your business. Not only will it help you keep track of your expenditures, it is legally necessary to have it in the event of an audit. There are quality commercial and open-source software packages that can help with this and some cloud-based services as well. Also bear in mind that expenses can be written off during tax season, and that keeping track of how much you pay for your hardware, software, inventory, home office, heck, part of your electric bill, are all going to come in useful. In addition to paper and digital receipts, put all your expenditures and the date in a spreadsheet together.
Prepare for Taxes
It’s nobody’s favorite thing to do, but you have to do it! If you run into hard luck or a financial crisis, you will need something squirreled away to keep the IRS at bay. Of course, it doesn’t hurt to have a rainy day fund in general, but staving off the tax authorities has priority over creditors and vendors.
Have a Plan
It is a truism that you have to spend money to make money. That much is self-evident, but the need to plan carefully for business expenses doesn’t always translate into appropriate action, alas. If you are going to need a major upgrade to your website or your inventory system — both absolutely vital for eCommerce — you need to start planning at least a year in advance. Decide if you will pay for it out of your revenue stream or if at least some of the financing will come from debt. If loans are involved, you must plan how you will pay for both the principal and interest.
Reconcile Your Accounts
The basic idea is simple. Your banks accounts and your business’ accounts must be in agreement. This will help ensure that your credits and debits match up and help you pinpoint waste, error, and fraud. Typically, accounting software will allow you to run a reconciliation report at the end of every month.
ECommerce is a business built on technology, and it should be little surprise that you’ll need to keep pace with technological change in order to stay competitive. You may at some point need to update your order fulfillment system, for instance, or spruce up your site, or purchase the latest accounting software. It’s an expense, to be sure, but it’s not just a “nice to have.” Tech is, again, indispensable for an eCommerce firm. When you choose software, make sure it’s a program that will integrate with your other programs. Nothing is more confounding than software programs that refuse to work together.
Running an eCommerce business is a fun, exciting, and fast-paced way to earn a living. But make sure you’re keeping your spreadsheets balanced. The nitty-gritty of bookkeeping may seem like a chore, but it’s vital to the survival and health of your enterprise. It is in the details of finance that the key to business success may be found.