E-commerce is a growing area of business and is a relatively easy type of business to set up and run from your own home. So with more and more ecommerce businesses springing up, what kind of financial issues do those who own them need to think about?
With an ecommerce business, it’s not just about invoicing and profits – you need to look at suppliers, customers, refunds, delivery, logistics etc… so it can become quite complicated to keep track of all the financial transactions. Here are our top accounting tips for your ecommerce business:
- Keep your personal and business finances separate
It can get really complicated if you mix your personal and business finance so even if you are set up a as a sole trader it is always better to keep your business and personal finances separated. It makes life much easier when it comes to sorting out taxes and expenses if you keep the business separate.
As ecommerce accounting can be complicated anyway, you should always keep the business finance in a different account.
- Keep excellent records
It’s really important to keep records of everything you sell, all stock you buy, and any refunds you give so that your accounts are in perfect order. You don’t need to keep printed versions of everything but as long as you have electronic copies of everything it will be fine.
Try using a business accounting software to help you keep track of everything, to make life easier for you and to bring some order to your business accounting processes. If you need professional support then take on an accountant to help you out.
- Try to predict and plan for large expenses
While you can’t predict everything there are some things which can be foreseen and you should try to put money aside to plan for these. If you know you will need a warehouse space, or you need to buy a new product line etc… then you should be able to forecast for these extra costs and save accordingly.
There might be costs which come up that weren’t predicted but there is not much you can do about that – however, if you have a fund set aside for large expenses than at least it won’t come as a big shock to you when you get the bill.
- Set up a tax account
As a business owner you will need to pay taxes regularly so it can be a great help to create a tax account and pay into it monthly, so that when it comes to the final bill you will have the money in the bank to pay it.
The last thing you want is to get to the end of the year and be landed with a large tax bill which you simply can’t pay as that will land you and your business in hot water with the Government. Paying a monthly amount into an account will help to take the pressure off.
- Use technology to make your business efficient
A lot of unexpected business costs can come from inefficient systems or ways of doing things, so investing in the right technology for your ecommerce business could save you a lot of money in the long run.
With ecommerce businesses you might need tools for inventory management, stock control, orders and customer services so you need to make sure you have all of the right technology in place to run an effective and efficient business.
Keeping your accounts up-to-date doesn’t need to be a nightmare if you keep accurate records and think ahead for large expenses which might come up. If you are working with technology systems then look for an accounting system which will work with your other business systems.
Automating your ecommerce and accounting together could help remove worry about managing inventory and invoice information repeatedly in different programmes – if you can combine all of your ecommerce processes it will make life far easier.
Running an online ecommerce business can become a complicated and huge offering like Amazon or EBay, or could be as simple as making your own products at home and selling them and shipping them one at a time to discerning customers.
Whatever the size of your business, you need to keep accurate records of all transactions to help keep your accounting up-to-date and ensure your business is running legally as well as effectively for your customers.
With so many aspects to think about with ecommerce, you don’t want your business idea to end up becoming a complete headache, so if you are unsure of any of the accounting aspects then seek help from a professional accountant, preferably one who specialises in working with ecommerce businesses and can offer you the specialist, expert advice you need.