eCommerce Bookkeeping

Are you running a small business and looking for tips on how to keep accurate financial records? Accurate bookkeeping is essential for any successful business, but it can be especially challenging when your business operates through eCommerce.

Whether you’re managing online sales or an online store, chances are you’ve encountered some difficulties with keeping accurate books. Don’t worry – help is here! In this blog post, we will discuss the basics of eCommerce bookkeeping and provide practical advice on setting up and maintaining accurate financial records. If you want to learn more about how to ensure that all your monetary transactions are properly tracked – read on!

What is an eCommerce Business?

An eCommerce business is an online business that uses technology, such as the internet or mobile devices, to conduct transactions and provide services. Examples of eCommerce businesses include web-based retail stores, digital content providers, online payment processors, and service providers who use websites or apps to offer their services.

Some of the popular eCommerce platforms include:

• WooCommerce on WordPress
• Wix eCommerce
• Shopify
• eBay
• Etsy
• Squarespace

Depending on your business will depend on the best platform. For some, an all-in-one easy-to-set-up is an ideal solution. For a larger business having a website developed and payment platforms set up is a better solution.

Why is Bookkeeping Important for E-commerce Businesses?

Bookkeeping is an essential part of any business, including eCommerce businesses. It’s important to keep accurate financial records because it allows you to track the income and expenses of your business, as well as monitor any changes in your cash flow.

Accurate bookkeeping also helps you stay organised and makes filing taxes easier. Additionally, accurate financial records are invaluable if you ever need to apply for a loan or attract investors.

How Do You Set Up an e-Commerce Bookkeeping System?

The first step to setting up a bookkeeping system for your e-Commerce business is to choose which method of record-keeping you prefer. You can opt for manual or digital methods depending on your preferences and business needs. The options include:

Paper Based Ledger

It involves entering all financial transactions into a paper ledger and recording it in an orderly manner. There are ledger books available to purchase. This method is only suitable for small businesses not planning to expand.

Excel Spreadsheets

This method uses a computer spreadsheet program such as Microsoft Excel to record financial data. This method is simple and easy to use but requires some technical knowledge. We have created over 25 Excel templates for free download, including a cash book.

Accounting Software

This method requires the use of computer software to record and monitor financial data. Examples include Xero, FreshBooks, QuickBooks and Sage Accounting. We will look at this in more detail later and discuss the advantages that using bookkeeping software has.

Inventory Management

Keeping track of your stock or inventory is extremely important in business. A good eCommerce business must always be aware of its inventory to maintain a healthy balance between supply and demand.

This is key for managing cash flow since being overstocked, or understocked can create disruptions in the order-to-payment cycle. Inventory tracking also helps businesses recognise issues related to shrinkage and wastage, both of which can lead to major financial losses if not properly managed.

Having an accurate understanding of stock levels enables e-commerce businesses to make informed decisions when making timely acquisitions or investments in future products. With proper bookkeeping and record keeping, an e-commerce business’s inventory will always be well-managed and ready for success.

Using a good bookkeeping package with the facility to track inventory can help you keep track of your stock levels at all times. This will make it easier to identify any issues quickly and take action if needed.

The bookkeeping process for an eCommerce business is not difficult, but it does require some careful consideration. It’s important to establish the best processes early on to ensure that you can keep accurate records and produce accurate financial statements.

For smaller businesses, you can use a manual stock control system. We have developed stock record cards to help you get started.

Recording e-Commerce Transactions

e-Commerce Bookkeeping includes tracking income and expenses, sales, payments, returns, etc. All transactions should be recorded accurately and in a timely manner to ensure your financial statements are accurate.

One of the questions I often see for new businesses is how to record eBay or Paypal transactions. For each transaction, a fee is taken for the service. This fee should be recorded and accounted for separately from the actual transaction amount.

When recording transactions in your bookkeeping, make sure to record the gross amount as income. An example is a receipt from the provider is 77.00, but that includes a processing fee of 2.00. The actual sales are, therefore, 79.00 with a transaction fee expense of 2.00.

This is essential as it accurately records the income and expenses of the business.

The most important thing to remember is that accurate bookkeeping is essential for any business’s success. Having complete and up-to-date records of all financial activities makes it easier to review the overall performance of your business.

eCommerce Bookkeeping Software

An e-Commerce business owner will need to take time to choose the best accounting software for their needs. Every accounting software accounting package is different and offers a different level of features available.

Below are a few features to look at:

Invoicing

The invoicing feature allows you to create and send invoices quickly and efficiently. This will help you manage customer accounts, track payments and ensure that you receive payment promptly. If you are only using an e-commerce platform, you may not need to raise manual invoices.

In WooCommerce, plugins are available to issue an invoice after an order is complete.

Inventory Management

As mentioned previously, keeping track of your inventory is critical for managing cash flow. There are many different inventory management programs available both online and offline.

Online systems are often more comprehensive and have the ability to integrate with other e-commerce platforms. This allows you to manage your inventory across multiple channels, including web stores and marketplaces.

Accounts Receivable

Accounts receivable is a crucial element of bookkeeping for any business. It involves tracking customer payments and following up on outstanding payments. Most accounting software packages include features to help you manage this process more efficiently.

Accounts Payable

Accounts payable is the opposite of accounts receivable and involves tracking payments that your business must make. Again, most accounting software packages have features for managing this process more effectively.

Business Reports

In order to understand how your business is performing, you need to have access to key financial reports. Financial statements such as Profit and Loss, Balance Sheet and Cash Flow statement provide insight into the performance of your business.

Financial forecasting

Financial forecasting, including a cash flow forecast, involves predicting future revenue and expenses based on current trends. This can be useful for planning for the future.

We also provide a free cash flow forecast template in Excel.

Additional apps and features

The above features are standard in most accounting software packages, but if you use different e-commerce platforms, you may need additional apps or features.

For example, if you are using PayPal, Stripe or Square for payments, specific PayPal, Square and Stripe apps are available to integrate with your accounting software. This makes it easier to track transactions across all platforms.

Below are a couple of options worth looking into:

Xero

Xero is one of the best bookkeeping software packages available for eCommerce businesses to track their financial data. As well as providing an easy-to-use platform with bank and credit card imports, there is a range of external add-ons available to integrate with your account to import your eCommerce bookkeeping data.

FreshBooks

FreshBooks is an easy-to-use accounting software package that includes invoicing, accounts receivable, expense tracking and detailed reports. It also offers integrations with eCommerce platforms with its income importer app.

QuickBooks Online

QuickBooks is a great choice for eCommerce businesses. It supports multiple sales channels, integrates with popular eCommerce platforms and offers features such as automatic bank feeds and automated invoicing.

NetSuite

NetSuite Suite Commerce is a great choice for ecommerce business owners that are looking to grow. It offers advanced features such as inventory tracking, multi-channel orders and stock control. It also integrates with popular eCommerce platforms such as Shopify, eBay and Amazon. Wherever the customer shops, you can integrate with it.

Additional e-Commerce Business Apps

So far, we have looked at accounting packages, but there are also additional apps designed for the purpose of recording external platform payments. Some of these integrate with bookkeeping software, while others work stand-alone.

Synder

It connects to multiple payment processors, including Square, WooCommerce, Strip, PayPal, Amazon, Shopify, Wix, Etsy and more. It is designed to work with multiple channels.

Pricing starts from $11 per month for 50 transactions, but you can save that in the time it will take to enter the transactions manually.

Synder connects with Xero, FreshBooks and QuickBooks and is also a stand-alone package for your business bookkeeping.

Open Payout

Open Payout is a great app for tracking payments across multiple channels, including Shopify, Wix, Etsy, WooCommerce and Squarespace. It is an easy-to-set-up system.

The starter plan starts from £8 per month for 75 transactions.

Dext Commerce

Dext Commerce works with Xero and QuickBooks and is aimed at bookkeepers and accountants. If you are using a bookkeeping service, they might include it in the monthly fee.

The single client starts from £31.23 per month but includes 1000 transactions and it integrates with multiple payment processors, including PayPal, Stripe, Amazon, Woo and Stripe.

Can I Complete Bookkeeping for my e-Commerce Business?

Yes! It is possible to complete bookkeeping for your e-Commerce business. Depending on your business’s size and the transactions’ complexity, you may need to utilise certain apps or bookkeeping software packages. The key is to find the right one that suits your needs and budget.

Once you have chosen a suitable system, ensure you are consistent with data entry, as this will help to keep your books organised and up-to-date. Don’t forget to reconcile all transactions periodically so that you can spot any discrepancies and rectify them in the most efficient time frame possible.

For a larger business, you might want to employ a bookkeeping or accounting team to ensure all records are accurate and up-to-date. it can work out cheaper than using external bookkeeping services.

Why Use eCommerce Bookkeeping Services?

Using bookkeeping services is the best way to ensure accurate financial records and accounts. With a bookkeeping service, you can be sure that your business finances are handled efficiently and accurately.

Bookkeepers will look after things such as invoicing, accounts receivable, list reconciliation and more. This ensures that all of your data is accurate and up-to-date so you have peace of mind that everything is running properly.

Bookkeepers can also help with forecasting, budgeting, cash flow management and tax planning. They will make sure that all transactions are correctly recorded in accordance with accounting principles and filing deadlines. In addition, they can provide valuable insights into how to improve processes for better efficiency and profitability.

eCommerce Bookkeeping Conclusion

Overall, it’s important to understand the importance of bookkeeping for an eCommerce business. With a reliable and accurate system in place, you can easily track your finances and ensure that all data is up-to-date and accurately filed with HMRC.

You will also have access to valuable insights into how you can improve processes for better efficiency and profitability. Whether you choose an accounting package or additional apps designed specifically for tracking external platform payments, make sure it fits your business needs as well as budget.

Additionally, if necessary, consider engaging professional bookkeepers who are experienced in handling complex transactions related to eCommerce businesses. Doing so ensures that everything is done correctly from the start. This could save time, money and headaches when filing taxes or dealing with legalities associated with running an online store.