Why Ecommerce Business Owners Need to Work with an Accounting and Bookkeeping Expert
This article is a guest post from our friends at Ecombalance, a monthly bookkeeping service and A2X Gold Partner.
Starting, running, and scaling an ecommerce business can be a difficult and complicated process, especially when it comes to your ecommerce bookkeeping and accounting.
In addition to managing your inventory, shipping, customer service and more, you also need to keep up with the financial side of your business.
This means staying on top of taxes, filing accurate financial statements, understanding business deductions, tracking expenses and more.
While this responsibility may seem daunting for many entrepreneurs, it’s essential for any ecommerce business owner to get the help they need in order to stay organized and successful.
Working with an accountant and bookkeeping expert is one of the best ways to make sure that your finances are in order.
expert in accounting and bookkeeping instead of doing it themselves.
Table of Contents
What Is the Difference Between Accounting and Bookkeeping?
There is a common misconception that accounting and bookkeeping are the same things.
While they are both important financial processes for businesses, there are key differences between the two.
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions.
Bookkeeping, on the other hand, is the process of recording all financial transactions made by a business.
While accounting focuses on providing information that can be used to make strategic decisions, bookkeeping is more concerned with the day-to-day recording of transactions.
Accounting also encompasses a wider range of activities, such as tax planning, auditing, and financial reporting.
Bookkeeping, on the other hand, is mostly limited to the recording of transactions.
So, while accounting and bookkeeping are both essential financial processes for businesses, there are some key distinctions between the two.
If you’re looking for advice on strategic financial decision-making for your ecommerce business, it’s best to work with a qualified accountant.
What Are the Benefits of Bookkeeping?
An ecommerce business owner needs to have a good understanding of bookkeeping and accounting in order to manage their finances effectively.
Bookkeeping can help you:
- Track income and expenses
- Manage inventory and budgeting.
- Setting up financial systems and controls
- Preparing financial statements
- Providing advice on tax planning and compliance
Bookkeeping is important for all businesses, but it is especially critical for ecommerce businesses.
This is because ecommerce businesses generally have higher volumes of transactions and more complex financial affairs than traditional brick-and-mortar businesses.
Therefore, it is essential that ecommerce business owners work with an accountant or bookkeeping expert to ensure their finances are properly managed.
What Are the Benefits of Accounting?
There are many benefits of accounting for ecommerce businesses.
Perhaps the most obvious benefit is that it provides owners with financial insights into their businesses. This information can help them make informed strategic decisions about where to allocate resources and how to grow their businesses.
Additionally, accounting can help ecommerce business owners manage risk.
By understanding where money is coming in and going out, owners can make informed decisions about which risks are worth taking and which ones to avoid.
This knowledge can also help them negotiate better terms with vendors and suppliers.
What Makes Ecommerce Bookkeeping and Accounting Unique?
Ecommerce bookkeeping and accounting are unique in many ways. Here are a few:
- It involves managing finances for a business that exists entirely online. This can present some challenges that traditional brick-and-mortar businesses don’t have to deal with.
- Keeping track of inventory levels
- Ensuring that all transactions are properly recorded.
- Dealing with transactions and data from multiple sales channels, i.e. Amazon, Shopify, Etsy, etc.
- Working with multiple payment processors, i.e. PayPal, Stripe, Shopify Payments, etc.
- Sales tax nexus
- Accounting for sales and expenses from different sales channels on your Chart of Accounts
- Managing cash flow for inventory purchases.
Why Do Ecommerce Businesses Need Both Accounting and Bookkeeping?
There are a few key reasons why ecommerce businesses need both accounting and bookkeeping services:
- Accurate financial reporting
- Compliance
- Save time
- Reduce stress
1. Accurate Financial Data
As an ecommerce business owner, it’s important to have accurate financial data in order to make sound business decisions.
An accountant or bookkeeping expert can help you keep track of your income and expenses, as well as understand your tax obligations.
Having accurate financial data will also help you secure funding from investors or lenders.
2. Helps in Identifying Fraud
As an ecommerce business owner, it’s important to be aware of the potential for fraud and to take steps to protect your business.
An accountant or bookkeeping expert can help you identify areas where fraud might occur, such as in inventory management or customer payments.
They can also provide guidance on how to set up internal controls to prevent and detect fraud.
3. Prepares You for Tax Season
As a business owner, you are responsible for ensuring that your business is compliant with all tax laws and regulations.
This can be a daunting task, especially if you are not familiar with the tax code.
Working with an accountant or bookkeeping expert can help ensure that you are prepared for tax season.
They can help you understand the tax laws that apply to your business and advise you on how to stay compliant.
They can also help you keep track of your expenses and income so that you can accurately file your taxes.
This can save you time and money in the long run.
4. Helps in Managing Your Inventory
If you are an ecommerce business owner, then you know how important it is to manage your inventory.
An accountant and bookkeeping expert can help you keep track of your inventory and ensure that you have the proper records for taxation purposes.
They can also help you plan for future inventory needs and advise you on the best way to manage your stock.
5. To Be Prepared for An Eventual Exit
As a business owner, it’s important to be prepared for any eventuality – including an exit from your business.
Whether you’re looking to sell up or simply wind down your operations, working with an accountant and bookkeeping expert can help you to prepare your business for an orderly transition.
An accountant can help you to value your business for sale, negotiate with buyers and ensure that the sale proceeds are properly accounted for.
They can also assist with the preparation of tax returns and financial statements, which will be essential in providing potential buyers with transparency into your business’s financial affairs.
Bookkeepers can help to keep your financial records in order, ensuring that all transactions are properly documented and reported. This will give potential buyers confidence that your books are in good order and that they’re getting a true picture of your business’s financial health.
Preparing your business for sale takes time and effort, but it’s well worth it to ensure a smooth transition – both for yourself and for your customers.
Working with an accountant and bookkeeping expert can take the stress out of the process and help you to achieve the best possible outcome from your sale.
6. Monthly Financial Clarity
Working with an accountant or bookkeeping expert can help you get this clarity.
They can provide you with monthly reports that give you insights into your business finances.
This information can help you make better decisions about where to invest your resources and how to grow your business.
If you’re not already working with an accountant or bookkeeper, now is the time to start.
Having this monthly financial clarity will be invaluable as you work to build a successful ecommerce business.
7. Helps When Getting Loan
Bookkeepers can also help you keep track of your expenses and income so that you can better understand your business’s financial health.
This information can be valuable when you’re trying to qualify for a loan or when you’re negotiating terms with a lender.
Working with an accountant and bookkeeping expert can help you get the financing you need to grow your ecommerce business.
They can provide the documentation and information that lenders require, and they can help you keep your finances in order so that you can get the best terms on your loans.
How Do I Find the Right Accountant and Bookkeeper for My Ecommerce Business?
There are a few key things to look for when choosing an accountant or bookkeeper for your ecommerce business.
First, you want to make sure that they have experience working with businesses in your industry.
This will ensure that they understand the unique challenges and opportunities that come with running an online store.
Second, you want to choose someone who is comfortable working with the software and systems that you use to run your business.
This will make it easier for them to keep track of your finances and provide you with accurate reports.
Finally, you want to work with someone who is responsive and accessible when you need them.
This is important because financial issues can arise at any time, and you need to be able to reach your accountant or bookkeeper quickly in order to resolve them.
Conclusion
Working with an experienced ecommerce accounting and bookkeeping expert is essential for any ecommerce business owners who want to be successful.
An accountant can help you plan your finances, track your spending, monitor cash flow, and advise you on the best way to manage taxes.
Bookkeepers understand how to accurately record financial data so that you can make educated decisions about where to invest your money.
With their expertise and guidance, ecommerce business owners will have the tools they need to maximize profitability while staying compliant with all applicable laws and regulations.
EcomBalance is a monthly bookkeeping service that helps eCommerce businesses better manage their bookkeeping and finances. ➡️ Contact them now.
