How Accounting Automation Can Help You Scale Your Ecommerce Business
This is a guest post from our friends at QuietLight, a world-class ecommerce business broker. Chat to them about selling your ecommerce business.
For many ecommerce entrepreneurs, accounting is the worst part of running their businesses.
Done manually, it’s a complicated, time-intensive process.
It’s also not something you can simply leave for an accountant at tax time. It requires constant input and planning.
It’s about more than just managing your finances. It’s about making smart decisions by tracking and evaluating your budget on a daily, weekly, and monthly basis to help your business grow and thrive.
To ensure those decisions pay off, you need to keep your accounting as efficient and accurate as possible—which is where automation comes in.
In this article about automating your ecommerce accounting:
Table of Contents
Want to feel completely confident in your ecommerce bookkeeping?
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What is accounting automation?
Accounting automation is precisely what it sounds like.
It involves offloading the most manual and labor-intensive accounting processes onto a software platform. Artificial intelligence ensures these processes are completed immediately and with unfailing accuracy.
The algorithms that form the core of accounting automation software tend to vary in complexity, from rudimentary robotic process automation to advanced analytics and forecasting.
In order to be effective, accounting automation software must be fully integrated with the rest of an ecommerce business’s software stack. This includes inventory management, payment processing, customer relationship management, and marketing tools.
It’s also important to note that accounting is not the only process you should consider automating.
It may also be worthwhile to explore the possibility of applying automation to inventory management, order fulfillment, product listing management, and multichannel selling.
How accounting automation can save you time, energy, and money
Running any business requires a significant amount of bookkeeping.
Especially if you have to deal with the inventory and sales fluctuations common in ecommerce.
It’s unsurprising then that business owners, on average, spend at least ten hours a week reconciling sales, inventory, and customer data.
Consider the amount of financial data generated by a single purchase:
- Product inventory changes
- Record of total purchases made by the customer
- The product’s sale value
- Shipping and handling costs, if relevant
- Change in total daily/weekly/monthly sales
- Supplier invoicing in the event that inventory needs to be restocked
- All other costs associated with the sale — marketing, manufacturing, merchant fees, etc.
- Tax information
Now multiply that by however many daily purchases your customers make.
You can likely see how reconciling all this information manually takes significant time, effort, and energy.
By automating that recording and reconciliation, you can instead focus on analyzing the data and using it to guide your business strategy, both now and in the future.
How automated accounting results in cleaner books
Another major benefit of accounting automation is that it’s not as error-prone as manual bookkeeping.
No matter how financially savvy you happen to be, you’re still human.
And if you’re trying to juggle bookkeeping on top of already working a 60+ hour week, you will eventually make a mistake.
And that error can be extremely costly both in time and money.
Accounting automation also helps keep your financials clean and organized, both for yourself and for any prospective buyers should you eventually decide to sell.
You’ll be able to pull up accurate data quickly for any date or timespan.
This also makes your life considerably easier when it’s time to file your year-end taxes. You can simply pull the relevant data and forward it to your accountant in a few clicks.
Why automated accounting leads to smarter business decisions
Armed with accurate financial data and predictive analytics, your business can create considerably more effective forecasts.
These forecasts provide you with a concrete idea of your future costs, which itself offers you a few core insights.
Financial forecasting gives you an idea of whether or not your business is going in the right direction.
If your forecast indicates some sort of financial trouble, you can immediately set to work determining the source.
Forecasting also gives you a baseline for budgeting and planning.
From this baseline, you can predict a great deal, including:
- When to purchase additional inventory to prepare for a surge in demand.
- When to replenish inventory, assuming demand remains steady.
- The ideal time to launch a new product or initiative.
- The upper threshold of your budget for marketing and advertising, based on cost per customer acquisition.
- The business’s future financial health and what can be done to improve it.
The predictions above can be even further augmented by machine learning and artificial intelligence.
Specialized algorithms are capable of predicting trends and recognizing patterns that human analysts lack the capacity to see.
That could mean identifying a new business opportunity you may otherwise have missed or avoiding a financial blunder that you may have never predicted.
Finally, eliminating the burden of manual bookkeeping means more mental energy to direct toward the business itself.
If you were handling everything yourself, that means potentially brainstorming new products, ideas, and strategies. If you hired an accounting team, less admin work means they can spend more time exploring how to save you even more money, especially if they take CFA mock exams and practice exams to get their certification and take their accounting to the next level.
And those savings can be redirected and reinvested into your business.
Better Business Growth Through Smart Accounting
Bookkeeping can be complicated, cumbersome, and time-consuming process.
All too often, it carries the risk of a costly mistake — perhaps even several.
And for larger stores, reconciling the massive volume of sales your business makes each day can seem almost insurmountable.
Accounting automation provides a solution to these problems. By deploying and integrating the right software, you can cut out nearly all the work involved in the accounting process.
This will give you more time to focus on evaluating your numbers for business insights, and generating forecasts and predictions that ultimately guide your business to success down the road.
Ready To Automate Your Ecommerce Accounting?
Get organized, accurate, accrual-based books without the fuss.
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Want to feel completely confident in your ecommerce bookkeeping?
Businesses that document their processes grow faster and make more profit. Download our free checklist to get all of the essential ecommerce bookkeeping processes you need every week, month, quarter, and year.
Download it here
