E-commerce has experienced a tremendous boost during the pandemic as physical stores are forced to stay closed. However, this also poses a challenge to e-commerce businesses because critical back-office functions, like accounting, may not be able to keep up with that immense increase in business volume.
E-commerce is widely known for having a large number of daily transactions, especially in this situation. Therefore, it is challenging for them to keep track of accounting data, which is normally saved on the selling channel, not in the bank account.
More importantly, e-commerce businesses like yours also have to deal with a lot of expensive foreign transactions. If you do not act quickly, it could lead to an unexpected loss in profit.
That is the reason you need the below practices to take the lead in this fast-growing industry to overcome some accounting challenges you might have during this time.
What are the best practices for e-commerce accounting?
1. Integrate your accounting software with your online store
One of the most important things all e-commerce companies need to have is getting an accounting software which syncs with your online store. This will help you save a lot of time from manually logging all your transactions which could be exhausted. More than that, it also helps you prevent the case of missing any transaction during the updating process and the data with your bank account later.
You also need to categorise your transactions into income and expenses. It is critical to closely check when the money comes in or leaves your account. Separating them into income and expenses would save you a lot of time to know how much money you have left.
2. Reconcile your account regularly
During the process of buying, selling, and shipping the products or services, there could be multiple instances that you have some transaction errors, or you are charged twice by the bank. Make sure your bank account matches with your records on your accounting software or your book, which could reveal any problems you have, or just to know that every credit and debit has been processed properly.
Do it regularly (monthly) so you can find out the reasons for imbalance and act on them quickly and appropriately. Accounting software enables you to automatically run the reconciliation report at the end of each month.
3. Manage your inventory and COGS (Cost of Goods Sold)
Sometimes, it is hard to keep track of your inventory if you are selling your products through multiple channels. You need to make sure the right merchandise is stocked. So, store a minimal amount of inventory you want to have and never let your stock pass this point.
Moreover, you also need to count the cost for the package needed to deliver these products safely as well. Similarly, make sure to have enough of them in your inventory.
COGS (Cost of Goods Sold) data is important for calculating gross profit and producing correct accounting and financial reports. Therefore, it is critical if you understand how much you are making on each of your products before you add in all your expenses.
Read more: Best practices for managing inventory
4. Manage your returns and chargebacks
If you are selling your products on some platforms that allow return such as Amazon, you need to categorise these products into Sellable, Damaged, Customer Damaged, Carrier Damaged or Defective. This not only helps you track your products process and customer satisfaction but also makes sure your inventory is not expensed twice.
A chargeback happens when a credit card company asks you to return funds you charged to a customer’s credit card for some reasons. You also need to keep track of it as an expense or fee.
5. Keep track of all other expenses
Purchasing raw materials or packaging for delivery are not your only expenses. There are many places you need to distribute your money. Make sure you count them towards your ledger since they affect your profit and cash flow significantly. Understanding them can help you minimise these expenses and increase your profit.
There is some common fixed expenses you might have:
- Property Tax
- Interest on loan payments
6. Have a cloud accounting software
One of the best advantages of cloud accounting software is all your data will be safely and centrally stored in the cloud. Therefore, it saves a lot of time as well as assures the data security.
Besides, you and your staff can easily access the data at any time and from anywhere. Thus, you can act on it quickly to reduce the info silos.
Cloud-based software efficiently aids your accounting tasks since it allows you and all your employees to access the same information anytime and anywhere. You do not have to store all information on any individual computer and worry about the memory capacity.
We would like to introduce Infor SunSystems version 6.4, one of the most comprehensive cloud financial management tools. This tool serves as a user-friendly and productive companion, providing a collaborative platform as well as other computerised workflows and reports for your company.
To be more specific, Infor SunSystems version 6.4 is now integrated with Coleman AI that will act as your virtual assistant and will automate many of your exhausting accounting tasks. More than that, you can now optimise your accounting process with many integrations with convenient apps from third parties such as cloud-based CRM. And all the regular updates are run automatically within the software.
Besides these key features, there are more interesting things you can explore, such as security measures or built-in BI tools to help you stay on top of this game.
Please feel free to contact us to get more detailed information on Infor SunSystems 6.4 and support from our consultant team simply by clicking the button below.