Running a successful business selling products online requires you to have a strong understanding of your finances. So what are some common eCommerce accounting issues? And how do you stay on top of them?
No two businesses are the same; if you’d like to talk to us about your unique eCommerce experiences, get in touch with us ASAP.
High transaction volume
With lots of sales comes lots of individual pieces of data — when you’re selling products through a platform like Amazon, for example, you’re limited by the lack of customer contact information (and varying fees).
By using cloud-based eCommerce accounting software, you’ll get the upper hand on all this information. Programs like Xero can handle your records and categorise them so you can process them more easily at the end of each month.
If you’re looking for more detailed transactions each month, you may want to consider talking to an accountant who can help you get things set up and give you that extra information.
An accountant can also help you batch your transactions so that you don’t risk slowing the software down with too much data to process.
Overheads and seller fees
There are countless fees, costs and expenses that some eCommerce business owners fail to account for when they first start running an eCommerce business.
eCommerce business expenses include:
- the item’s cost
- the packing and shipping
- sellers’ fees
- import/export customs fees and taxes
- customer service
- rent for business property
- advertising
- software budget
All of these costs add up very quickly over time, and paying them will affect your margin on every product. If you’re not on top of this and making a clear note or reference of each fee, you’re putting your entire business at risk.
This is a challenge that many business owners face, but by understanding these costs, you can then build a reasonable profit margin and then price your costs properly.
We’d advise you to be:
- tracking every cost relating to selling products
- categorising costs through bookkeeping
- using the “Profit and Loss” reports
- checking the total costs of every item
Your profit margins and pricing can be adjusted once you know your costs so that you can cover all your overheads and, hopefully, grow your business.
Taking care of inventory
As an eCommerce business, managing inventory should be very high on your priority list. In fact, without it, you’re likely to find yourself with one of two things: too much stock or too little.
Whether you’re tracking the value of your products or trying to determine how much it will cost for them to be made, taking care of inventory isn’t just about counting your stock.
If you deal internationally, you’ll find you have fees and connection issues to worry about as well.
The key here is to make your business model scalable. It’s no good having £10,000 worth of stock when you don’t have the demand for it.
By using automated inventory management systems, you can avoid problems and see clearly where you need more stock or where some products aren’t working.
You’ll also have more data to work with and plan your products, and your cashflow will be much better for it.
Data analytics
Accounting challenges can normally be avoided in any business by having the right data tools.
Throughout the accounting process, collecting data and analysing it will help you get results simply because you have more information to work with.
Data analytics will take details directly from your sales channels and turn them into charts, graphs, and other pieces of information you can use to effectively manage your cashflow.
Whether you want to observe trends monthly or quarterly, you can use this tool to create campaigns, analyse stock and assess where to improve.
Now imagine doing this with manual data entry — you’d spend hours with Excel to get a result that will be half as accurate and not update in real-time.
By investing in the right software tool — one which gives you access to data analytics — you’ll see your eCommerce business grow, and you’ll become a better business owner as a result.
Professional support
Whatever it is you sell online, there are always challenges when running an eCommerce business, not least when it comes to accounting.
By talking to a professional like us, you’ll give yourself the best chance to sell better, manage your cashflow, and grow your business.
Talk to us, and we’ll help you with your eCommerce accounting challenges.