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Best Practices for E-commerce Accounting

Best Practices for E-Commerce Accounting

Lots of variables can make e-commerce accounting challenging, but following these established practices can help you take control of your finances.

Keep Track of Your Cash Flow

If you can, monitor your accounts weekly. The more in tune you are with your bank feeds, the quicker you can recognize when something seems off with your cash flow. It’s important to take revenue and expenses into account, but tracking the actual movement of cash through your business provides the most complete understanding of your financial status. Keeping a close eye on your cash flow will help you better plan for the future and understand how much liquidity your business has at any given moment . Accurate cash flow statements will improve the accuracy of your financial forecasting.

Forecast Expenses (Especially Taxes)

Stay on top of your dues and enjoy financial flexibility by keeping an accurate record of your regular accounts payable. Being aware of your financial obligations makes it easier to work with your remaining income, and staying on top of your expenses makes tax season less hectic. Forecasting your business’s expenses includes putting money aside for tax payments so that April 15th doesn’t catch you off guard – over a third of small business owners report spending more than 80 hours a year on federal tax returns.

Regular Account Reconciliation

The process of buying, selling, and shipping products creates many opportunities for transaction errors and similar issues. Regularly confirming that your bank account information matches your bookkeeping helps identify and resolve errors and imbalances quickly. Routine account reconciliation typically happens on a monthly basis, but you can reconcile more often. Businesses that do not regularly reconcile their books risk becoming victims of fraud, unlawful withdrawals, and banking mistakes.

Manage Your Inventory

Every year, the US retail sector loses around $50 billion in unmoved inventory. Keeping track of your inventory helps prevent the accumulation of unmoved inventory while ensuring you have enough inventory on hand to maintain sales. Understanding your inventory can help you collect a variety of data about your business, inventory velocity, Return on Inventory Investment, and Return on Working Capital among them. These metrics keep you from tying up unnecessary amounts of cash in unsold inventory, allowing you to borrow less money and turn a higher profit.

Monitor Returns and Chargebacks

When tracking your inventory and sales, pay close attention to discounts and returns. Returns mean the customer is sending your product back in exchange, while chargebacks occur when a customer asks their credit card company to return the money charged on their card. Both significantly affect cash reserves, so monitor them closely to avoid effects on your liquidity.

These standard practices will keep your books running smoothly. If your eCommerce business is looking to outsource its accounting, contact us for a free consultation.

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