As your eCommerce business grows, you will definitely find it challenging to manage your finances. Be mindful that you have to analyze and categorize all business operations, including sales, supplier payments, banking fees, returns, entire details of money transactions. Meanwhile, you need to report to the tax authorities about your financial details.

Ecommerce Accountant

Typically, an eCommerce accountant is a person who acquires the expertise in dealing with the eCommerce business that mainly aims to sell their service and products online. Ecommerce requires a proficient accountant as to any other industry needs. You probably sell your products through your website using different eCommerce platforms like WooCommerce, Amazon, or Shopify.

Bookkeeping Vs Accounting: Why are they different?

You must be aware of bookkeeping. Bookkeeping is the primary accounting method of maintaining the proper and organized record of financial transactions and documents in an eCommerce business. Basically, its core purpose is to organize and demonstrate your financial state. Take into consideration the bookkeeping tasks include

• Invoicing
• Maintenance of balance sheet
• Transaction categorization
• Account reconciliation
• Management of account payables and receivables
• Payroll management

Accounting is a method of evaluating all the financial statements, bookkeeper produces. With efficient accounting, you can effortlessly generate financial models, forecasts, and reports. Accounting enables you to understand the exact level of your finances and future plans. Keep in mind the key accounting tasks include:

• Financial information audit
• Financial forecasting and risk evaluation
• Tax planning and reporting
• Maintenance of new entries.
• Creation of financial statements, models, and reports.

Primarily, accounting equips you with current financial information to make smarter and healthier decisions for your business.

Types of Accounting in Ecommerce Business

1. Accrual method

Take into consideration that accrual accounting empowers you to keep track of every expense and sale once it takes place, even if the amount is not reached or released from your bank account.

Take account of the fact that accrual accounting is also considered the traditional accounting method because of its systematic financial institution. On the surface, you will be surprised to know that accrual accounting is more confusing than cash basis accounting because you need to maintain the record of that money which is not received yet.

You have to track the amount you have to pay. Although, once you get familiar with this system, it will start making more sense. Reckon that it offers you a more realistic representation of your eCommerce business earning every month. Likewise, you can make more accurate financial projects as you consider your current and future financial situations.

The downside of this accounting method is that focus of earning money shifts to the spending amount. By keeping the record of future payments, accrual accounting can portray your operations as more profitable than they actually are. Not lose sight of your cash flow.

2. Cash basis accounting

Generally, small eCommerce businesses choose this method as a starter because they can simply maintain this method. Be mindful of the fact that you need to report all money transactions as they transfer. Meanwhile, being an eCommerce accountant, you should be aware of the amount you have at your disposal. Another significant fact about the cash basis method is that you are not responsible for paying income tax on those payments you haven’t received yet. With this method, you can effortlessly enjoy the smaller tax bills.

Not to forget that cash basis accounting particularly helps in a few businesses:

• Dropshipping operations.
• Product-on-demand stores.
• Maker businesses.
• Small eCommerce sellers.
• Amazon FBA stores.

Remember, this accounting method is not a perfect choice for large eCommerce businesses because it does not identify future account payables and account receivables.

Due to this reason, cash basis accounting is not for you if you:

• Plan to secure a loan for your eCommerce business.
• Apply for financing.
• Run an eCommerce business with multiple suppliers and high stock levels.
• Desire to bring auditors on board to acquire audited financial statements.

As an eCommerce entrepreneur, an accrual accounting method is a preferable option for your operation scale. On the contrary, cash basis accounting method can only be beneficial for the firms acquiring an annual growth rate of $5 million or less.

Roles of Ecommerce Accountant

With all the tasks line up, let’s discuss the essential accounting tasks you need to perform on a weekly or monthly basis:

1. Categorization of Transactions

Firstly, you need to mark every cash flow transaction as an expense or income. Be mindful you can use the latest accounting apps that can auto-start your transactions. With the help of an accounting app, you can easily categorize your capital as marketing, salary, or returns. Categorization of the transaction will help you in estimating monthly revenues and regular and one-off expenses.

2. Maintenance of Business Budget

 A well-maintained business budget will clarify your profits and losses. With a proper business   budget, you will be able to:

• Focus on long-term business goals.
• Avoid debt.
• Secure some income for tax.
• Predict when to pedal back and splurge.

3. Identify returns and chargebacks

Take on board that you need to differentiate between store return and chargeback.

• Store return includes store credit or full refund.
• Store chargeback can occur when a client dispute a transaction.

4. Record keeping

For reporting your taxes and financials to the authorities, you need to verify all your applications. Not forget to collect the subsequent reports for your eCommerce business accounting:

• Acquisitions, checks, and receipts
• Account statements
• Prior cost results
• Bounced and canceled checks
• Revenue record

5. Stay-up-to-date with taxes

Take into account make your accounting as simple as you can;

• Make sure your cost charges are suitable for clients
•  Predict major expenses.
• Maintain inventory management

Why You Need To Hire an eCommerce Accountant

Typically, eCommerce businesses require cash flow management systems and mechanisms, tax complexities, and, most importantly, streamlined inventory. Bear in mind that you can easily gain a competitive advantage by collaborating with an accounting company that already acquires deep eCommerce knowledge.