Top eCommerce Accounting Challenges an Accountant Can Solve

The success of your eCommerce firm will be significantly increased by sound accounting and financial management.

Knowing what your clients want is not enough to grow your online business; you also need to find the right products and get them to them.

Accounting concerns abound for owners of small enterprises involved in online commerce. Taxes, unreported fees, foreign exchange, inventories, and profit margins are just a few of the issues that pressure your financial management.

Common Accounting Principles for All Businesses

Before we go on to the accounting difficulties particular to eCommerce, it is important to consider the foundations of solid accounting that apply to all businesses, whether conventional or online. Appropriate accounting practices include:

Create an accounting system to monitor your company’s cash intake and outflow.

Use a company bank account and check every transaction against your accounting software.

You can calculate how much cash you have available to pay staff, buy inventory, and take care of other essential business needs by knowing your income, costs, and earnings.

Along with your final annual payment, make projected quarterly tax payments.

After going through the fundamentals, you should focus on eCommerce-specific accounting concerns.

Tax on Revenue Must Be Paid

Online sales tax has suddenly gotten more complicated. Nowadays, almost everywhere they do business requires online sellers to pay taxes.

These new “economic nexus” laws created revenue and sales volume thresholds. These determine when a business must file taxes.

Until recently, your only obligation was to collect sales tax in the region where your company is located. To understand everything there is to know about an economic nexus, read our sales tax tutorial.

There might only be one or two tax locations for brick-and-mortar stores. Online businesses currently have dozens of tax locations to monitor. Additionally, sellers must file monthly or quarterly taxes depending on the nature of their business.

Software alternatives that are focused on taxes are numerous. You can set up tax locations in some tools and track them using that method. Use our free sales tax calculator to give it a try yourself.

To minimise confusion when it comes time to file, keep close track of taxes on each sale. Technology improves process efficiency and is worth investing in. Check out our in-depth guide to learn more about computing sales tax.

Inventory Management

Controlling inventory can be difficult for sellers regardless of the company’s size. The introduction of new commodities and distribution techniques only makes this more difficult.

You must keep track of what you have, its worth, and where it is if you have more than one warehouse or fulfilment centre. Every transaction modifies the total inventory quantity. Returns that reach the warehouse intact will also impact the inventory.

Even apart from accounting, inventory management is a challenging task. It is essential to maintain control over it because it is essential to the cash flow of every online retailer. Most profitable shops use scalable, automated, and integrated inventory management systems.

These platforms will offer the most reliable data, ensuring that financials are always up to date. You will be completely ready after reading our inventory management guide.

For most eCommerce sites, there is a set monthly fee for sellers. Keeping track of such fees is exceedingly difficult. The charging schedule at Amazon serves as the best instance of this.

Listing, transactions, advertising, and order fulfilment all have associated costs.

Managing Returns

Online buying annoyances include return tracking. Most businesses let customers return items if they don’t fit, arrive damaged, or are otherwise defective.

Studies show that having a friendly returns policy can boost brand loyalty and result in reconversions. It’s in your best benefit to accept returns as a given when operating an internet store.

However, returns complicate the accounting process. The returned item(s) may need to be added to the inventory after customers obtain refunds.

While managing returns, meticulous attention to detail is necessary. Sellers must decide whether to write off goods to avoid charging them twice and mucking up their records.

The capacity to manage returns is a feature of many inventory management systems. You can also manually modify your accounting software to handle refunds.

Data Entry

A variety of items need to be tracked with each sale, including regional sales tax, seller fees, inventory amount sold, shipping costs, and more. It becomes difficult to enter this data as the company grows manually.

Some sellers outsource this task to an accountant on the Gold Coast, but you could be surprised by the price. As explained, human data entry is a major pain point since it takes too long and has a high likelihood of inaccuracy.

Automation can help online stores overcome this hurdle by taking over the process. Accounting automation software can connect internet stores to your accounting system by reporting all transactions.

Conclusion

eCommerce accounting can be a challenge for businesses of all sizes. Some factors to consider when setting up an eCommerce accounting system include inventory management, tax compliance, and financial reporting. However, eCommerce accounting can be a breeze with the right tools and processes and hiring an accountant for business.

Our comprehensive accounting and bookkeeping services at New Wave Accounting support the expansion and scaling of organisations. We know small businesses and have worked with over 600 companies across various industries. This has made it possible for our Gold Coast accountants to comprehend various industries and develop specialised solutions for our customers. So, if you require small business accounting services, we can assist you. Contact an ,accountant on the Gold Coast right now!

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