In eCommerce, just like in any other sector, it’s impossible to manage your finances effectively if you don’t maintain your financial records.
eCommerce accounting is useful in this situation. It maintains effective control over your receivables, payables, and other payments. It is a crucial requirement for a consistent and well-planned increase in e-commerce businesses.
What is eCommerce Accounting?
eCommerce accounting is the process of gathering, examining, classifying, and disclosing financial information about assets and business transactions inside an eCommerce business.
eCommerce business owners gather all the financial data through these techniques serve as an important starting point for future business decisions.
eCommerce accounting consists of these three major categories:
- Submission of Tax Returns
Basics of eCommerce Accounting Everyone Must Know
For good eCommerce accounting, the following conditions must be met:
- Bank Account
- Business tax GST ID number
- Accounting Solution
eCommerce Bank Account
Opening a separate business bank account is the first step on your path to precise and organized eCommerce accounting. Various banks provide various deals for business owners. They may also have different offers and maintenance costs. As a result, look around at several banks before selecting the best bank for your eCommerce endeavor.
Finding a trustworthy and efficient payment processor is also essential if you want to collect payments online successfully. You can also keep your business and personal assets apart by opening a different e-commerce account.
Business Tax GST ID Number
Each proprietor of an eCommerce business needs to have its business GST Identification Number. This number will appear on all tax documentation for your company. You can submit your request electronically rather than in person at the IT department. After all verification, the business owners will receive the GST ID via their registered e-mail.
Nobody here can perform eCommerce accounting without a suitable accounting solution. Using eCommerce accounting tools can help you handle your finances much quicker, more precisely, and more practically.
These are the five accounting software features that can prove effective for your eCommerce accounting requirements.
- A simple cloud-based to use programme, which should have user-friendly components, and that can easily connect with other tools and convert currencies.
- Simple invoicing, cost and bill tracking, clear reporting, simple tax reporting, time and expense management, and payroll.
- It must feature effective cost management, accrual and cash reports, seamless credit card processing, and an infinite number of clients and suppliers.
- It must offer scalability, inventory and task management, user-friendly features, a customer care center, and cash flow management.
- It must possess integrated payment methods, low cost, easy project monitoring, and improved invoicing.
eCommerce Accounting Financial Statements
eCommerce accounting works on the following three financial statements:
- Income Statement
- Balance Sheet
- Cash Flow Statement
An income statement is a financial document showing how much a company makes during a specific period. It includes the company’s income, gains, losses, and costs, known as a profit and loss statement (P&L statement) or a statement of revenue and expense.
A balance sheet is a detailed account of the company’s assets, liabilities, and stockholders’ equity at a specific time. It includes information on a company’s assets, liabilities, and investments from shareholders and investors.
Cash Flow Statement
The cash flow statement lists all your cash and its equivalent amount paid to and received by your business. It gauges how much cash a business can produce to pay off its obligations and fund its ongoing operations.
Tasks in eCommerce Accounting
Every proprietor of an online store must regularly handle a variety of accounting-related chores. These are as follows:
- Categories of expenses and transactions
- Monitor expenses
- Track inventory cash flow
- Check Inventory
- Stay on top of taxes
- Check customer returns and chargebacks
- Calculate break-even sales
There are many different areas and subcategories within eCommerce accounting. Owners of online stores need to understand each of these terms and how to apply them to their eCommerce operations.