eCommerce Bookkeeping Services: A Complete Guide for Online Businesses

Contrary to what you may think, bookkeeping practices are a bit different for an eCommerce startup than they are for most other types of startups. Managing cash flow largely involves managing digital transactions – not physical ones. Additionally, since online businesses aren’t limited by geography, they must also manage sales tax for different states. Some even have to manage different currencies if they have international reach.

There are various other ways that eCommerce bookkeeping differs from conventional bookkeeping, underscoring the importance of having someone who knows what they are doing running your books. Otherwise, improper bookkeeping could lead to cash flow issues, tax penalties and even potential legal risks. These problems all have the potential to do more than just hamper the financial performance of your online operation, but potentially lead to reputation issues for your startup as well.

Understanding the Complexities of eCommerce Bookkeeping

eCommerce bookkeeping is more complex than bookkeeping for a conventional brick-and-mortar location when you consider the lack of geographical limitations, managing sales tax and more. Good eCommerce bookkeeping involves tracking and recording sales, determining the cost of goods sold and managing sales across multiple platforms.

Managing sales across multiple platforms and the potential of even selling internationally are two of the key factors that really separate eCommerce bookkeeping from traditional bookkeeping, underscoring the importance of having a trusted professional to manage your books.

Traditional vs. eCommerce Bookkeeping

As an online company, you’re likely doing more than just selling from your consumer website. You probably have your product listed on other retail sites, like Amazon, Shopify, eBay and more. As all eComm startup owners know, it’s important to track your transactions across these various sales platforms to ensure your books are accurately managed. Tracking sales across platforms also has other benefits. For instance, you can gain key customer insight into shopping behavior and maximize marketing strategies more appropriately. That’s one of the most significant ways eCommerce bookkeeping differs from traditional bookkeeping and why a specialized online bookkeeper can be of such value.

Another key difference is in managing sales tax. You need to ensure sales tax compliance based on where your customers are located to avoid penalties and fees. This becomes even more complicated if you’re doing business with international customers, who may be paying in a different currency or dealing with fluctuating exchange rates compared to your company’s base currency.

Benefits of eCommerce Bookkeeping Services

So why hire a professional eCommerce bookkeeper for your online startup? Aside from ensuring that your books are kept up to date and managing sales across different platforms, there are many ways an eCommerce bookkeeper adds value. Some of the benefits of working with one include:

• Improved understanding of financial statements and financial records
• Better cash flow management and forecasting
• Reduced errors in tax filings and avoided penalties
• Real-time financial reports (P&L statements, balance sheets, etc.) to help startup owners make better decisions, faster
• Improved inventory management and tracking cost of goods sold (COGS)

Setting up Your eCommerce Bookkeeping System

A good eCommerce bookkeeping professional, like Graphite, will ensure that there’s a robust system in place to help manage the finances of your startup. In most cases, the best systems are cloud-based platforms like Xero or QuickBooks online. These programs easily integrate with your eComm platform to provide a robust, all-around solution.

Another nice thing about using QuickBooks or Xero for your eCommerce accounting is that they offer opportunities to customize the chart of accounts based on categorical inventory, shipping and even advertising expenses. These platforms also allow for the opportunity to automate sales tax collection, like A2X.

Avoiding Common eCommerce Bookkeeping Mistakes

eCommerce bookkeeping comes with its fair share of challenges – and oftentimes, these challenges can result in a variety of significant mistakes that can come back to harm your startup. Some of the most common bookkeeping mistakes that eComm startups make include:

• Misclassifying Amazon or Shopify fees
• Miscalculating COGS
• Not using cloud accounting software for bookkeeping purposes
• Incorrect inventory evaluation, such as incorrectly using the FIFO and LIFO methods

What can you do to avoid some of these common mistakes? One thing is to ensure you’re using cloud-based software. The other thing you can do is work with an experienced, qualified online bookkeeper who can ensure that your books are managed properly.

Choosing the Right eCommerce Bookkeeping Service

Choosing the right eCommerce bookkeeping experts isn’t as easy as it may seem. You want to ensure you find a partner that can avoid many of the pain points that come with bookkeeping for an online business. Aside from searching for a credible, experienced online bookkeeper, it’s important to find one who’s also experienced with the common platforms that you do business on like Shopify, Amazon, Etsy and more.

Additionally, don’t underestimate the value of hiring a specialist versus a generalist bookkeeper. When searching for a bookkeeping service, you want one that specializes in eCommerce bookkeeping. This way, you can ensure you’re getting more than a cookie-cutter approach to such services, especially when it comes to managing tax compliance, understanding inventory management and many other challenges.

How Graphite Supports eCommerce Startups

If you’re looking for a bookkeeper who knows eComm startups, look no further than Graphite Financial. With familiarity with all eComm platforms – from Amazon to Etsy – and the ability to tailor solutions so that we meet the unique needs of your online business, we’re here to help. As expert accountants with know-how of everything from financial forecasting to tax planning to real-time financial data, and, of course, bookkeeping, we have the skills and the experience to elevate your online company’s financial reporting to new heights.

Master Your eCommerce Finances for Long-Term Success

eCommerce accounting is a lot different from general accounting – and that’s why you shouldn’t hire a generalist bookkeeper for something that a specialized bookkeeper should be handling. With various challenges including tax compliance, multi-platform sales and the potential for cash flow issues, hiring an experienced online bookkeeper can help keep your finances in order and position your eComm startup for future growth and prosperity.

Contact Graphite today for more information on how we can help manage your eComm’s bookkeeping.

Unlock the Full Potential of Your eCommerce Startup

To unlock the full potential of your eComm startup and put its bookkeeping in trusted hands, contact Graphite today. With flexible pricing plans and access to our accounting experts, you’ll never have to second-guess your bookkeeping accuracy again. Contact us today to schedule a free consultation and put your bookkeeping on the right path.

FAQs

What is eCommerce bookkeeping?

eCommerce bookkeeping is the process of recording and managing financial transactions for an online business. Similar to traditional bookkeeping, eCommerce bookkeeping involves tracking sales, purchases, expenses and more to match bank records. However, several unique factors separate eCommerce bookkeeping from traditional bookkeeping, underscoring the importance of having an experienced professional take on this task.

Why do I need specialized bookkeeping for my eCommerce startup?

Specialized bookkeeping is important for an eComm startup because there are various complexities involved in online bookkeeping that differ from conventional bookkeeping. Managing sales across multiple platforms and selling internationally are two of the key factors that separate eCommerce bookkeeping from traditional bookkeeping, underscoring the importance of specialized bookkeeping.

How can eCommerce bookkeeping services help with tax compliance?

Cloud-based eCommerce tools like Xero and QuickBooks can integrate sales tax automation tools like A2X that pull in data and help keep sales tax on track. Being that this is one of the major challenges of running an online business, the right platform can help automate sales tax and ensure your startup stays compliant.

What tools are recommended for eCommerce bookkeeping?

When it comes to eCommerce bookkeeping, it’s best to work with cloud-based software. Solutions like Xero and QuickBooks are two of the leading platforms that integrate well with online systems to provide well-rounded support. These platforms offer opportunities to customize the chart of accounts based on categorical inventory, shipping and even advertising expenses.

How often should I update my eCommerce books?

How often you update your books depends on the size of your startup and the volume of sales that you’re recording. However, most industry experts state that bookkeeping should be updated at least monthly. This helps ensure that your information is always up to date, that leadership can make informed decisions on the future and that you’re in compliance with tax regulations.