Ecommerce Bookkeeping Basics: How To Keep Records For Your Product Based Business
Whilst we may love it here at Navigate the Noise, we get it - eCommerce Bookkeeping is not something which every Entrepreneur enjoys! However, it is an essential activity which must happen in your eCommerce business if you are to grow.
For many product business owners, when it comes to keeping track of your expenses, paying taxes and recording accurate records in your books, you may find as your business starts growing that it’s not all as straightforward as you’d want it to be.
More often than not, we find our clients coming to us either at start up or when they get to the point that the feel frazzled, bookkeeping for eCommerce business transactions is taking up all their time and stressing them out. What they really want to do as business owner is be focused on sales and growing their business instead!
There are steps you can take on a regular basis that will make the whole bookkeeping process a lot easier and a bit less stressful for you. Let’s take a look at some of bookkeeping basics for eCommerce business.
How to Master Small Business Bookkeeping
When it comes to mastering small business bookkeeping, it’s important to remember there are some tasks you need to do on a regular, consistent basis. Ideally, you want to do these things daily, and schedule in the other tasks weekly, and in some cases monthly.
Let’s look at each.
Your Daily Must Do's
Make sure that you keep a record of all your expenses and adhoc spending. Think of it as a paper trail and part of your job as Founder and Director is to evidence how the money flows in and out of your business.
You need to record each transaction you make into your accounting software. Keep copies of any receipts you gather, supplier invoices and any regular payments you make automatically so that you can complete the books properly later. This is regardless of how you pay, from your current account, paypal or on your credit card and even cash - keep the evidence (!) we want to see a record of every little expense you make in relation to your business.
But don't panic if you feel you will get swamped under a mountain of paper! We are Xero accounting software specialists and when you work with us we share with our clients the very best ways to capture evidence of your "paper trail" without it involving paper... yes - there's an App for that! If you know how to use the camera on your phone, you'll be all set - simply take a pic of your receipt, upload to your accounting system and bin the paper.
Your Weekly Must Do's
On a weekly basis, you need to make sure that you do a few things to prevent your bookkeeping from turning into a massive, overwhelming task at the end of the month. We like to think of this like garden maintenance.
It keeps your business tidy and helps you stay on track and in control as a business owner. Priority activities could include a weekly review of your cash flow, checking you can match the expenses and receipts you've had to the money in your bank account, reviewing what cash is available to cover future spend, looking for anything you don't recognise or items where you've forgotten to get a receipt for.
We recommend to all our clients to stay vigilant in checking how quickly you are using your cash, especially during start up or growth phases (- this is your burn rate - how quickly it's flowing through your fingers!), and a weekly review helps you watch out for any increases or new expenses that come in.
We also recommend for our ecommerce business clients to check that their data feeds and CSV files from marketplaces and websites like shopify or woocommerce are successfully linked to their accounting software and pulling through the line item transactions as expected. Better to catch these things early and fix them rather than discover 6 months later that the feed was broken and the data wasn't coming through.
Your Monthly Must Do's
Finally, on a monthly basis, you are going to want to make sure that you get a financial health snapshot of your business. This includes running a set of key financial reports from your accounting software that summaries how well you've done this month in terms of performance on Sales, Profit, Cash and overall Wealth (assets vs liabilities). The 2 major statements all product based business owners should look for are:
- a Profit & Loss Account (Income Statement) - run for the whole month under review e.g. 1st to 31st May.
- a Balance Sheet report - run as at the month end date e.g 31st May.
Reviewing your profit and loss account report will help you keep a proper eye on your expenses, and help you make a note of anything that doesn’t seem right. For example, questions you can ask include: Did you have any unexpected costs, or do you know what all of those expenses were for? Have you overspent in a particular area and now need to cut back? Did you have any unexpected transaction fees for a marketplace or returns that needed processing that weren't captured?
All good questions!
Why Bookkeeping Gets More Complicated As You Grow
As your business really starts to grow, there are several reasons why eCommerce entrepreneurs need to outsource their bookkeeping services to us as their reliable eCommerce bookkeeper:
- Sheer volumes of transactions - you want to save your own time and free up your brain space!
- Inventory tracking becomes onerous as your product range grows
- Cash flow management is key as demands for inventory and marketing spend grows
- Marketplace data from several sources into one accounting system makes it complex
- Cross border tax - EU VAT anyone!
- Multiple currencies to deal with
- Multiple payment wallets to deal with
Why Good eCommerce Bookkeeping Drives Business Growth
Good bookkeeping is the cornerstone of successful business growth. Without good eCommerce bookkeeping, you will not see the growth that you want because you won't have a tight enough control over what is really being achieved financially in your business. For example:
- How can you know how much to invest in marketing, if you don't really know how much you already spend each month?
- How can you know if you can afford to take on that employee, if you don't know if you can pay their wages?
- How can you invest in the next round of inventory production if you don't know how much inventory you have today or how fast you are selling it through?
Being able to make smart decisions only comes from using the data about your business and having enough accurate, up to date evidence to make the investment decisions needed to help you grow.
This is especially true for fast growth ecommerce businesses - with accurate bookkeeping records, you can quickly access the numbers you need to make smart financial decisions to power up your business growth.
Make It Happen In Your Business
Bookkeeping for eCommerce can definitely be a hassle for any product based business owner to manage. As you grow your business there are always so many conflicting demands on your time as Founder and CEO but it is an essential activity which must happen to have a healthy business.
All great CEO's love their numbers, not avoid them - because they KNOW that it's the numbers, the hard data which tells them they can grow faster and run harder in pursuing their dreams!
Most growing businesses make the choice to outsource bookkeeping to a trusted, reliable third-party. We are here to help you grow and happy to make sure that you stay organised, giving you peace of mind that your books are accurate and compliant. We will save you time and reduce your stress so that you are ready to go when it comes to your bookkeeping and making the bigger financial decisions in your business.
- Ask yourself honestly if you have a good handle on your bookkeeping and financials today. Or is it time to get some help?
- Gather up all your receipts and invoices if you haven't already and do the work or appoint a professionally qualified bookkeeper to help you get this done.
- If you would like to talk to us about how we can help you save time and reduce the stress of recording your bookkeeping transactions, schedule a free call with us to find out more and get a quote.
- Don't worry if you are behind - we offer catch up bookkeeping services too. If you are hoping someone will help you sort them out... Challenge accepted! We won't judge if you've had a go yourself and got in a pickle or if you've simply not done them for a few months (or years!)... We'll make a detailed plan to get your financial records back in shape and we'll take that weight off your shoulders once and for all.
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