If you’re going to DIY your bookkeeping: You Need to Know
While e-commerce businesses are exciting and rewarding ventures, they come with a unique set of challenges with bookkeeping. Properly tracking your financial records is essential for the success of your business, so in this blog, we’ve curated a short list of tips in hopes to lead you to bookkeeping success.
Tip 1 – Set up a separate business bank account
I’ve got one word for you: comingling. Comingling in the bookkeeping world is the mixing of personal and business activity in the same account and I’ll let you in on a little secret… your bookkeeper doesn’t care for it. If you want clean records for your finances, one of the easiest and most important things that you can do is to open a separate bank account for your business. A separate business bank account makes it easy to track your transactions, reconcile your accounts, and is easier to audit.
Tip 2 – Keep track of your expenses for better eCommerce Bookkeeping
One huge mistake that we often see in e-commerce bookkeeping is bookkeeping straight out of the bank feed. This type of ecommerce bookkeeping is incorrect because it only captures the resulting net payout while missing the full picture of where that deposit came from. Your payment processors take a portion of each sale that is earned and that expense needs to be reflected on the books. The proper way to complete your bookkeeping is to capture the gross sale less applicable fees.
Tip 3 – Use a clearing account
When you are tracking payment activity within your separate payment processors, you want to make sure that it is done as cleanly as possible. The only way to do this is by way of clearing accounts. Each payment processor should have its clearing account to track sales, applicable fees, and payouts.
Tip 4 – Consider automation software
Manually entering sales when you are starting is perfectly fine, however, once your business picks up and you are clearing hundreds of transactions a day, manual entry is going to exhaust your time (and patience). Automation software, such as A2X, Bookkeep, and PayTraQer will do the heavy lifting behind the scenes by connecting your sales platforms/marketplaces and your accounting software.
Tip 5 – Stay on top of your sales tax obligations
The most challenging aspect of e-commerce bookkeeping/accounting is tracking sales tax obligations. Your team must help you stay compliant by tracking nexus triggers so that you are registering and collecting sales tax from the correct customers.
Bonus eCommerce Bookkeeping Tip – Reconcile your accounts regularly
Reconciling your accounts regularly is important to ensure that your books are done correctly. Reconciling helps you catch errors in your bookkeeping as well as helps prevent fraud. At Upscale Bookkeeping, our clients’ books are reconciled every month.
In conclusion, e-commerce bookkeeping is a crucial aspect of running an online business. By following these tips, you can set yourself up for success and ensure that your financial records are accurate, organized, and compliant. Remember, accurate bookkeeping is not just a legal requirement, it’s also essential for making informed business decisions and growing your e-commerce business.