Commerce has been evolving since the beginning, and e-commerce is no exception. When you start an e-commerce business, it is easy to manage the books initially, but it will be challenging as the business grows.
E-commerce is a business model where companies sell products to customers online over the internet. All transactions are done on the internet. E-commerce has a few business models:
- Business to business
- Business to customer
- Customer to customer
- Customer to business
Managing books and recording transactions accurately is not an easy task. One small error and your profit and loss or the balance sheet will be inaccurate. It is where e-commerce accountant comes in handy.
Hiring an accountant will free up your time to focus on business growth and customer service.
Often startup business owners think that they can manage the accounts themselves. It is never a good idea. It takes a significant portion of your time and will tire you
Read our guide to : what is turnover in your business and how do you work it out?
As your business starts to evolve, it is time for you to delegate some tasks. If you are still hesitating and looking for signals, then this article is going to be it.
1. When your knowledge isn’t enough
Accounting and bookkeeping are pretty tricky tasks, and I suggest you not mess with them once they become tough. In an E-commerce business, there are many things that you need to take care of in accounting, starting from products to taxes and product codes. It is not easy to tick all of these boxes by yourself. Then comes MTD for VAT and Brexit, making it even more challenging for people with less accounting knowledge to file their taxes.
The moment you find booking confusing, start looking for an accountant. A professional e-commerce accountant is well versed in all of these aspects and will surely help you maintain your accounts perfectly. Errors, be they small or big, usually lead to unnecessary fines and penalties.
2. When your time becomes expensive
When you are just starting, it is common to have less business and more free time in your hand. But as you progress, there will be a lot of other stuff to take care of. This will throw finances to the bottom of your to-do list. When such a thing happens, it is time for you to bring experienced professionals on board.
They will be able to reduce your workload by taking finances and accounting off your plate altogether. Now, you get to focus entirely on the marketing and selling of your product.
3. When you are going international
If you got overseas customers and are all set to go international, then the first thing you need to do is get an accountant. Taxes in the UK are already complicated enough, and juggling with other country taxes will surely tire you.
Different countries have different kinds of tax systems, and once you go international, you will need an E-commerce accountant to take care of these taxes without affecting your business.
4. When your finances are a mess
Now, I suggest you do not wait until this point, but some of us are late learners, right. For any business, staying in the cost-profit zone is quite important. If you observe any financial issue and cannot resolve it, it’s time for you to get professional support.
Cost of products, inventory, sales, tax, and payroll liabilities are various things that e-commerce accountants in the UK will handle. They will help in cleaning up all the financial mess and bring your business back on track.
5. To write a business plan
If you have just started a business and looking to curate a long term sustainable plan, an accountant can help you with that. With various accounting software available, the accountants can help you make financial projections, forecast the situation and provide essential insights.
These insights will help in creating a realistic business plan.
If you hire a professional at the starting stage of your business, you can reap various benefits.
Read our guide: what is a business model
If you want to have a financially stable and reliable business, then the first thing that you need is E-commerce accounting. Whether you are using a third-party platform to sell products or have a platform of your own, you must have robust accounting processes in place.
Here are some of the reasons for you to rely on e-commerce accounting.
- Build a financially stable business model: It is essential to watch the cash flow daily. A solid bookkeeping and accounting system in place will go a long run for companies. You can avoid any unpleasant surprises at the end of the month if you stay on top of all the accounting details from time to time.
- Filing taxes: Once you start keeping your accounts intact from the start of the month to the end, there is no going back. Filing taxes become so easy at the end of the financial year too. You can follow all the laws and file the taxes on time or earlier once your books are ready. E-commerce accountants can help you in the entire process.
- Forecast: Once you have your accounting numbers with you, it is easy to forecast the business and understand where you are lacking. You can make future projections and plan everything smartly.
- Helps in selling your business: If you want to sell your company, buyers will first ask for your books. If you have everything maintained intact, it becomes easy to sell the business.
Categorising the cash inflow
E-commerce sellers use different platforms to sell their products, like eBay, Amazon, Shopify, and personal websites. It is where the main issue arises.
It is essential to know which channel generates more income, which product is a fast seller, and which is slow moving. If your business is international, knowing from where you are getting more amount is also critical.
As said earlier, in e-commerce, there are many platforms where one can sell, and this includes different payment gateways too. Knowing vendor fees on each forum, the time it takes to receive cash, recording invoices at gross amount etc., can be time-consuming and often challenging.
Integrating the payment gateways with software isn’t going to work like a miracle either.
However, if you hire an accountant, they will track and record every transaction from all platforms for you. The tracking of vendor fees becomes easy this way.
Now, inventory management is one of the most challenging things in ecommerce accounting. This includes creating a purchase order, managing inventory on multiple platforms, managing returns and damaged goods etc.
Inventory valuation can be a challenging area, like deciding which method to use. Four common inventory valuation methods are – First in First Out (FIFO), Last In First Out (LIFO), simple average and weighted average.
Know what returns and chargebacks are
Returns are different from chargebacks. E-commerce stores offer return policies for customers.
The chargebacks occur when customers dispute the transaction by claiming it as fraudulent. It happens a lot with e-retailers. There are instances when you are charged with an extra fee after chargeback.
Addressing these issues is essential, and getting help from a professional accountant will solve them even easier. You can stay on top of your books.
Here is our Beginners guide to growing your business
As a business owner, your primary focus is on the activities that will boost your productivity and business income. It is important not to fret more about the cash flow and spend time sorting out the numbers.
Hiring an e-commerce accountant will reduce pressure and assure you that the numbers and your accounts are in the right hands. Right from drafting a business plan to tax compliance, accountants can be helpful for you in every aspect of your business. The right accountant will ease your work life and also bring your books into order.