Ten accounting basics to run an eCommerce business successfully

Accounting is an essential part of running any type of business. For your eCommerce business, you need accounting to help you track your income, expenses, and it is also to ensure that you will be able to provide the government with financial information about your business. All of these are important in making business decisions.

Through accounting, you together with your managers, stakeholders, and other investors will be able to evaluate your business and how it stands in terms of financial performance. Accounting gives crucial information profits and loss, liabilities and assets, which are all essential factors in making business plans and controlling processes within your eCommerce business.

So here are the top 10 basics which you need to run your eCommerce business successfully.

Accounting software

First of all, you will need accounting software. Trust us when we say you can’t do accounting by just using a calculator or Microsoft excel. Managing finances manually will not help you reach your expected results. With the help of accounting software, your company will eb able to manage your budget more effectively.

In choosing accounting software, you should understand how it works. Make sure to have a professional explain it for you and see how it can benefit your business. Make sure that it is really the software that suits your accounting needs.

Cash flow

Tracking your cash flow means determining your expenses and compare them with your receivables as well as your projected income. Cash flows are considered the lifeline of every business and it is very important in order for your business to survive.

Every business faces challenges. However, regardless of the trials, it is crucial that you maintain a positive cash flow in your eCommerce business.

Inventory

Do you know that inventory can make or break your business? Your products on hand appear as an asset. You have to know the exact number of products you have left and how much it is worth. Having this information will help you make smart decisions and plan efficiently when it comes to handling your finances.

Balance sheet

This is a document that offers a quick view of the financial standing of your business. Without his document, you as a business owner and your managers may make decisions that will have negative effects on your business. The balance can be used to track your spending and earnings as well as how much your company owns and how much it owes. To interpret the balance sheet successfully, it is important that all investors know how to use, analyse and read a balance sheet.

Income statement

This is also known as the profit and loss statement or profit and loss account. It is a record that shows whether the company is making a profit or loss. You can measure the total revenue as well as the total expenses you incurred for a certain period of time in your income statement. Subtracting your expenses from your revenues will provide you with your total period for a given accounting period.

Burn Rate

This is used to track the amount of cash that your company spends on a monthly basis before it starts generating an income. It is also used to calculate the amount of time left for the company before it runs out of money. Through the burn rate, you are able to know how fast your company is spending your available cash supply.

Tax payments

As a business, it is your obligation to pay the right amount of tax. Every business must file their taxes to the government. Whether you are just starting or running a large business, your company’s taxes should be done appropriately. Failure to comply may lead you to incur penalties and other rother fees.

Bookkeeper

Hiring the best bookkeeping services sydney can save you from a lot of stress and saves you time. They will handle all the financial work for you which means you have more time to focus on running your business. Make sure you hire certified and trusted bookkeeper to help you out with your journey in running your eCommerce business.

Account payable and receivable

These accounts are the same in a way they are being recorded however, they are totally different. Account payable is your business liability while accounts receivable is your business’ assets. There is a need to maintain these account efficiently as they help in ensuring a healthy cash flow in your business

Keeping documentation

Keeping documents in all your accounting processes is essential because it is your way of keeping evidence that a certain financial transaction has occurred. This is especially important during a tax audit or accounting audit. Documentation helps in telling the narrative for all the business decision made. Also, it can help support you with your future actions for your business.

Overall, there is no doubt that accounting is extremely important to any business. Without it, you won’t be able to know the financial health of your business and you can’t show the financial information to your stakeholders. Accounting is a need for every business to maintain a record of all financial transactions of the company not only for knowledge purposes but also to comply on financial statements required by the government. If you do not want to incur penalties, then you know that you have to do it. Overall, accounting helps you protect your business, make sure that it is running healthy and it helps you make smart decisions and make your business successful.