Accounting for the Move to eCommerce: going from playing checkers to three-dimensional chess
Starting an online business venture is an exhilarating journey filled with opportunities and innovation. Many entrepreneurs prioritize the exciting challenges of product development, branding, and marketing, pushing aside that one crucial area: eCommerce accounting. Understanding the nuances of eCommerce accounting is essential to the long-term health and growth of your online business. It’s vital to recognize its significance and invest the necessary attention and resources from the outset.
The Challenge of eCommerce Accounting
eCommerce accounting is complex and quickly becomes daunting for business owners who just want to focus on the core of their business. From intricate sales tax regulations to diverse revenue streams; from omnichannel inventory management to actionable financial reporting, the intricacies of eCommerce accounting require dedicated knowledge.
Learning something about eCommerce accounting yourself and hiring accountants with the expertise to support your business, brings you the confidence that your financial resources will support your business in the long term and enable you to grow and scale.
Before you become lost in the financial labyrinth of running an online business, look for knowledge and help: eCommerce accounting is not simple. Although your primary objective as you launch your business may not be your financial data, you really do need complete and accurate financial information. It’s not just about filing tax returns, it’s also about understanding your financial landscape; essential to sustain your venture and to facilitate healthy growth.
Enlisting the help of experts in eCommerce accounting from the very beginning really can save you from future financial terrors. Implementing robust accounting processes early will give your business the clarity and stability needed to scale effectively.
Key Differences driving eCommerce Accounting
eCommerce accounting is different from traditional retail accounting... there is soooo much more. Multiple shopping and payment channels create unique accounting needs for online merchants.
The differences are not merely superficial; they introduce layers of technical complexity that can complicate financial management. Here are some of the key distinctions:
Payment Processors: eCommerce businesses rely on various payment gateways like PayPal, Stripe, Payedge, Wise, AfterPay, and many more! Each platform has its own fee structure, processing timeline and data flows.
Sales Tax Compliance: Sales tax regulations governing eCommerce are convoluted and vary significantly by region. Online sellers must track taxes by buyer's location and adhere to specific reporting requirements. E-commerce’s reach is global: Canadian ecommerce retailers sell into Canada (13 jurisdictions) and the US (50 states) and many other regions worldwide.
Inventory Recording: Unlike traditional retailers who can store all their inventory in a single location, eCommerce businesses hold stock in multiple locations, including warehouses and fulfillment centers. Accurate tracking of inventory is necessary to support your knowledge of your profitability.
Multi-Channel Sales: eCommerce businesses operate across various sales channels, including Shopify, Amazon, their own websites, and social media platforms. Each of these channels can introduce different payment processors, data management requirements, and fee structures that must be navigated carefully.
Sales platforms are generous with information about building online stores and about how to do business online. This is the first place an ecommerce store owner should go to educate yourself.
Connector Apps: Capturing sales data and payment processor data typically requires specialized apps to rapidly flow data from the platform and processors into accounting software. Trying to enter data manually is time consuming and expensive and often surprisingly inaccurate. Hiring ecommerce accountants who have the technical accounting expertise to manage sales, payment and connector apps is cost effective.
You need to manage every element effectively to ensure you have accurate financial data to make fully-informed business decisions. A grasp of the basics of eCommerce accounting practices is indispensable. Partnering with an accounting company such as Guildstreet, which specializes in handling the technical complexities of ecommerce accounting will expand your knowledge and leave you free to focus on your business.
Future-Focused Planning
Beyond keeping track of current financials, the data gathered for accurate eCommerce accounting also serves as the basis for a roadmap to future growth. Analytics driven by accounting data identify -
· which products or services yield the highest profitability for your business,
· map your financial results against budgets and goals,
· show opportunities to expand your margins,
· provide benchmarks against which you evaluate new marketing initiatives,
· allow you to assess return on investment (ROI),
· give you financial assurance before you explore new markets.
Financial data for any business goes far beyond the requirements of filing tax and providing financial statements; for an ecommerce business these data are the core of your knowledge about the metrics and key targets of your business.
The Role of eCommerce Accountants
Ecommerce accounting is a specialized field requiring specific knowledge. Ecommerce accounting experts understand the intricacies of managing eCommerce finances, the multi-faceted technical links, and help you implement effective processes as you scale your business.
It’s not just about growing your business; it’s about having systems in place to allow you to grow rapidly and without pain.
Ecommerce businesses tend to transition very rapidly from a small operation to a large entity, so it’s well to be set up for compliance and financial reporting requirements well before the financial issues become overwhelming.
Seek out specialists who can provide the necessary guidance. Yes, Guildstreet has that expertise, plus we are multi-currency experts.
Trust the Experts
As you start or build your business, prioritize eCommerce accounting alongside product development and marketing to lay a solid foundation for future success.
Embrace the complexities of eCommerce accounting as an empowering step toward realizing your business’s full potential.
Contact Guildstreet Today!
Guildstreet is here to support you through all the complexities of financial management, letting you concentrate on achieving your business goals. We are dedicated to helping your business prosper and grow to dream profitability.
Feel free to reach out to us for personalized advice and solutions that can help you streamline your finances and enhance your profitability. The first discovery call is always free!
Written by Justine Beaulieu
