Accounting is a necessity that no business owner can deny. And same goes for an ecommerce business is all. Here, in this article we are going to discuss about what accounting basics you should know when starting your ecommerce business.
Starting your ecommerce business? Have got your website ready? Have prepared for keeping the inventory, stock, arranging for delivery? Have got the staff to manage the workflow process?
Well, all these are necessary, but have you counted in one other and extremely important thing for your business – accounting management? You might have or might not have. When you want to business to run smoothly and you want it to be on the right side of law, as well as keep your financial structure strong, you need to know accounting basics for your ecommerce business:
- Set Your Accounting Process in Place – Have a Professional Accountant on Board
While you may be thinking that you might be able to get accounting done yourself, it won’t be a good idea. Will you like to keep engaged in balance sheets and numbers all day or would want to focus on how to grow your customer base and business? A professional accountant for ecommerce business is an investment that would keep you away from all the worries, whilst also handling everything in accordance with rules and regulations (which you may err if you do it yourself).
Also, having a right accounting software could be a right option to assist with all the accounting process.
- Keep a Track on Cash Flows
This is must. Get a business bank account, and know what money is being spent on what and what revenue is being generated and from where. Knowing everything about the movement of your money is an extremely important step.
- Count Inventory Professionally
Inventory management might look an operation, but is also important for your accounting. All the extra costs related to inventory like product packaging or wrapping has to be kept track of. Ensure what minimum inventory you need to keep your workflow smooth, so that you don’t run out of products and lose sales.
- Keep Track of Goods’ Costing
Manufacturing cost of the product, along with its delivery cost and other costs associated with it, all should be combined to determine the total cost you are paying for the product, and it determines how much margin you will make selling that.
- Keep Track of All Other Expenses
Your product, staff, product procurement and delivery aren’t the only expenses. These also include rent, property tax, loan interests, insurance, utilities and more (whatever you have). These are expenses and can be rise or fall every month. Keeping track of your entire expenses, including emergency or unwanted expenses, goes toward defining your budget.
- Determine What Sales and Profits You are Achieving Before Tax
To make profits you need to break even. Calculating your expenses thoroughly will give you a clear idea about how much product sale you have to achieve. Then keep a track on sales so that you get a clear picture of whether you will be able to pass that mark or not. After than track your profits specifically for each month, coupled with the tax you are incurring, that will detail you what you are going to have in your bank account at that end. A clear idea about this helps to determine your sales targets each month.
Conclusion:
An accountant comes as a vital cog in your wheel that helps you drive smoothly. If you are targeting to put your store on a big ecommerce site like Amazon, then an Amazon FBA accountant would be of great help to keep your accounts, taxes and finances in order.
About the Author:
The author is associated with a leading firm of accounting and VAT experts who provide their services precisely for ecommerce businesses all across the Europe.
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