Ecommerce Accounting: Definition, Best Practices & Tools

While Xero and QuickBooks both have a default chart of accounts, this isn’t designed for the complexities of eCommerce businesses. Having a bookkeeper can help you set up and manage your chart of accounts. Once you have the three items above, you’ll be ready to set up your accounting for your e-commerce business. Managing your business’s inventory levels is key to knowing how much and when to order more product.

However, you can still accept different payment types (primarily if you also sell in person). Develop a habit of frequently comparing financial records with bank statements to ensure accuracy. This can help you identify and rectify any errors before they pose serious threats.

Common mistakes in ecommerce bookkeeping

Ecommerce platforms often charge merchant fees, which is a unique bookkeeping element online sellers need to track. You may be hoping for the best and have a few college courses in your back pocket. Even with these tools, you may not have the expertise you need to handle the responsibilities of a bookkeeper. By logging and keeping track of all financial transactions, you will have easy access to any financial information you might need.

You have to think about the money you haven’t earned yet (account receivables) and subtract costs you are yet to incur (account payables). There are a few essential practices to consider when discussing ecommerce business and accounting. The following principles apply whether you have an in-house accountant or dedicated software.

How to Keep the Most Accurate Financial Data

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. Those who dedicate a portion of their home to an e-commerce business can take advantage of the home office deduction. Say I open Book Me, a purveyor of books long and short, heavy and light.

• In an inventory cash flow document for example, costs listed should be exclusively inventory-related.
• Your IRS compliant financial records are collected by your Bench tax coordinator and a Bench tax preparer will get your taxes filed on time, every time.
• If your business has big (or slow) months or weeks, your financial statements will show you.
• Ecommerce bookkeeping is the process of recording and managing all financial transactions for your online store.
• Small businesses with many transactions and multiple accounts should consider using bookkeeping or accounting software or hiring a bookkeeper.

Over time, as your business grows, not having accurate timing of transactions (sales, expenses, liabilities, etc.) will become very significant. Selling products online may have started out as a hobby, but look at you now—you’re running a full-time ecommerce operation! If the financial aspects of entrepreneurship are starting to feel like a bit much, we’re here to help. ecommerce bookkeeping In addition to your monthly bookkeeping, Bench can also file your federal and state income taxes for you. Your IRS compliant financial records are collected by your Bench tax coordinator and a Bench tax preparer will get your taxes filed on time, every time. You’ll want to find a freelance bookkeeper who has experience working with ecommerce businesses like yours.