Bookkeeping, Ecommerce

Top 8 benefits of bookkeeping for e-commerce businesses

10 min read

According to eMarketer, global e-commerce retail sales are expected to surpass $5 trillion for the first time in 2022, representing more than 20% of total retail sales. Despite a slowdown in growth, overall spending is projected to reach $7 trillion by 2025.
 
Is your e-commerce business growing but not seeing the expected profits? Are you concerned about saving enough to cover your expenses and taxes? If these questions have been on your mind, consider hiring a bookkeeper specialising in e-commerce bookkeeping.
 
An e-commerce bookkeeper is familiar with the ins and outs of online selling. They understand your platforms, know how to handle details like refunds, and can provide customised advice to help your business succeed. This blog will explain how an e-commerce bookkeeper can support your online business.

Importance of bookkeeping for your e-commerce businesses

It’s essential to understand why bookkeeping for e-commerce businesses is necessary. Understanding the basics of e-commerce bookkeeping can help make your business profitable. Every online business needs a reliable bookkeeping system, so let’s look at how bookkeeping works for e-commerce businesses.

1. Helps in easy decision-making

Establishing well-informed strategies for success is crucial for e-commerce businesses. Accurate bookkeeping provides access to current financial information, offering insights into profit margins, customer acquisition expenses, and inventory turnover rates. This data empowers businesses to make strategic decisions about marketing initiatives, product pricing, and resource allocation.

 

For example, if bookkeeping reveals a drop in sales for a specific product, businesses can investigate the causes and take corrective actions, such as adjusting pricing or improving product descriptions.

2. Tracking of inventory level

E-commerce businesses need to monitor their inventory at all times. This helps them manage their stock and prevent product overruns. Monitoring stock levels also enables businesses to identify and invest more in their best-selling products. 
 
Proper inventory tracking can also help identify products that have been in stock for a long time. This can more effectively lead businesses to run promotions or sales for those products rather than holding onto them and incurring more storage fees.  
 
Businesses need to maintain the correct inventory levels to meet customer expectations and demand while minimising excess inventory or shortages. E-commerce bookkeeping services are crucial in helping business owners efficiently monitor and manage inventory levels.

3. Managing financial health

Tracking business transactions is essential for making smart decisions and improving your business. E-commerce bookkeeping allows accountants to review past data and spot sales trends. 
 
It helps you monitor your income and expenses, giving you a clear view of your company’s financial status. By knowing how much money is coming in and going out, you can make informed choices about using your resources and expanding your business.
 
For instance, if you notice a significant dip in your sales for a month, you can use this information to feed in to get a better understanding of the reason. Maybe you didn’t invest in the right products that month or cut back on your advertising budget. E-commerce bookkeeping helps business owners keep accurate records of their financial transactions. This enables them to manage their business finances effectively.

4. Maintaining accurate records

By 2027, e-commerce sales are expected to make up 23% of global retail sales. Research shows that 79% of e-commerce customers buy at least once a month. As e-commerce proliferates and many transactions occur, businesses must record each sale or transaction. 
 
This helps companies understand their profitability. With e-commerce bookkeeping, business owners can keep a secure record of all transactions, which makes managing finances more manageable.

5. Compliance with regulations

Compliance is essential for preventing fraud and money laundering in e-commerce businesses. Businesses must submit accurate financial reports to the government to avoid penalties. Bookkeeping companies play a critical role in ensuring the accuracy of these reports by keeping meticulous records of all financial transactions. 
 
Compliance with government regulations also helps protect consumers. Non-compliant businesses may face fines or penalties, leading to higher consumer prices. By ensuring businesses comply with accounting and taxation legislation, bookkeepers can help keep costs down for consumers.

6. Improving cash flow management

Businesses must have enough money coming in to cover their expenses. If you don’t have enough cash, paying your employees and keeping essential supplies can be challenging. To run a successful business, you need to understand your cash flow to work efficiently and avoid problems. 
 
An e-commerce bookkeeper can create cash flow reports to help you manage your business. These reports show how much money you’re bringing in and spending. This information lets you decide whether to increase revenue or cut expenses.

7. Understanding profitability

Tracking the profitability of products or SKUs (stock keeping unit) involves examining different factors, such as pricing, advertising costs, staffing expenses, and conversion rates. E-commerce bookkeeping gives business owners the tools to monitor these variables effectively. This helps businesses better understand SKU profitability, allowing them to improve their operations and maximise profits.

8. Fraud protection

Your bookkeeper must ensure that each invoice’s items and services are correctly received. As the business grows and more customers make purchases, this becomes more challenging. Invoices must be approved before payment to avoid paying for items or services that have not been received. 
 
Having an efficient bookkeeping service is essential. Understanding your e-commerce business finances makes it easier to notice unusual spending or balance sheet issues that could be related to suspicious employee activity. 
 
Only a reliable bookkeeper can reconcile your balance sheet and review your finances about the monthly budget. They can also help you set up systems inside your company to stop and find fraud.

Conclusion

Effective bookkeeping is crucial for success in the online retail industry. It helps business owners track spending and income, making it easier to make financial decisions that are crucial for growth. Whether you do your bookkeeping or hire a certified bookkeeper, understanding your business’s financial flow is critical to successful bookkeeping. With ever-changing tax regulations, numerous opportunities for growth, and various business models and structures, it’s essential to have a flexible e-commerce bookkeeping service provider who can handle these complexities. Golding Accountancy offers specialised e-commerce bookkeeping services designed for your business’s needs.

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