The Importance of Bookkeeping & Accounting for Ecommerce Businesses
As an ecommerce business, you’re likely focused on driving sales, optimising your web store, and developing your product offerings. But it’s important to remember that keeping accurate and organised financial records is crucial for the success and growth of your business.
6 Benefits of Bookkeeping for Your Ecommerce Business
Here’s why bookkeeping and accounting are important for ecommerce businesses:
Understanding Your Financial Health
Bookkeeping helps you track your income and expenses, providing a clear picture of your company’s financial health. By knowing how much money is coming in and going out, you can make informed decisions about how to allocate your resources and grow your business.
Making Informed Business Decisions
With accurate financial records, you can make data-driven decisions about your business. For example, you may want to analyse your expenses to see if you can reduce costs or increase profitability.
Compliance with Tax Laws
Bookkeeping and accounting are necessary for compliance with tax laws. You’ll need to keep accurate records of your income and expenses to report them accurately on your tax returns. Failure to keep accurate records can result in fines and penalties from the government.
Securing Funding
If you’re looking to secure funding from investors or banks, you’ll need to provide accurate financial records to demonstrate the viability of your business. Investors and lenders will want to see that you’re keeping accurate records and that you’re on a solid financial footing.
Making Budgeting and Forecasting Easier
Bookkeeping and accounting make it easier to create budgets and make financial projections for the future. By having a clear understanding of your past financial performance, you can make more accurate projections and plans for future growth.
Improving Cash Flow Management
Accurate bookkeeping and accounting can help you better manage your cash flow. By knowing exactly how much money you have coming in and going out, you can make decisions that improve your cash flow and reduce the risk of running out of money.
So, what do you need to know to get started with bookkeeping and accounting for your ecommerce business?
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Choose an accounting method: There are two main accounting methods: accrual accounting and cash accounting. Accrual accounting records income when it’s earned and expenses when they’re incurred, while cash accounting only records transactions when cash is received or disbursed.
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Set up a bookkeeping system: You’ll need a system for tracking your income and expenses. This can be a manual system using a ledger or a computerized system such as Sage 50 or Xero.
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Keep accurate records: Make sure to keep accurate records of all your income and expenses, including receipts, invoices, and bank statements.
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Hire a professional: If you’re not confident in your ability to handle bookkeeping and accounting, consider hiring a professional. An accountant can help you set up a bookkeeping system, keep accurate records, and ensure compliance with tax laws.
Bookkeeping & Accounting is Essential
By understanding your financial health, you can lay the foundation for a strong and successful business. So, make sure to prioritise bookkeeping and accounting and invest in the tools and resources you need to keep accurate financial records.
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