For Business Owners
Why Accounting Is Vital In E-Commerce
E-commerce is a fast-paced industry where all nuances matter. Success is often sought by tweaking marketing, product, or other areas of the business, and not many think of accounting as a make-or-break sector. In this article, we will explain why accounting actually has the potential to turn e-commerce businesses successful—read on to find out everything.
The Crucial Role Accounting Plays In The E-Commerce Industry
Accounting for businesses that engage in traditional trade is performed in a manner that is distinct from accounting for businesses that engage in e-commerce.
Regardless of whether you generate revenue from sales on Amazon, eBay, Noon, Shopify, or any other e-commerce site, your company has requirements that are unique to its sector, and they must be accounted for while conducting accounting and bookkeeping procedures.
What Exactly Are The Functions Of Bookkeeping And Accounting?
Accounting is the process of recording daily financial activities, such as sales and purchases, systematically.
The responsibility of storing this information and categorizing these transactions into the appropriate business sector is delegated to the bookkeepers.
The information that was compiled by bookkeepers is sent to accountants so that they may do analyses and produce reports as part of their jobs.
The purpose of accounting is to evaluate the monetary well-being of a company and to provide management with assistance in making educated decisions on crucial aspects of the company.
Read in detail about The difference Bookkeeping And Accounting.
Why Are Bookkeeping And Proper Accounting So Important?
E-commerce is a particularly fast-moving business, and your ability to succeed in it hinges on having precise and trustworthy vital performance statistics readily available.
The yearly tax filings and quarterly or monthly business reports on which the majority of conventional companies rely are, quite simply, not often enough.
As a seller in e-commerce, you need to be able to measure not just the overall real-time success of your business but also the performance of every aspect of your company.
Knowing which product, market, or sector of your business to concentrate on will, as a result, contribute to an increase in the profitability of that firm.
Have you ever looked at your product variety and found it difficult to determine which goods bring in the greatest profit for your company?
Management accounting will enable you to answer queries such as
- Which of my items should I focus on selling the most?
- Which one should I put more emphasis on?
- How much does it cost to do logistics?
- If the supplier increases the cost price by 7%, would there still be a profit to be made on this product?
Implementing Reliable Accounting Procedures For Online Business
Implementing accounting procedures that are relevant to your business's industry is essential to the success of your company, regardless of the e-commerce platform you use to conduct sales.
Unfortunately, e-commerce platforms like Amazon do not make it easy.
However, with the assistance of the appropriate bookkeeping and accounting software, such as Wafeq, you will be able to grasp the figures and begin using management accounting to assist you in making better-educated business decisions.
10 Ways Accounting Can Bring E-Commerce Success
Below are ten examples or areas of accounting that will most likely have a long-lasting positive impact on your e-commerce business, possibly within a few short weeks of implementation:
- Maintaining an accurate record of your cash flow
- Managing inventory
- Credits and commissions
- Delivery partners and logistical costs
- Marketing expenses (online & offline marketing)
- Additional expenses and costs
- Keeping tabs on your earnings before accounting for taxes and commissions
- Tax levels
- Performing analysis to determine the break-even point
- Balance sheet to monitor leverage
Accounting and its various functions have the power of turning a struggling e-commerce business into a success story.
Be it clever tax solutions, leverage, and credit monitoring, or tracking the marketing budget and return on investment, accounting helps e-commerce businesses in several ways.
If you’d like to have efficient and easy accounting, check out Wafeq's advanced accounting software that enables both professionals and beginners to upgrade their numbers game—see you soon!