Shifting to Accrual Accounting: How Small E-commerce Businesses Can Streamline Bookkeeping Across Multiple Platforms

Shifting to Accrual Accounting: How Small E-commerce Businesses Can Streamline Bookkeeping Across Multiple Platforms

The U.S. e-commerce market seems to be booming, with the total revenue expected to reach $1.6 bln by 2027. Smaller e-commerce businesses with under $1 mln in revenue make up a significant part of this market, and the volume will increase with more companies embracing the e-commerce model. While those are different businesses working in various niches, they possess common characteristics and struggle with typical challenges, such as managing and correctly bookkeeping for sales and inventory across multiple platforms and payment processors and having a generalized outlook of the financial data for correct analysis and reporting.

Understanding the challenging dynamics of this large group of businesses, Synder comes up with a solution, helping unify sales and inventory management, facilitating bookkeeping, and turning accounting into an ultimate source of truth for business performance tracking.

Business profile

Let’s look at the background. As an example, we take an e-commerce business that sells through Shopify and uses PayPal as a payment provider. Both platforms are among the most popular in their class, so it’s safe to assume that a significant percentage of e-commerce businesses use them. (But basically, everything you’ll read below relates to businesses using any other e-commerce and payment processing platforms, such as Amazon, WooCommerce, Etsy, Stripe, Square, and more.) They’re managing inventory in Shopify and analyzing their sales there. They’re also manually entering data into QuickBooks Online for bookkeeping.

Recently, as the business grew, they’ve decided to widen their audience by adding eBay as another sales channel. Moreover, they’ve shifted from cash to accrual-based accounting as more suitable for managing their growing sales. Ultimately, the business wants to have all their financial data in QuickBooks accounting to track their performance and have more accurate and informative reporting to power decision-making.

Potential problems and challenges

At this point, things get more complicated, as the business now has to track inventory on both platforms and analyze sales on both channels. Also, manual bookkeeping is no longer a solution, provided the increased volume of transactions to record and the shift to accrual accounting. 

What are the challenges the business will potentially face? Let’s look at the most frequent issues of selling across multiple platforms.

Managing and analyzing sales across multiple platforms

When businesses use multiple sales platforms, it can be challenging to analyze sales data. Often, sales platforms and payment processors have their reporting systems and different ways of reflecting data, which can be challenging for businesses to navigate and consolidate.For example, some platforms show gross sales, while others – net sales. But even reflecting sales the same way, they still might treat refunds or discounts differently: either including or excluding them from calculations.Plus, certain platforms, like PayPal, might take a long time to generate a report, so you won’t be getting your reports from different channels simultaneously. In some cases, the data may be incomplete or difficult to access, making it hard to analyze the performance accurately and identify areas for improvement. As a result, the business’s financial and performance reporting can be inaccurate, affecting such crucial aspects as tax filing and decision-making.

Tracking inventory on multiple platforms

Tracking inventory on multiple platforms can be complicated as inventory levels and sales are updated independently. Besides, the sales data may not be updated in real-time, which can cause overselling or overstocking issues. For example, having a product out of stock on one platform but still listed as available on another may result in lost sales or increased costs.

Manual bookkeeping for transactions from multiple platforms

As the business grows, manual entry of transactions from multiple platforms can become time-consuming and error-prone. As various platforms might record transactions differently (using different data formats, for example), manual entry can lead to mistakes and sometimes incomplete data in the books. One of the most common mistakes here can be bookkeeping sales based on bank statements. The thing is, the number in the bank statement is your sales minus the fees, so this is already a net sales number that you can’t use for tax reporting purposes. So the books should reflect correct sales gross and the payment processing fees. Falling at this point can drastically complicate reconciliation and make financial specialists spend hours locating and correcting erroneous entries.

Having a full view of the business financials

Siloed data can also complicate matters when managing and analyzing sales on multiple platforms. If data isn’t integrated and shared between different systems, it can result in fragmented and incomplete information, making it difficult to get a full view of the business. The outcomes can vary from missed opportunities to inefficient cash flow management and a misleading basis for decision-making.

Specifically, you might not want to rely on Shopify data only, as it doesn’t show PayPal processing fees, which can prevent you from having a correct view of your profitability. Moreover, many e-commerce marketplaces, like eBay or Amazon, can charge you a variety of fees: from payment processing to product listing to marketing, etc. The ability to estimate these fees properly will be a key to understanding the real profitability of selling on a certain marketplace.

How Synder helps e-commerce businesses handle multi-platform sales hands down?

To help smaller e-commerce businesses overcome the challenges of selling across multiple channels, shifting to accrual-based accounting, and managing growing sales more accurately, Synder comes up with a multi-dimensional solution within Synder Sync – accounting automation software for e-commerce businesses. Here’s what a business can achieve.

Multi-platform integration

Synder connects with Shopify, eBay, and PayPal and integrates data into QuickBooks Online (QBO) with no duplicates. This integration allows for accurate syncing of every sale and its fee to a clearing account, matching payouts to the bank feed, and easy reconciliation with just one click. If users also need to import cash orders from Shopify’s point of sale (POS), they automatically get to a separate clearing account in the books.

Moreover, once all the settings are fine-tuned, users can import unlimited historical data to completely update their books.

It’s worth mentioning that in this particular example we’re speaking about three platforms, but in fact, Synder can connect with 25+ platforms, including e-commerce, payment and accounting solutions. You can look through the full list of Synder integrations to learn more details.

Detailed per transaction synchronization

The synchronization is fulfilled hourly and in a very detailed way. This way, shipping, discounts, and tips are all shown under the corresponding accounts. Each entry has product data inside, giving you the ability to fully manage your P&L categorization and define how detailed you want it to be (showing sales by product or by product group, or simply by payment processor, etc.). All refunds and disputes are accounted for as well.

Synder also provides Smart Rules functionality that allows for adjusting transactions during the sync according to the specific needs of a business. Smart rules can solve different tasks starting from categorizing expenses based on descriptions or vendor names, changing product names based on descriptions, and finishing with sending email notifications on low inventory, negative account balances, and so on.

As your business grows and starts featuring larger amounts of transactions, you might want to learn what Synder offers to help you scale and manage large transactional volumes.

Tax reporting

Tax amounts are imported into accounting directly from the connected integrations, and the corresponding tax rate is recognized based on tax percentage or shipping address, depending on the tax setup in the accounting platform. At this point, users get tax reports pre-ready for a tax professional to go through before tax filing. Consulting with a professional is a common recommendation, but basically, the generated tax reports are ready to go if everything is set up properly.

Automatically closing open invoices

In some cases, the sales team sends invoices right from inside of QuickBooks, and the customer pays such invoices to their PayPal. Checking for the payments and marking such invoices as paid in QuickBooks can be quite a chunk of work. Synder can automatically close open invoices in QuickBooks with corresponding payments from PayPal based on the customer name and email, saving significant time and effort and ensuring your team doesn’t have to spend time on tracking unpaid invoices. 

Inventory tracking

Synder is also syncing over inventory, making QBO a landing space for all the necessary data to track quantities of sold inventory and cost of goods sold (COGS). And as it can close invoices sent via QuickBooks with payments coming from PayPal, the correct accrual-based sync ensures that inventory is tracked on invoice creation. At this point, QBO becomes a source of truth for inventory (as well as sales, fees, discounts, refunds, taxes, and more).

Bottom line

When you start growing as an e-commerce business, and more sales channels get involved, having a wise approach to managing your sales and inventory can make a huge difference between mess and success. The more sources of transactions you have, the more challenging it can become to bookkeep for them. And accuracy dramatically matters for frictionless reconciliation, financial and tax reporting, and the overall correct understanding of a business’s well-being.
For e-commerce businesses that strive for ultimate accuracy handling multi-channel sales, Synder offers a solution that helps put data integration on autopilot and turn their accounting into a single source of truth for financials, inventory and overall performance.

Should you believe Synder can improve your bookkeeping and financial operations, book office hours or sign up for a free trial to explore the full range of Synder’s features. Don’t hesitate to get in touch with the team for more information and assistance.

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