Why Is Accounting Important For E-commerce?

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While accounting isn’t the most glamorous aspect of running an e-commerce business, it is one of the most important functions that determine your success. 

Tracking the basics such as your sales and expenses using Shopify accounting software is just a fraction of the information you’ll need to develop a pricing strategy, predict cash flow balances, or when deciding how to scale up. An e-commerce accounting app helps make your finances work for you by helping you understand what the data is telling you and making informed business decisions.

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Do I Need E-commerce Accountancy Software?

The answer in a nutshell is: yes. Although there is a feature for expense tracking in Shopify, it does not provide you with essential reports like a P&L, which you need to monitor overall profitability and file your returns.

Shopify includes accounting services at a very basic level, so you get reports indicating gross sales, gift card transactions, or sales by region, but that’s only the start of a comprehensive management accounting approach. This software is also specific to Shopify, which means it excludes every other sales platform or payment processing service you may use.

What Features Should I Look For in an E-commerce Accounting Program?

The following features should be prioritized to ensure your accounting functions work for you, and not against you.

  • Integrations: if you’re selling through Shopify, perhaps as the CMS behind your website but also on Amazon and in-store, you need accounting software that can collate all of that information into one place.
  • Reporting: detailed, customizable reports are key to analyzing your e-commerce business data, seeing where you’re doing well, and spotting problems before they become serious. 
  • Ease of use: bookkeeping does not need to be a rigorous manual task. A good accounting software is accessible to anyone, and you don’t need to be a qualified accountant to record your expenses or run a weekly sales report.
  • Support: even the best, most intuitive accounting software can experience issues, so choose a service allowing you to contact customer support if you have any problems with your account.
  • Updates: a cloud-based e-commerce accounting system will update automatically. This feature is important, as it means you won’t be stuck with outdated functionality or a program that isn’t compliant with changes to regulations such as data privacy laws.

What Are the Benefits of Using Accounting Software Designed For E-commerce Businesses?

Now that we’ve run through the features to look for in an accounting software, it’s also worth thinking about its advantages to your e-commerce business and to you as a company owner.

Understanding Your Business Finances

An e-commerce accounting program integrated with every system and channel gives you a complete picture of how your business is doing. You can spot sales trends, forecast inventory requirements, or identify errors and take action to get back on track.

Managing E-commerce Cash Flow

Cash flow and profitability are two different things, but both have the power to make or break a company in a competitive retail sector. When you can see what you’re earning and spending, you get valuable insight into your profit margins, which can help you plan when to buy stock, when to cut back, and when to go for that new tool you’ve been wanting to invest in.

Accurate Business Analytics

Accounting provides a range of reports, translating data into vital information that can help you keep track of your targets. Whether it’s cash flow, profit levels, total sales, or e-commerce categories, an analytical reporting function is a building block of a new robust business strategy.

Setting Competitive Pricing

Sales prices need to be on point to attract market shares, keep new customers on board, and entice new buyers. Your e-commerce software can show you exactly how much profit you make per sale, so you have space to make reductions or increase your pricing to offer great value, without compromising on your profit.

The final takeaway is that an advanced e-commerce accounting solution can save you money, effort, and time; eliminating hours of manual bookkeeping work, and emphasizing the figures that are most important to your business strategy and its success.

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