How Do You Do E-commerce Accounting?

E-commerce has revolutionised how businesses operate, with millions of transactions occurring online daily. In Australia, e-commerce is no exception, with many businesses using online platforms to reach a wider audience and streamline their sales process. With this increased volume of transactions, e-commerce businesses need to implement proper accounting processes to stay organised and manage their operations effectively. This blog post will discuss how to handle e-commerce accounting in Australia.

Let’s first try understanding what e-commerce accounting is, and then we can determine how to do it.

What is E-commerce Accounting?

E-commerce accounting involves managing and recording financial transactions for businesses that operate through electronic commerce. This includes tracking and reporting sales, expenses, and other financial activities through online platforms like websites and mobile applications.

The purpose of e-commerce accounting is to accurately record financial information, generate reports, and help businesses make informed decisions about their finances.

 

What do you need to start Accounting for your E-commerce Store in Australia?

To manage accounting for your e-commerce business with confidence, focus on keeping clear and organised financial information for your business. 
Below are some practical measures:

• Always have detailed and updated records of all sales, expenses and payments. This helps you track the financial health of your store and avoid cash flow issues. 
• When it comes to accounting software, always use reliable accounting tools such as Xero or QuickBooks, which is a go to choice of many Australian online businesses. 

With these platforms you can manage your store’s finances easily and  work well with e-commerce platforms.

Starting with these tools will help you handle your store’s finances in an organised way and support better decision-making as your business grows.

 

How Can You Do Proper E-commerce Accounting?

Here is a process that can help you systematically do your e-commerce accounting.

Keep Accurate Records

One of the most critical steps in accounting is to keep accurate records of all transactions. This includes invoices, receipts, and any other financial documents related to the business. Keeping correct records will make it easier for you to track income and expenses and generate reports.

Use Accounting Software

Accounting software is an effective way to automate the accounting process and ensure that all transactions are recorded accurately. Several options are available, including cloud-based solutions like Xero, QuickBooks, and MYOB, which can help you manage invoicing, payments, and expenses.

Some e-commerce platforms, such as Shopify and Magento, have built-in accounting tools to help you manage your finances.

This can be done by using accounting software or hiring an accountant to handle the process. You can also outsource your accounting needs to an external accounting agency.

Separate Business And Personal Expenses

To accurately track your business finances, a separate business and personal expenses. This includes using a different bank account for business transactions, making it easier to keep track of income and costs and generate reports.

Monitor Cash Flow

Cash flow is an essential aspect of e-commerce as it can impact the sustainability of your business. Monitoring cash flow will help you understand when money is coming in and going out and make informed decisions about your business finances.

This can be done using accounting software or creating a simple spreadsheet to track your transactions.

Generate Financial Reports

Generating financial reports is a crucial part of e-commerce accounting as it provides valuable insights into the financial performance of your business.

Reports such as income statements, balance sheets, and cash flow statements can be generated using accounting software or by an accountant. These reports can help you make informed decisions about your business and track its growth over time.

 

Accounting Methods For E-commerce Sellers

There are several accounting methods that e-commerce sellers can use to manage their finances. These include:

Cash Basis Accounting

This method records financial transactions only when cash is received or paid out. It’s simple but may not provide a comprehensive view of the business’s financial performance.

Accrual Accounting

This method records financial transactions when they are incurred, regardless of when payment is received or made. It provides a more accurate view of the business’s financial performance but can be more complex.

Hybrid Accounting

This method combines cash and accrual basis accounting elements and is often used by e-commerce businesses that want to track their finances in real-time.

To Sum It Up

E-commerce accounting is essential to running a successful online business in Australia. If you’re unsure about how to handle e-commerce accounting, it may be helpful to hire an accountant or seek the help of a professional accounting agency to assist you.