Important E-Commerce Accounting Tasks Managed By Online Services

by Jack John Outsourcing Partner for Bookkeeping and Accounting

E-commerce businesses are in rapid growth, and there are numerous small e-commerce businesses. The accounting of these small businesses is done with the help of e-commerce accounting services and online accounting software. Businesses can use online accounting software in-house by hiring a team of professionals. Even the outsourcing partners chosen by the businesses use online accounting software to handle the process. 

What Is Online Accounting?

Online accounting means conducting a business’s accounting activities with the help of online accounting software. The business owners can access the online accounting software from anywhere, with an internet connection and a phone or laptop/computer. The software can be used by the in-house team of the business or the outsourced ecommerce accounting services provider. 

The use of up-to-date accounting software easily replaces outdated accounting technologies and providers numerous benefits. Some benefits of using e-commerce accounting software include:

·        Mobile access from anywhere at any time

·        Improved efficiency

·        Broader reach for promotion and marketing activities

·        Increased revenues

·        Enhanced intelligence

·        Better customer service

E-Commerce Accounting Tasks Are Managed By Accounting Software

The accounting function for an e-commerce business includes numerous activities. Managing all the activities manually, as was done earlier, is very difficult and time-consuming. So, to overcome the problems that arose from manual and outdated systems, online accounting services for small businesses are used. Following are some critical e-commerce accounting tasks that are managed by accounting software:

Transactions Recording and Categorization

E-commerce businesses have many types of transactions, both revenue and expenses. Accounting software help in recording the transactions as soon as they take place. It is compulsory to categorize the transactions accurately as incomes or expenses as any inaccuracy will affect the financial statements. The incomes and expenses are further categorized according to the purpose for which they were received or incurred, respectively. Proper categorization helps identify the regular incomes and expenses and how they affect the final statements and reports.

Maintaining Business Budget

Recording business transactions, preparing financial statements, and drawing reports from them all help businesses prepare budgets. Proper knowledge about accurate business numbers also helps maintain the budgets set by a business. Accounting software records every transaction accurately and prepares a sound financial report from them. These reports help set up a goal and maintain the business budgets. It also ensures proper monitoring of business cash flows, reduction in business debts, information about unplanned and recurring expenses, etc. Businesses can also create weekly budgets for regular tracking with the help of accounting software.

Regular Tax Updates

E-commerce businesses have to manage business tax and sales tax. Handling both taxes together can be challenging, especially sales tax, as it involves navigating both local and state-level sales tax. Accounting software ensures that the customers are charged correct taxes, confirms quarterly payment of business taxes, and files accurate sales tax on time. E-commerce accounting services that accounting software provides prevent penalties or fines for taxation failures. 

Differentiate Returns and Chargebacks

Returns occur when a customer returns the products bought, for which a business offers store credits or full refunds. Chargebacks occur when the customer disputes with their bank that the specific transaction was fraudulent. E-commerce businesses need to distinguish between these two accurately in their books. E-commerce businesses’ accounting software helps correctly identify and differentiate the transactions to initiate proper treatment. 

Accurate Recordkeeping

A business self-reports the financial reports and taxes to the authorities when it uses accounting software. It requires them to manage proof of all the claims made by the business by accurate record keeping. The records are required to be kept by businesses for a specific time. Most common records need to be kept for at least 3 years. Some of the records that an e-commerce business needs to maintain include: 

1)     Receipts, invoices, and bills 

2)     Canceled and bounced cheques

3)     Previous tax return records

4)     Bank and debit/credit card statements

5)     W2 and 1099 forms

6)     Revenue records from e-commerce platforms

Undoubtedly, accounting software helps manage the e-commerce accounting process more efficiently. However, a business must always be diligent when choosing online accounting services for small business. Always analyze business requirements, check the reviews, consider the costs, and have expert personnel to manage the software effectively.  

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Created on Jul 28th 2022 06:42. Viewed 171 times.

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