The Top 5 Benefits of Automating Your Ecommerce Accounting

The Top 5 Benefits of Automating Your Ecommerce Accounting

For most eCommerce entrepreneurs, accounting is the last thing on their minds. Managing the books is a complex task that consumes valuable resources, but it is a necessity for any viable operation. Accurate accounting provides insight into your financial fundamentals: revenue, expenses, sales tax liabilities, margins, and cash flow. Research shows 82% of businesses fail due to poor cash flow management, so a clear picture of your financial health is crucial for long-term success. 

The only issue: Because data is complex and scattered across so many systems, eCommerce accounting is fraught with challenges. And managing everything manually is a nightmare. That’s why retailers and brands need to leverage software to stay agile and organized, letting technology handle bookkeeping tasks so there is more time to spend on growth. Ready to get started? Here’s how automation streamlines your eCommerce accounting and helps you get back to growing your business. 

Stay Compliant, Know your Sales Tax Liabilities

At the most basic level, businesses need to do accounting for compliance and sales tax purposes. Online retailers know that the eCommerce sales tax landscape is growing more complicated by the day, so it’s a tall task to manually determine what you owe. You need a clear view of your revenue and the tax rates of each jurisdiction where you sell. But if you don’t know how much you’re making, remitting taxes is nearly impossible. Tools like Avalara and Taxjar are great for automatically capturing sales tax rates and filing. But you still have to record your tax liabilities accurately in your accounting system. 

This is where automation comes into play. By connecting your sales channels and accounting system, all transactional data—including tax rates—is automatically captured and posted. You’ll ensure timeliness and accuracy come tax season and save your accountant plenty of headaches. Even better, you can use your accounting system as a single source of eCommerce truth moving forward. And you didn’t even have to lift a finger. 

Gain Cash Flow Visibility

As a high-growth company, another key piece of the puzzle is cash flow. Understanding the rhythm of your income and expenses gives you a strong sense of how much money you can re-invest, and how much money you have on hand to replenish stock or hire additional staff. In short, cash flow is the essential data that will make or break your operations. 

But your bank statement isn’t enough. It only shows a snapshot of your cash position and doesn’t factor in pending payouts, processing returns, and varying fees. Case in point: Amazon only settles your funds every two weeks. On top of that, when they do settle—depending on your return rates, ratings, and the category you sell in—they may keep a significant portion of your money in reserves. Then, not only do you not know how much you made, but you also might not have as much cash in the bank as you thought you did. 

Automation enables much-needed visibility so you can see incoming and outgoing money without painstakingly cobbling together data from all of your sales channels or using guesswork. You can see why your bank statement looks the way it does and where your business spending is.

Easily Manage Inventory

Another challenge 7-figure sellers face is inventory management. There is a constant flow of incoming vendor shipments and outgoing customer orders via multiple digital (and, possibly, physical) sales channels. It’s a delicate balance of keeping enough inventory on hand to avoid overselling but not so much that it sits stagnant in a warehouse, where you’re paying storage fees and seeing no return on investment. At the same time, you’re tracking fulfillment costs: picking and packing, shipping, and inevitable returns. 

By automating these workflows, the bigger picture emerges showing how inventory and fulfillment impact your revenue, cash flow, and profitability. A complete financial picture is important for any business, but particularly for eCommerce ventures because there is constant movement. The rapid pace puts you at risk of missing important details if you’re doing accounting by hand.

Streamline End-of-Month Reconciliation

With the right financial practices and the right structure, you can take care of these fundamentals, and you can reconcile your books at the end of the month without having to do much manual work. Once you have all your data in, you’re spending a lot less time figuring out what the data is and can simply make any adjustments at the end of the month. You get your books right, and the bank balance looks the same as what’s in your accounting system. Then, you know you can close your books and settle, saving time and money along the way.

If your accounting system is connected to your channels correctly, and the flow of information—whether it be your revenue, your sales taxes, your expenses and fees, your shipping and fulfillment costs, your purchasing—is in tune, you’ll know how the engine is moving and whether you need to throttle up or down. 

Understand Profitability

Though profitability is closely related to cash flow, it is important enough to warrant its own category. The rate of money going into and out of your business is a critical indicator of performance, but at the end of the day, your total income has to outpace your total expenses. Profitability largely determines whether your business will be successful long term. 

Online retailers often struggle to understand their profitability because eCommerce sales channels don’t provide line-by-line details of purchasing transactions and spending. (The same challenges of clearly seeing cash flow also apply here.) And that’s before calculating fixed expenses like rent, payroll, and variable expenses like advertising and seasonal warehouse workers. Once again, putting automation in place between your sales channels and accounting system saves time and provides clarity so you can see your profit margins and adjust spending as needed.     

Final Thoughts

For high-growth sellers, accounting isn’t one problem; it’s a variety of things that are impacting what you do on a daily basis, how you close your books every month, and what you’re doing long-term to grow your business. The more automation you put in place, the better data you have at your fingertips, the more control you have over your destiny, and the smarter you are in your decision-making.

Source : eCommerceFuel Read More

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