You’ll also have a clear picture of your business financial state. Depending upon the size and complexity of your e-commerce business, you might choose to do periodic inventory annually, quarterly, or monthly. While the method you use is up to you, they all exist to ensure that the final cost figure is correct by tracking your inventory accurately.

• A cash flow statement is probably the most important document you can have as an e-commerce entrepreneur.
• Maintaining accurate financial reports keeps your business legal.
• Then add the total costs together to get one sum, and divide that sum by the total number of units in your inventory.
• As you record how much of your inventory has been sold, you must calculate the price each item sold for to keep proper count.

Since your March batch was the last “in,” you can assume the 1,000 unsold units this quarter are from the March batch, as everything in the earlier batches was sold first. To get the total cost of your inventory, simply add up the costs of all the items sold in order. If you produce all the clothing you sell in-house, you might add the cost of raw materials and equipment acquisition/maintenance. If you have bulk inventory that has to stay frozen, you’d include the cost of running and maintaining your freezer in the cash flow sheet.

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Then use an inventory management system to accurately track your inventory, and make sure you audit it on a regular basis. When you first start a small business, you will hear the terms bookkeeping and accounting used almost interchangeably. There is a difference in bookkeeping and accounting in your business firm. Small businesses may have both bookkeeping and accounting functions, and they are synergistic.

Bookkeeping is a vital component of any business, but especially for ecommerce. Your company will suffer if you don’t know what’s going on with your business bank account. Ecommerce businesses have to pay bills like any other business. They need to calculate shipping fees and unearned revenue and maintain the general ledger.

Why would you outsource your eCommerce bookkeeping?

For example, you need to note that you sold “x” number of sweatshirts at “y” price per sweatshirt. Additionally, currency conversion and international tax regulations pose global challenges for businesses. While there’s value in getting expert help and advice, make sure you have a solid understanding of your numbers, no matter who you have managing your finances. They also provide a great resource for potential investors who can see the financials of your business over time.

Unclear tax laws and exciting growth possibilities afforded by the internet are just a few reasons why bookkeeping and accounting are vital for eCommerce businesses. This blog discusses how to ensure your eCommerce business’s success with effective bookkeeping and accounting procedures. Implementing the systems discussed in this article lets you drastically reduce the stress you experience as a growing business and ensures you stay compliant with all tax laws. Bookkeeping involves recording daily financial transactions, while accounting interprets and analyzes the data to create reports, budgets, and forecasts. Don’t underestimate the transformative power of sound financial management in your e-commerce venture. Embrace the world of bookkeeping tailored for e-commerce businesses with Meru Accounting’s expertise and watch your online business thrive.

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Income statements come in handy to pick up on sales trends, predict future performance, and monitor your key performance indicators (KPIs). They will include your cost of goods sold, or the cost of sales, so you can see what income you have due to sales. This software program will organize your ecommerce bookkeeping chart of accounts and help you improve your cash flow. This program is ideal for tech-savvy individuals who need the organization and math skills of a software program to help with this task. Using a chart of accounts software program will also make human error mistakes less likely to occur.