E-commerce accounting presents specific challenges over the traditional method of accounting. While traditional accounting has always relied on what is in print on paper, e-commerce accounting isn’t the same. Everything is electronic, and for most ecom businesses, transactions can happen from myriad platforms all over the world. Here are 5 specific reasons e-commerce is a difficult nut to crack.
1. Tracking Your Inventory
With a traditional brick and mortar store, inventory is tedious but relatively straightforward. You keep track of what you order, what you sell, and keep accurate books to ensure there’s no discrepancies. Moving into the realm of e-commerce however, can make this tricky especially if your CMS isn’t tracking your product count or the unique properties of your products (such as different sizes/colors).
Not only this, but shipping proves to be a uniquely challenging factor. If you’re offering products nationwide (or globally), inventory tracking can be difficult especially with different transit times and considering some purchases may result in returns.
2. Reporting Sales Tax
Shipping costs vary significantly depending on where your products are being purchased. As a result, one of the chief challenges for e-commerce accounting lies in tracking accurate profit margins. It does not behoove you to offer your products in a location that’s yielding less of a return.
3. Seller Fees
If your product or business is new, you may be looking to get it listed on various seller platforms, such as Etsy, Ebay, or Amazon. However, different platforms feature different fees. Some charge for listing your items, while others only charge once you sell something. Typically, the benefit of being listed on these platforms is it nets you greater visibility into your business and product given the built in audience. For many ecom companies, this gives some credibility to their business.
However, given the myriad fees across different platforms, this is one of the reasons, it’s pivotal for your accountant to identify where your sales are coming from and if there’s a plan to improve efficiency.
4. Understanding and Access to Data Analytics
When you’re starting your own business, you may not immediately recognize there’s a difference between a data engineer and a data analyst. A data engineer can help you collect, record, and automate your data, but an analyst can help mediate between your engineer and you.
Almost every ecom platform features copious data analytics, but they’re useless if you don’t know what you’re looking at or how to pull action items from them. With ecom businesses, it’s not simply a matter of “sales are up,” you need to be able to identify who is buying your product; what age; what gender; what time. As well as the deeper questions like, is there a product with a high review score; is there a product that’s returned more often than others? Data analysis is paramount to growing your business.
This piece can be exceptionally tricky even with accounting software in place. Again, with ecom, part of the challenge is different shipping timelines and this is doubly true with returns. However, an additional hiccup with online returns is whether or not to resell the product or expense it.
Ecom accounting is challenging, but with proper bookkeeping, you’ve one less thing to worry about when growing your business.