With only a few exceptions, accounting is rarely anybody’s favorite component of the business cycle as a whole. Whether your business operates online or in any other commercial space, accounting tasks are usually viewed as something that you must do, rather than something that you want to do.
Even eCommerce businesses will need to engage in essential accounting activities, such as recording cash flows, creating income statements, and making sure that their company is ready to pay its taxes. However, though these tasks may be far from what you might consider to be “fun”, they can still be made significantly easier.
In this article, we will discuss five of the ways that eCommerce accountants can immediately begin to improve your accounting systems. By taking the time to reorganize these systems and create a functional plan for the future, your business can immediately begin to shift its focus to whatever it is that you do best.
1. Update Your Books as New Transactions Occur
With the coming of the new year, there is seemingly one resolution that all businesses can benefit from making—resolving to record all new financial transactions as they occur. Failing to do this can create an unnecessary amount of stress for your business, cause errors to be much worse over time, and also disrupt your normal business operations.
Once you are able to effectively develop a routine—ideally taking place on a near daily basis—your books will be in much better shape. Even if you have not received payment or made payment for a typical transaction, marking these events as “accounts receivable” or “accounts payable” can help assure that your records are a much better reflection of your financial reality.
2. Save Your Receipts throughout the Course of the Year
Another activity that most business owners know they should be doing—but, for some reason, choose not to—is saving their receipts for the end of each year. Saving your receipts will not only protect you in the event that your business is audited, but choosing to do so can also save you a considerable amount of money.
Contrary to popular belief, the current tax code actually makes it possible for businesses to save a considerable amount of money each year. Things such as business events (subject to certain limits), rent, office supplies, and various other expenses may be tax deductible. If you are currently operating in the eCommerce space and usually work from home, your ordinary rent—which you are already paying anyway—may be at least partially deductible as well.
3. Develop an Excel Spreadsheet that Minimizes the Need for Duplicate Entries
One thing that many people have come to discover about the process of bookkeeping is that many of their financial entries need to be made multiple times. This is because every time you add an asset to your balance sheet, for example, you also need to make at least one additional entry to your liabilities or owner’s equity column as well.
In order to minimize the amount of duplicate entries that your business is making on a regular basis, it may be helpful to develop an excel spreadsheet that will duplicate these entries automatically. This will also be quite helpful for checking to make sure that none of your books contain any mathematical errors. If you are unsure how to create such a spreadsheet, there are many pre-designed templates available that will work for most businesses.
4. If You Haven’t Already, Formalize Your Business Structure
Many individuals who are working in the eCommerce space didn’t original think this was where their career would end up taking them—in fact, many in this industry claim that they got there “by accident.” For example, an individual may have begun doing one or two small freelancing jobs (graphic design, coding, writing, etc.) and eventually realized that they had what it takes to start a small business.
Instead of continuing to work as an individual contractor solely using 1099s, you may want to consider “formalizing” your business if you haven’t already. There are currently millions of sole proprietorships across the United States and many of these enterprises operate similarly to informal freelancers but with various additional benefits. By formalizing into an LLC, you can increase the legitimacy of your business while possibly also reducing your annual tax obligations.
5. Consider Outsourcing Your Most Important Accounting Tasks
Many people have come to recognize that, even though they are able to understand the principles of accounting with a little bit of research, they would still prefer to outsource their most essential accounting task to a specialized firms. Due to the unique nature of the eCommerce marketplace, there are actually many different firms that focus on these businesses above all others.
The benefits of outsourcing your accounting tasks are obvious. By making this decision, your business can focus its efforts on your specific area of expertise, assure that all of your financial reports are accurate and legally compliant, and—perhaps best of all—you may also be able to save money due to previously unidentified opportunities for tax deductions.
Managing a business can be a very challenging tasks. There are many important decisions that will need to be made and your business’ accounting processes are certainly no exception. By keeping these simple accounting tips in mind, your business will be in a position to manage its books and make important financial decisions with ease.