Traditionally, accounting principles and concepts have almost always been the same, just got advanced with the changing business environment. We still read financial statements, cash flows, balance sheets, etc. to ascertain our accounts performance. 

But, with the growing consumerism over digital platforms, businesses have shifted their most of the trade online through the Ecommerce websites. You can have your own ecommerce website, which will provide every product and service of yours in an easy manner. But, the switch requires a lot of changes, including your accounting practice. 

To do so, your first choice must be an ecommerce accounting software online, which provides complete upgradation to ecommerce accounting practices. Let’s understand more about it.

What Is Ecommerce Accounting?

The ecommerce accounting refers to the practice of collecting, organizing, analyzing, and reporting accounting data related to the daily ecommerce transactions and assets of the business. 

The ecommerce business requires daily transactions updates, and you can’t just deploy your accountants for those volumetric redundant data entries. Therefore, you need a solution which is focused on ecommerce accounting specifically. The ecommerce accounting software is not just constrained to the profit and loss, cash flows, and balance sheet, but also includes other important ecommerce functions like measuring business performance metrics, forecasting and budgeting, real-time business insights, etc. 

To categorize the basic ecommerce accounting software’s functions, you can broadly think of three categories:

• Core accounting 
• Reporting
• Filing tax returns

These categories serve different ecommerce accounting tasks which are unique to the business, let’s understand the same. 

Unique Ecommerce Accounting Tasks

Every ecommerce business needs to operate various accounting tasks daily, which can be categorized into five such operations:

Organize Expenses And Transactions

Organizing accounting activities which reflect the purposes of the cash generated from the ecommerce business’s products, and the data of its usage in the business activities is vital to track for the ecommerce businesses.

Modern ecommerce accounting software automatically sorts the transactions data on the user’s behalf. Although, you can double-check the transaction history, and add other required categories like, sales metrics, salaries, marketing expenditure, etc.

This sorting of data automates the calculation of your timely revenues, along with the regular and dynamic costs.

Monitor Inventory 

The ecommerce businesses that manufacture all the products sold to their customers, include the following components of accounting in their inventory cash flow:

• Raw materials
• Equipment acquisition
• Maintenance

The ecommerce accounting software gives the complete picture of the inventory cash flow, along with accurately calculated net profit. For this, it is compulsory to track the inventory losses too, such as:

• Theft
• Spoilage
• Production damages, etc.

Monitor Cash Flows

It is vital for every ecommerce business to control and supervise their inventory cash flow, without affecting the accounting operations.

Technically, an inventory cash flow report provides the business owners real-time business insights – time and amount of cash paid, along with the manufacturing expenses and the selling price vs. production costs. 

The ecommerce accounting software smoothens this process by providing real-time cash flow insights, and the advanced features allow for forecasting of the cash flows for current trends.

Track Break Even Sales

When it comes to calculating the break even, ecommerce business owners must look into the two types of major taxes: sales tax and income tax.

Now, depending upon the location where an ecommerce store is registered, the owners are required to connect with the tax administration of the local area to work out the taxes to be paid by them. Additionally, different locations of the customers attract different inter-state taxes, which are charged to the buyer. 

To make the process easier, an ecommerce accounting software system automatically calculates the different types of taxes for you, without any platform constraint.

Final Thoughts

Ecommerce business accounting is no longer a traditional accounting system, but more than that. It involves various operations like organizing and calculating transactions and expenses, tracking inventory and cash flows, and monitoring business metrics like break even, sales rate, etc. for overall business tracking.