What you need to know to run a successful eCommerce Company
eCommerce Accounting 101
One of the hardest parts of starting up an online business is determining how to maintain your accounting. However, once your business starts growing things will again change. What seemed at first pretty simple - just profits and expenses - now becomes extremely complicated by adding supplier costs, taxes, refunds, and logistical solutions. All of those items, plus many more need to be accounted for and have accurate records.
Starting your business with a reliable eCommerce accounting system in place will make running your business much more manageable. You'll be able to stay up-to-date with the overall picture of your business, plus forecast the future and strategize your next step as you grow your business.
Keep Your Finances Separate
While this may seem obvious, many eCommerce business owners fail to do it. It starts by using business funds for personal reasons; with all intentions to reimburse the business. Comingling business accounts with private accounts can get complicated fast, and once tax time rolls around, you will feel the pain, struggling to figure out what funds belong where.
What business structure should you use for an eCommerce business? You have two likely options:
Sole Proprietorship – Little to no separation between your business entity and you as a person. You can be personally held responsible for the legal and financial debts of your business.
Limited liability company (LLC) – Your liability for the debts of your business is limited. Your assets are protected because you are a separate entity from your online store.
There are additional business structures to consider, but for most eCommerce businesses, these two options are straight forward.
Keep Sales Records in the Cloud
When operating a business, you need to have proof for everything you do. Keeping your sales records will provide evidence of activity in case you ever face an audit. Now, this doesn't mean you have to print and file every sales order, but create an electronic version and store it in the cloud.
Plan for the Expected and Unexpected
It's often hard to plan for significant expenses as you never know when they are going to come up. However, there are some you can plan for, equipment upgrades and additional warehouse spaces are things to consider as your business grows. Considering these types of expenses now will allow you to develop a plan to start saving. Also, for an eCommerce business planning for purchase orders and preventing stock-outs is an integral part of expense planning.
Create a Tax Only Account
Planning for taxes is essential - start by setting up an account where you can set aside money slatted for taxes only. You might be swayed to dip into that fund for unplanned expenses, but remember owing the IRS is not a position you want to put yourself in. Also, it is often a hard spot to dig out of. Work with your eCommerce accountant to determine how much money you should be setting aside for taxes and unplanned expenses, as mentioned above.
You Don’t Have to Do It Alone
Maintaining an online business doesn't have to be complicated. Start by implementing the tips referenced above. Then find an eCommerce accountant you can trust to help you set up your integrated accounting system, and detail procedures to help you stay organized and ahead of the curve.