The pandemic has changed consumer habits, with online shopping taking the lead over in-store retail in a big way. For some companies, this meant relaunching themselves fully in e-commerce. For others it meant upping their online game due to increased competition.
As more businesses sell online, they should also embrace online accounting to ensure they’re properly managing their finances, since it’s the most important aspect to the success of their business. E-commerce accounting software can help businesses by streamlining financial processes and helping them as a whole.
If you’re an e-commerce business and want to streamline your operations, read up on 5 ways accounting software can be beneficial.
Gain cash flow insight
Understanding cash flow (rhythm of your income and expenses) is essential data that can make or break your operations. Accounting software is a powerful tool that can help you gain valuable insight into your cash flow, by producing cash flow statements.
Accounting software also automates processes (alerting you when there’s a drop in your cash flow) so you can see incoming and outgoing money, and have a clear picture of your expense tracking.
Stay compliant with your taxes
It’s crucial that you have a clear picture of your revenue and comply with online and distance selling regulations. These regulations are complex since each country’s tax laws vary. Businesses that don’t clearly understand these components can risk underpaying their taxes and be fined by the government.
This is where accounting platforms come into play, providing you with information on sales tax, tax receivable, tax balance and helping you understand the requirements in each country. Cloud accounting can also automate importing tax data from your e-commerce platform, saving you time.
Effortlessly manage inventory
Incoming vendor shipments and outgoing customers orders are in constant flux for businesses. Cloud accounting takes away the hassle of inventory management, allowing businesses to balance having enough inventory on hand (notifying you of low stock items) but not having an abundance of stock that just sits in a warehouse (provides information on total value of inventory).
Online accounting software can also track fulfillment costs (e.g. picking, packing, shipping and returns). These key features help business owners see overall stats including how inventory and fulfillment impact their revenue, cash flow and profitability.
Maximize your profits using automation
E-commerce businesses often struggle with understanding their profitability (total income minus total expenses), but at the end of the day this is a crucial indicator of a business’ performance and correlates with how successful a business will be in the long run.
For instance, as a business owner you can automate your sales channels and accounting system so you have a clear understanding of your profit margins.
Forecast the future of your business
The best way to plan for the future is to understand your past financial trends. Cloud accounting can produce comprehensive reports to compare changes over time. This can reveal important information, like seasonal purchasing patterns, and lead to valuable insight into maximizing revenue, such as optimal times for sales and discounts.
You can plan and forecast your cash level, inventory and sales. Factoring these into your budgets allows you to order inventory so you don’t run out of stock while keeping enough cash on hand to deal with unexpected fluctuations in the market.
Accounting software is gaining popularity as more businesses embrace selling online. An e-commerce business can automate accounting processes such as producing cash flow statements, importing tax data, seamlessly managing inventory, integrating sales and accounting and producing comprehensive financial reports. With these automated processes, e-commerce businesses can save time and money.