5 Accounting Mistakes that eCommerce Sellers Make

5 Accounting mistakes ecommerce sellers

Managing cash flow is one of the biggest challenges for eCommerce businesses.

There are some common accounting and bookkeeping mistakes that we see many eCommerce businesses make. In this post, we’re sharing the top 5, along with what to do instead.

1. Separate your business and personal finances

While it can be tempting to mix all of your financial data in one place, especially if you are a solopreneur or only have a couple of people working in the business, this is a recipe for trouble.

This is because you want to be able to see your business data objectively so that you can make better, data-driven decisions, such as how much inventory to order and at what intervals or when to hire another team member.

To make these decisions, you need to know your numbers, such as total transactions, sales velocity, cost of goods sold, operating expenses, contributing margin, etc. You can’t do that when you have a bunch of personal expenses mixed in with this data.

2. Use cloud-based accounting software and sync your business bank accounts

Many sellers start off tracking their accounts in a spreadsheet. This can be a time consuming and frustrating task and often results in the bookkeeping getting months behind.

One of the advantages of using a cloud-based accounting system like Xero or Quickbooks is that you can sync data from your bank accounts and platforms like Shopify. This speeds up the bookkeeping and also reduces the risk of error from manual data entry.

With most major business banks and credit card companies having integrated Xero feeds, the process for syncing all of your financial data is relatively simple.

Pro Tip: If you sell in multiple currencies on Paypal, make sure to create separate feeds for each currency.  

3. Create a standardized process for managing business expenses

If you are still storing your receipts in a shoebox on your desk, a filing cabinet, or in a storage unit, you are making your job so much harder than it needs to be.

Come tax time, you then have to spend ages going through all of your receipts and praying that you don’t miss anything.

Instead, we recommend using one of the many digital expense tracking apps, such as Expensify or HubDoc.

Pro Tip: If you already use Xero, Hubdoc is included free with your subscription. And, it has an auto-fetch feature where it can extract data directly from the source. For example, if your internet provider was listed as one of Hubdoc’s suppliers, then you could actually set up Hubdoc so that it would fetch the invoice directly from your internet provider. You wouldn’t need to save that each month.

4. Create and maintain detailed financial SOPs

A great financial standard operating procedure (a.k.a. SOP) describes a key, repeatable business process or task in detail from how to complete it, who is responsible for the task (or individual components in the process), and how often it needs to be done.

For example, you could create a weekly business operations report SOP. The SOP lists out how to prepare the report, what eCommerce metrics to include, who should prepare, and who on the team should receive it.

5. Review your financial reports on a regular basis

Growing a thriving eCommerce business without monitoring your key business and financial KPIs on a regular basis is the equivalent of hopping on an airplane without a pilot. It might work, but you are probably in for a rough ride.

This starts by setting key business goals for the year, each quarter and each month. Each goal should have KPIs and metrics tied to it so that you can monitor and track your progress. If you are checking your reports regularly, you’ll be able to see where you are ahead of schedule, see trends in real-time, and address any potential issues before they become major problems.

In sum, running an eCommerce business is hard enough as it is. Doing these five things will make it a little easier since you will have more confidence in your business’ numbers and won’t have to worry about making decisions based on inaccurate financial data.

About the author 

Wayne is a management accountant who forged a 15-year career with tech heavyweight Hewlett Packard. He is now the COO and resident eCommerce accounting expert at Bean Ninjas. When Wayne isn’t managing a global team and equipping eCommerce entrepreneurs with the financial tools they need to enjoy business success and lifestyle freedom, he’s being an everyday superhero to his wife and five children.  

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