Starting an ecommerce business can be an exciting adventure, like riding a rollercoaster that offers an adrenaline rush at every turn.
From the moment your product enters the market to the triumphant "cha-ching" of your first dollar earned, it is a thrilling experience.
However, managing the financial aspect of your business is a challenge.
In this article, we will discuss the importance of ecommerce accounting and how it can benefit your business in the long run.
Follow along to discover how to choose accounting software for ecommerce business.
Ecommerce accounting refers to collecting, organizing, evaluating, and reporting financial data related to your business.
However, it is not limited to mundane tasks such as bookkeeping, inventory management, and tax filing.
It also encompasses more strategic activities like generating and analyzing reports to facilitate your business's growth.
There are several crucial reasons why you should master this skill:
1. Accurate accounting lets you understand which products or services generate the most profit. It helps you focus on what's working and cut back on what's not.
2. Tax laws for ecommerce can be complex, with sales tax, income tax, and international tax considerations. Proper accounting ensures you meet all your tax obligations and can help you minimize your tax liability.
3. When seeking external funding or loans, investors and lenders require well-organized financial statements. Reliable accounting builds trust and increases your chances of securing financing.
4. A clear financial picture of your ecommerce business is vital for strategic planning. It enables you to set realistic goals, allocate resources efficiently, and expand your business.
When choosing an ecommerce accounting software, look for features that align with your specific needs of the online business.
For online sellers, it is particularly vital that the software seamlessly integrates with your ecommerce platforms, enabling automatic data synchronization, including sales, refunds, and inventory updates.
Integration with popular payment gateways is critical for seamless transaction processing and overall customer satisfaction.
This integration should facilitate automatically recording sales, refunds, and payment processing fees.
Effective ecommerce accounting software must have inventory management and order tracking features to monitor stock levels, track sales, and efficiently manage orders.
Ecommerce businesses often face complex tax obligations, including sales tax, VAT, and income tax.
That's why you need to ensure the software has tax automation capabilities.
It will help you accurately calculate and collect taxes and generate tax reports for compliance.
Comprehensive financial reporting is essential for understanding your ecommerce business's performance.
Look for software that offers customizable reports to analyze key metrics, such as sales trends, profit margins, and inventory turnover.
Lastly, but surely, one of the most important things when looking at how to choose accounting software for ecommerce business is – your budget.
Let's take a closer look at the different pricing models below:
1. Subscription-Based Pricing
In this model, you pay a recurring fee (monthly or annually) for access to the software and its features. The subscription fee can vary based on the software's tier or the number of users.
2. Tiered Pricing
Accounting software often comes in multiple tiers or plans, each offering different features and capabilities. Higher-tier plans typically include more advanced features and may accommodate larger transaction volumes.
The cost increases as you move up to higher tiers.
3. Add-Ons and Modules
Some accounting software allows you to purchase add-ons or additional modules to extend the functionality of the core software.
These may include features like payroll processing, advanced reporting, or inventory management. Be aware of the costs associated with these add-ons.
4. User-Based Pricing
Some accounting software charges per user. If multiple team members need access to the software, user-based pricing can impact your overall cost.
Consider whether the software offers user permissions and roles to control access.
5. Transaction-Based Pricing
Sometimes, especially for smaller businesses or startups, you might find accounting software that charges based on the number of transactions or invoices you process. It can be a cost-effective solution for companies with low transaction volumes.
6. Free Accounting Software
Different free options are available but may have limitations on features or scalability. Evaluate whether a free solution meets your needs before considering paid options.
The choice between subscription and one-time payment models depends on your budget, long-term plans, and preferences.
Subscription models offer flexibility and access to ongoing support and updates.
At the same time, one-time payments provide ownership and potential long-term cost savings.
When deciding, consider your budget, scalability requirements, and the features essential for your operations.
✔️ Start with Essentials: If you are on a budget, consider starting with an accounting software plan that covers essential features. As your business grows, you can upgrade to a higher-tier plan with more advanced functionality.
✔️ Leverage Free Trials: Use the free trial to test the software's suitability for your business before committing to a subscription.
✔️ Look at Cloud-Based Solutions: Cloud-based accounting software eliminates the need for costly on-premises infrastructure and software updates. You typically pay only for the subscription and any add-ons you need.
✔️ Don’t Overlook Scalability: Choose software that can scale with your business. It prevents the need for frequent software changes or migrations as your transaction volumes increase.
✔️ Consider Total Cost: When evaluating costs, consider not only the subscription or license fees but also any additional costs, such as training, integration, and support.
Before you settle on the desired accounting software, here's a list of questions to go over:
So, how to choose accounting software for an ecommerce business?
It’s not only a matter of convenience but also a strategic decision that can significantly impact the efficiency and profitability of your ecommerce business.
By selecting software that meets your business's specific requirements and objectives, you can position your ecommerce enterprise for long-term success in a fiercely competitive online marketplace.
Likewise, electing to invest in your business's expansion is a strategic move that has the potential to yield substantial returns over time.
If you're in search of both financing and a growth partner, Myos presents an ideal solution.
As the premier asset-based financing provider in the UK, Myos extends funding options ranging from €10,000 to €2,500,000, tailored to businesses of all scales.
Our adaptable funding solutions have been instrumental in assisting numerous companies to expedite their growth and attain impressive outcomes.
To discover how Myos can help your business grow, sign up and receive a free, non-binding offer today!
Numerous ecommerce accounting software are available, with Xero, Multiview ERP, Wave Accounting, Kashoo, Acumatica Cloud ERP, and Sage Intacct being the most popular.
Scalability is essential as your ecommerce business grows. Ensure the software can accommodate increased data volumes and complexity, adapting to your business's evolving needs.
Essential features include integration with your ecommerce platform, inventory management, real-time tax calculations, and user-friendly interfaces.
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