E-commerce is indeed the present and also the foreseeable future from the business perspective of the retail sector. The buzz about the pace of its growth is visibly audible. Accounting for eCommerce is thus imperative to aid its flourish as predicted. Success in e-commerce, like any other business, is essentially dependant on the effective use of accounting principles. This blog highlights fundamental eCommerce accounting tips that you need to follow to ensure the growth and success of your eCommerce business.
Monitoring the cash flow
You must keep a tab on the inflow as well as the outflow of cash in the business. From the eCommerce standpoint, an increase in sales is bound to improve the cash flow but you could alternately curtail the costs that are not required and invariably save expenditures. Strategies of upfront payment and cutting down delays in payments can also be put into action. Incentives to the vendors in form of discounts on purchases and lengthy payment terms are also an effective option for additional cash flow.
Detect your Break-even
A major aspect of accounting for eCommerce involves figuring out the point of break-even. You need to ensure that the sales have helped you recover your cost even if you have managed to make no profit. You can simply detect your break-even by dividing your fixed costs by the contribution margin. Subtract your selling price from the variable costs and you would get the contribution margin. Cutting down the variable costs and increasing the prices is one of the few eCommerce accounting tips that has proved to be effective to reign in a high break-even.
Calculate your EBT
When you have decided on accounting for eCommerce, then the calculation of the earnings before taxes and sales (EBT) is of utmost importance. If you are monitoring sales, then there is absolute clarity about reaching your target revenue. More money can be pumped into specific areas of operation to generate extra revenues. Once you have figured out the expenditures, cost of goods sold, and the sales, subtract it from total revenue and you arrive at your EBT.
Be aware of tax rates and tax payments
As an eCommerce business owner, you just cannot be wary about the aspect and impact of taxation on business, rather stay up to date with revised rules and regulations every year. This is one of the key aspects of effective accounting for eCommerce. It is advisable to seek the services of a tax professional to take stock of the situation. If you are well-versed with eCommerce accounting tips, you would surely categorize your products into tax-exempt and tax-payable categories. When accounting for eCommerce, ignoring tax is suicidal as it could prove to be a major hurdle to your business growth. You need to maintain a distinction between the tax and the revenue. In fact, opening a separate account for taxes is among the first ecommerce accounting tips that you should put into effect.
Outsource accounting for eCommerce
Keeping track of income and expenditures, taxes, revenues, and sales could prove cumbersome for many newbies in the eCommerce segment. Accounting for eCommerce however annoying, cannot be ignored and avoided. This is because to achieve success, your accounting operations must remain up to the mark. Ecommerce accounting tips in such a case suggests that you hire offshore accountants in India to take care of your accounting woes with aplomb. When you hire offshore accountants in India, not only does it reduce the costs of maintaining a full-fledged accounting department but also lets you focus on other aspects of business growth.
Ecommerce like any other business activity requires a sound and updated accounting procedure to keep a track of the resources used in the business. Luck is on your side if you are well-versed with the dynamics of accounting practices. Do not fret if you are not. You can be number savvy with these accounting for ecommerce tips in the least possible time.