The shift from brick-and-mortar businesses to eCommerce has been the highlight of the business world over the last two decades. The United Kingdom has the most advanced eCommerce market in Europe with eCommerce revenue in 2019 amounting to 693 billion in GBP. It is also the third-largest market for online retail sales. More and more retailers or product manufacturers are looking for establishing an online presence for retail distribution and sales. While this trend is here to stay, let’s look at some of the bookkeeping tips for setting up a financially stable and viable eCommerce business.
Integration of Amazon/Shopify to Accounting Software.
Managing your Amazon FBA account or Shopify account using google sheets or MS Excel is a daunting task given the different items involved such as Chargebacks, Shipping fees, Promo Rebates, Sales Tax collected, and FBA inventory reimbursement. Listed below are a few of the accounting software tools tailored to be linked with sales channels to make accounting easy and efficient.
Xero: Xero has a great user interface along with a wide selection of add-ons. It can be easily integrated with A2X or Stitch labs for a customized Amazon Seller experience. In addition, it has a mobile app enabling access to it on the move.
A2X Accounting: The A2X app connects the systems to cloud accounting to automate bookkeeping for Amazon Marketplace transactions. When Amazon creates a new settlement file, A2X can generate the summary for the same along with being able to split multiple month settlements on a per-month basis for multiple years. It works great with Xero, QuickBooks, and Shopify.
NetSuite: For accounting software to integrate with Shopify, the use of apps like Zapier and A2X is required to set up the integration. Alternatively one may find an app connector in the Shopify app store. Another way to streamline your operations is to integrate NetSuite with your online Shopify store which offers a scalable solution that seamlessly handles financial data as well as sales channels.
Clarity on Accounting for Sales- One single Invoice per month by sales channel/ Geography.
One of the functions of good bookkeeping is to help with creating projections that predict future business activity. One such area that has a huge bearing on the eCommerce business is sales. A detailed understanding of sales will help to make decisions such as which products to push, when to increase the price of a product, and to understand the seasonal fluctuations per product. Using A2X helps automate eCommerce accounting since it connects your accounting software to your sales channels, helps you track sales basis different tracking categories viz. sales per month, per channel, or sales by country. Example; you are looking for accurate sales data from Amazon but the backend report provided by Amazon will not bifurcate the numbers by categories such as FBA fees, shipping fees, warehouse fees, and chargebacks and it might all get recorded as Sales which will be incorrect. A2X can avoid this problem by automatically updating your books from the backend of Amazon. Similarly, when you want to look at your VAT liability, you can set up the sales tracking category as EU and Non-EU.
Daily bank Reconciliation to identify failed payments.
Ecommerce business is usually characterised by huge volumes and speed of exchange. The fierce competition and marketing inventions have pushed eCommerce business owners to complement their product offers with a number of collateral services such as gift cards, trial periods, flexible payment options and reduced shipping costs. The complexity of completing a transaction multiplies in a digital environment. One single online order requires the action of at least four parties other than the customer and merchants themselves – their banks, the payment processor, and the parcel delivery company. In case of cancellations, refund requests, and glitches down the supply chain, the complexity level becomes 2x. This calls for a 3-way reconciliation between payment processors, banks, and the ERP systems, which is performed in 2 steps viz. processor to bank and processor to the internal system. This will not only reduce any fraud risk but also identify any unauthorised withdrawals or bank errors.
Analytics report- Geography, product, etc.
Using analytics to uncover customer insights is a game-changer for an eCommerce business. Yet, having a very large amount of data to mine is different from having a clear insight into customer preferences. The difference lies in the ability to get the most out of your data. You may choose from different analytics programs such as Google Analytics, Mixpanel, Adobe Analytics, and Statcounter to name a few. In addition to an Overview Dashboard, some valuable analytics reports include:
1. Sales by Channel. The data in this report will help you identify which channel sources are successful or underperforming.
2. Sales by billing country. This report helps you identify which countries contribute the most to your revenue so that you can determine where to invest in new markets.
3. Sales by Product. This report helps you identify the bestselling products by season or time period.
These reports enable you to see margins on an item-by-item basis. When you total the cost of goods sold and link it to relevant suppliers, you can see how much money is being spent on each item and which items you need to focus on. Having this kind of data is a solid negotiating tool.
Portal for suppliers to extract invoices.
Accounts payable automation improves efficiencies thereby helping finance scale and adapt to their business changing needs. Using a suppliers’ portal reduces supplier payment frictions since these are web interfaces for collecting and displaying information pertinent to suppliers. This information includes but is not limited to payment histories, Tax ID’s and invoices. Using a suppliers’ portal reduces data entry errors as well as the dependencies on the accounts payable team. Where a supplier payment system is also a part of the supplier portal, it centralises the supplier management system along with allowing ease of reconciliation and reporting.
Pay invoices of suppliers ahead of time to gain discounts.
Reducing the cost of sales is a sure shot way to increase the profits from your eCommerce business and paying invoices ahead of time to gain a discount helps you achieve that. If your supplier doesn’t offer you any benefits for advance payments, you could work on striking a deal with your supplier’s competitors to get a better rate. While it is obvious that to avail of this benefit, you need to close your own cash flow gaps and increase your own working capital, any gaps in the cash flow can be fixed by using tools such as credit cards, bank loans, and capital advance for eCommerce or marketplace sellers.
By understanding these areas and how they impact your eCommerce business, you can make the best decision about managing the bookkeeping of your eCommerce business and find the bookkeeping software or service that’s right for your business.