Bookkeeping is a basic requirement if you’re going to manage your online store’s accounts efficiently and effectively.
Ecommerce businesses are growing every year, with a 43% growth in new ecommerce business registrations in 2020 in the UK.
The best way to make sure your bookkeeping is top-notch is to have a system, and the ideal way to do this is to automate your ecommerce bookkeeping.
- How to do bookkeeping
- What are the benefits of automated bookkeeping?
- How do you automate your ecommerce bookkeeping?
If you’re going to set up a bookkeeping system, you need to know what it should include.
There are various fundamental bookkeeping tasks, but the overarching purpose of bookkeeping is to record your financial transactions.
These transactions include:
- Record your online sales
- Reconcile your payment gateways
- Matching bank statements to pay-outs or invoices
- Monitoring and managing cashflow
- Matching outstanding bills to statements
- Keeping up to date and accurate records.
Some of these tasks you’ll need to do daily, some less frequently, but you must keep all of them up to date and have the records to show for it.
Daily Bookkeeping Tasks
Your business’s cash position is highly important, and you must have enough cash to cover any outgoings.
Consequently, cash flow is central to your financial health, and it’s something you should monitor daily.
Another daily task is managing receipts. If you don’t maintain clear records of what you’ve spent and when, then you cannot get the full tax benefits of claiming legitimate business expenses.
Providing you’re keeping a close eye on your cash position (see above), you can set up weekly systems for processing invoices, including preparing and sending them.
Make sure your payments to suppliers are updated weekly too. Record all your transactions using spreadsheets or other dedicated software.
It’s important to review your incoming and outgoing payments and match them to your bank statements. You also need to review your monthly turnover and profit and compare your performance with previous months.
Furthermore, depending on your turnover, you will need to monitor your VAT thresholds and in some cases you will require monthly VAT returns, otherwise these will be quarterly.
If you’re VAT registered, then you will more than likely need to make quarterly VAT returns and send these to HMRC
Whether you’re a limited company or a sole trader, you’ll need to have all your figures and records to hand each year:
- A limited company must submit its annual accounts to Companies House
- A sole trader will need to complete an annual self-assessment and submit this to HMRC.
Good, accurate bookkeeping can make both of these tasks easier and cheaper.
Bookkeeping is an essential set of processes, but it can be challenging to keep on top of. That’s why you should develop a clear system for managing and undertaking these tasks.
The easiest way to make this system work for you is to automate your bookkeeping.
By doing this you can:
- Record and store all your vital bookkeeping data securely, categorise it and access it easily and rapidly whenever you need it
- Reconcile and update your records regularly, so you don’t end up with a backlog of bookkeeping work or out of date records.
There are also various best practices when it comes to bookkeeping for ecommerce trading:
- Factor in your fees – these include merchant fees, shipping costs, the cost of managing returns and various third-party software tools such as apps and plug-ins
- Track your inventory – this should go hand in hand with your bookkeeping
- Build-in alternative payment methods – make it easy for your customers to buy from you by using platforms such as PayPal and Stripe.
Once you’re clear about how you want your bookkeeping system to work, ask an ecommerce accountant to recommend the best cloud accountancy software for your business to put it into practice.
Bookkeeping is an essential pillar of good business accounting. Is it time to automate yours?
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.