Whiz Consulting is a reputed name in the field of accounting and bookkeeping. They have been providing accounting and bookkeeping solutions to a variety of businesses. They have a professional team with relevant expertise and years of practical exposure in their respective field. Such professionals’ robust accounting and bookkeeping backgrounds help businesses resolve all accounting-related queries. In a recent interview with Whiz, the senior officials expressed their opinions on the importance of e-commerce accounting for e-commerce businesses. An organised accounting system serves as a strong base for the solid financial standing of an organisation in the long run. 

 

What is e-commerce accounting? 

Regardless of any business, accounting and bookkeeping are the two critical determinants of long-term success. Things may fall out of place without an organised and strong accounting system. In the same way, e-commerce accounting holds importance for e-commerce organisations. E-commerce accounting is collecting, analysing, organising and reporting financial data related to business transactions and assets. The relevant information obtained through such procedures is valuable for business decisions. An e-commerce business owner needs to handle various accounting tasks regularly. It can be listed as: 

Categorisation of expenses and transactions
Tracking inventory cash flow 
Tracking inventory 
Tracking expenses 
Tracking customer returns and chargebacks 
Calculation of break-even sales, etc. 

What are the types of accounting? 

Two accounting methods are- cash and accrual. The top executives at Whiz provided an elaboration of the two methods: 

Cash basis accounting- In this method of accounting, transactions are recorded as soon as they land in the accounts or leave as an expense. In the initial stages, e-commerce organisations can do well on a cash basis because of its simplicity. It is easy to report any money movements and see how much cash is left at any given point in time. This method works primarily for smaller e-commerce sellers, product on-demand businesses, dropshipping operations, etc.
Accrual basis accounting- In this method of e-commerce accounting, transactions are recorded as they occur and not when the money reaches or leaves the account. An accrual basis is suitable for more extensive or growing businesses as it provides a more realistic representation of the business’s monthly income. This leads to more accurate financial projections considering present and future obligations. The key benefit of this method is accuracy which is helpful for business analysis and better planning. However, the downside is that accrual accounting provides less awareness about the business cash flow. 

 

Thus, the simplicity of cash basis accounting makes it more tempting. On the other hand, the accrual basis of accounting provides a more honest picture of the business expenses as incurred over time. For start-ups or small e-commerce businesses making $100k or less in sales, it is profitable to stick to cash basis accounting. On the other hand, if an e-commerce business is consistently making 6 figures, it is better to migrate towards the accrual method of accounting. 

 

What is the importance of accounting in e-commerce businesses? 

The senior officials at Whiz highlighted specific good points of an organised accounting system for e-commerce businesses. A reliable e-commerce accounting system provides stability to business finances. Some of the issues can be listed as follows: 

Ensures tax compliance- Without an organised accounting system, e-commerce businesses have to handle and manage all the accounting tasks, including tax compliance. However, with accounting procedures, business owners can stay tax compliant and do not have to divert their attention from core business activities.
Financial integrity- With a reliable accounting system, e-commerce businesses can maintain financial integrity by getting in-depth insights into the processes. E-commerce accounting helps organisations to stay up-to-date and prepared for all accounting aspects.
Financial forecast- Having a reliable accounting system, e-commerce businesses can project the future success of their business. Without a sound accounting system, no company can perform financial forecasts and plan their future confidently. 

Conclusion 

With rapid changes in tax laws, unique business models and structures and growth opportunities, e-commerce businesses need an equally adaptable e-commerce accounting service. We at Whiz Consulting can provide valuable support to your growing or well-established e-commerce business. Our expert team is proficient in providing tailored advice and accounting solutions per your business’s needs and requirements. 
https://www.whizconsulting.net/uk/services/ecommerce-accounting-services/