The basics of running any business, whether virtual or brick-and-mortar, rest on solid accounting and financial management. Otherwise, you are one step closer to failure even if your goods or services sell well. Remember, to make sound business decisions, you must first ensure that financial books are in order by acquiring the most recent accounting software innovations, keeping updated on tax laws and ordinances, being on top of recent transactions, and seeking professional guidance.
While E-commerce business operations and functions are not usually carried out like regular businesses, they still need a strong foundation for financial success. Participation in E-commerce also requires a strong grasp of the accounting cycle, formulas, and principles, as E-commerce companies are taxed and audited like every other business out there. However, because of the nature of online businesses, there are certain differences in rules applied in accounting compared to traditional operations.
Here is everything you need to know about E-commerce accounting so that you can effectively manage and lead your online business to ascertain its success.
The difference between E-commerce Accounting from Accounting for Traditional Businesses
Because E-commerce businesses do away with the usual direct card or cash transactions from the physical customers, receipt of transactions may be found within the E-commerce channel or platform. E-commerce platforms often come with their own monitoring system for transactions that your business may refer to. This includes all your sales, whether the client paid for the transaction with an E-wallet, credit card, debit card, or COD (cash on delivery).
2. Understanding How to Monitor Cost of Goods Sold and Inventory Online
Knowledge of inventory and the Cost of Goods Sold is essential. Therefore, it is important to know how to monitor these books of accounts. Why? Because when you’re working in commerce, this is how you can keep track of the products you are selling. As much as possible, you want your records to tally with the receipts. This ensures you don’t get stolen from, make errors in deliverables, or run out of supplies.
3. Monitoring the Proper Online Sales Tax
Yes! E-commerce businesses do get taxed. And it is usually a little trickier to file your taxes as an online business, especially since receipts issued are not physical copies issued by the BIR. Whether you meet the tax bracket or not, you are required to register your business with the BIR as an online seller.
4. Reducing the Cost of Foreign Transactions
E-commerce businesses usually deal with foreign and overseas purchases from clients. This means that cash inflow will be in the form of multiple currencies that will later need to be exchanged. Therefore, you must monitor this correctly vis-a-vis that currency exchange rate so that you don’t lose out.
Top Tips to Help Your Online Business Manage Accounting Functions
1. Invest in the Right Accounting Software
There are many accounting software out there and many others being invented as we speak. While carrying out the same functions, different accounting platforms and software have specified targets for all the various accounting needs of any business.
It is advised that you invest in well-known software as these have been tried, tested, and loved. But, more importantly, do your due diligence on the different software and platforms so you can pick the right one for your business.
2. Hire a Bookkeeping and Accounting Service
The most helpful, no-fail way to stay on top of finances is to simply seek professional help. If it is within your budget, and if your company needs it, you may always hire an in-house bookkeeper or accountant. Bookkeepers will help you keep accounts in order, and accountants do the same with the added benefit of filing taxes for you and providing you with a detailed financial data-based analysis of your company.
If this is beyond the scope and budget of your business, you may always opt to outsource these services. There are many firms online and around the Philippines, that will cater to your needs. Notably, even if you have accounting software, you may still need that input of CPA for proper crediting of deductibles and filing your tax returns.
The Final Word
The right service will assure your financial health is never compromised with the best bookkeeping and accounting practices. At the same time, you can count on their professional CPAs to help you deal with the BIR to help your online business avoid investigations and penalties.
Should this sound all too overwhelming, you can get in touch with our team of CPAs. We work with small enterprises to large conglomerates and give everyone the same superior service. We can help you with your E-commerce store’s bookkeeping, accounting, and tax filing. Call us today for a free 30-minute consultation.
