As an e-commerce business, one of your top priorities needs to be keeping your finances in order – but it can also be the biggest headache! Whether you’re shipping all over the world, or a local shop that’s recently expanded online, there are many moving pieces of your accounting that need to be kept organized.
Accounting for your e-commerce business can become complicated with international taxes, cost of goods, and payment portals, and it’s helpful to have a professional’s insight to make sure you’re CRA compliant while making the most of your revenue!
Today, the experts at Virtual CFO Solutions are giving their advice on how to best manage your e-commerce accounting.
Common E-Commerce Accounting Issues
Not Charging the Correct Tax
What amount of tax to charge can be one of the most confusing parts of setting up and running your e-commerce store, especially if you ship internationally! Sales tax is determined by the location that the item is being shipped to, which can make calculating, charging, and paying your taxes more complicated. Having integrated cloud-based accounting software can help automate this, and alleviate your stress!
Pricing Your Products To Account For Additional E-commerce Costs
By selling your products online, there are additional costs that need to be accounted for. Some costs, like shipping, can be passed along to the purchaser, but things like credit card processing fees, website costs, and the cost of your packaging need to be built into the price that you set on your online store.
Relying On Traditional Accounting
Traditional accounting can be cumbersome for an e-commerce business. Instead of taking your information from online to offline, switching to cloud-based accounting allows you to integrate your accounting software directly with your payment processor, invoicing software, credit card, and website. By having all of your software working together, you can easily get a moment-by-moment snapshot of how your business is performing financially.
Taxes and E-commerce
Taxes can be calculated for each order, and are based on where the purchaser is located. Certain e-commerce website platforms, such as Shopify, have apps that make it simple to automatically calculate, charge, and track tax amounts. Depending on the platform you’re using, there will likely be a preferred sales tax integration that will help each customer pay the correct amount of sales tax.
Best Online Accounting Software For Ecommerce
Xero is the only cloud-based accounting software we use, and it is by far the easiest to use by both accountants and business owners while providing valuable information to both parties.
Here are some of the main highlights of using Xero:
Xero can be used anywhere, as long as you have Wi-Fi available. This means you can check out your live data whenever and wherever.
Xero can integrate with hundreds of different cloud-based apps. I’ll be listing out a couple of them but there are many more available that can provide added value depending on your business goals.
Xero connects to your bank and credit card accounts and will automatically upload your transactions through an API connection. This means you are saving roughly 50% of manual data entry and getting the information on a daily basis (instead of monthly or annually).
The support for Xero is efficient and useful and can be accessed by accountants or business owners.
Stripe is one of the largest payment processors that can be integrated with a variety of e-commerce platforms. Stripe has competitive fees for credit card processing and has a user-friendly interface that gives you a snapshot of your daily performance.
Shopify is one of the best all-in-one e-commerce platforms. They make it simple to get started, and have powerful integrations and apps that take the headache out of shipping, taxes, reporting, and accounting.
A2X is an integration software that connects your Shopify store with Xero, our recommended cloud-based accounting software. This increases your automation and seamless accounting across all of your e-commerce store’s platforms and software. Take the guessing, tracking, and paper records out of the equation and seamlessly integrate your store with your accounting software.