The pandemic has caused many problems for businesses — but if you’re an online-only business, it may have been lucrative for you.
Businesses in the right industries were able to take advantage of buyers who flocked online to buy almost everything during lockdowns.
Whether you’ve been online since your start, or pivoted to online once the pandemic hit, there are a few accounting practices that are absolutely necessary for e-commerce or online businesses. We’ve detailed the most important points below.
#1: Use accounting software that fits your business.
Discovering what software works best for you might be a bit of trial and error.
Freshbooks and Xero are marketed to online businesses. QuickBooks Online is a powerful tool, and if you use Shopify, you can find a few accounting apps in their app store.
If you’re unsure of what you need, start a free trial and play around.
You definitely need a software that offers bookkeeping, invoice and quoting options, and the ability to see your revenue streams.
#2: Open a separate business account.
Whether you use your same bank, or find a credit card that offers great perks for business owners, keeping your business account separate from your personal money is a huge step.
It’s so much easier to detail receipts, write-offs, and expenses when you have everything in one account.
You can better track your cash flow if you use a business account. Dividing your revenues and expenses into multiple components can help you watch liquidity levels and understand the general payment cycle. Separating accounts receivable and accounts payable will make it much easier for your business to plan for the future.
Plus, if you get audited, it’s much easier to show the IRS what they need if your accounts are divided.
#3: Keep your books up-to-date.
Balanced books are vital to online business success.
Often, sales volumes will surge and fall, depending on trends and seasons.
It’s important not to get bogged down in sales, even if you have high-volume orders.
You must have an accurate “snapshot” of your asset, liability, and equity situation at any given point in time. Make sure when you’re choosing your bookkeeping software that it gives you tools to see those numbers in real time.
Keep track of receipts and transactions for better optimization of information. Try to use all digital copies. It’s easier to find them if you need them down the line.
Help with accounting practices for online businesses
Listen, we understand that starting a business is harder than it looks.
But the correct accounting practices can set the tone for your success.
If you’d like expert help setting up your accounting or getting your books up to date fill out the contact form below. We’re happy to help!