When asked what their least favorite part of their job is, most e-commerce business owners will say ‘accounting.’ But here’s the deal: whenever your e-commerce business expands, so will your finances. Sales, supplier payments, returns, banking fees – any money movements must be properly classified, analyzed, and stated to the tax department. The following are some bookkeeping best practices for nonprofits that are very essential for any e-commerce business.
Inventory Management Across Sales Platforms
The first of nonprofit bookkeeping best practices is inventory management. Inventory management tools are built into many e-commerce platforms. This makes inventory tracking and management for digital sales through one’s store simple. However, if you are selling in multiple places online, your platform will not track any improvements to inventory caused by outside sales. That makes it critical to have a single central location to track inventory, regardless of whether it automatically syncs your books. If you hire a bookkeeper, they will be capable of employing that data to maintain a precise record of sales, restocks, and returns, in your books.
Dealing with Merchant Fees
Merchant fees are unavoidable if you conduct your online store over an e-commerce platform. Establishing your store on top of such platforms provides numerous advantages, ranging from faster startup to simple search optimization. To provide those benefits, e-commerce platforms as well as payment processors must take a small cut of every online sale. It’s how they make a living. This can make bookkeeping more difficult since the deposits that appear in your bank are truly net sales rather than gross sales. This is due to the platform taking a cut before actually depositing the funds into your account. The proper way to record it in your books would be to mention the gross sale, after which note down the difference between the number and your bank’s final deposit as “merchant fees.”
Keep Sales Tax Records
Among the bookkeeping best practices for nonprofits is to keep sales tax records. A few e-commerce platforms would also handle both parts of the transaction, collecting and remitting sales tax to your state’s sales tax authority. However, most platforms would only procure sales tax from their customers. From a bookkeeping standpoint, it’s critical to understand that tax money is not revenue. Sales tax will become a liability for you to pay to the government as quickly as your sale is processed. Your books must demonstrate the distinction between gross sales, merchant fees, sales tax, and final deposit on the property.
Determine Your Break-Even Point
The break-even point (BEP) of a business is the point at which income equals costs. E-commerce businesses should determine the BEP to determine the bare minimum for production costs. A rise in consumer sales or production costs is two factors that have an impact on BEP. Unexpected events, such as equipment repair, can also result in higher operational costs.
Running an e-commerce store involves several bookkeeping complexities. There will be difficulties regardless of whether your store is small or large but these nonprofit bookkeeping best practices will surely help your business.
