9 Effective Bookkeeping Tips for Small Ecommerce Stores

Are you a small ecommerce store owner navigating the exciting but often overwhelming world of online sales? You’re not alone! As your business grows, so do your financial responsibilities. 

Keeping track of your finances doesn’t have to be daunting, though—especially when you’ve got the right financial tools like doola Bookkeeping up your sleeve! 

In this blog, we’ll share 9 indispensable bookkeeping tips that will streamline your processes, sharpen your financial insights, and free up more time for what you love: growing your brand and connecting with customers. 

Let’s unlock the secrets to successful bookkeeping explicitly tailored for small ecommerce ventures like yours! Let’s dive in!

9 Effective Bookkeeping Tips for Small Ecommerce Businesses

Effective bookkeeping is crucial for a business’s success and growth. It provides a clear overview of its financial health and allows for informed decision-making.

However, many small ecommerce businesses struggle with bookkeeping due to limited resources and knowledge. 

To help you effectively manage your books and ensure financial stability, here are some tips for small ecommerce businesses:

1. Sales Tax Management with Bookkeeping Software

Many states require businesses to collect sales tax on purchases made by customers within their state and then remit it to the relevant tax authorities. 

In some states, the marketplace is responsible for collecting and remitting sales tax. However, in states without marketplace facilitator law, this obligation may rest with individual sellers. 

In this case, you should monitor your sales in that state and register for a sales tax license. This can become complicated as different states have varying sales tax rates and rules. 

To avoid this, you must use comprehensive bookkeeping software that automatically calculates the appropriate taxes for each transaction and creates reports that make filing sales tax returns easier. 

2. Categorize All Your Transactions

Categorizing all of your transactions involves organizing and grouping financial transactions into different categories to help track expenses, income, and investments accurately. 

The first step in effectively categorizing your transactions is to create a chart of accounts specific to your business needs that you can use to record your financial activities. 

It typically includes basic categories such as sales, expenses, assets, liabilities, and equity. However, you can customize it to include more specific categories unique to your business.

Once you have established your chart of accounts, it’s crucial to track and assign each transaction under the appropriate category consistently.

You can also automate this process with dedicated bookkeeping software that integrates with your bank feeds to import and categorize transactions automatically.

This makes tax preparation much easier since the Internal Revenue Service (IRS) requires businesses to report their income and expenses by category on tax returns annually. 

Proper categorization ensures that you have all the necessary information at hand without having to scramble through receipts at tax time.

3. Distinguish Between Returns and Chargebacks

Returns and chargebacks are two common occurrences that can significantly impact the financial records of an ecommerce store. 

Both involve the reversal of a sale, but small business owners need to understand the key differences between them in order to track finances accurately.

In terms of bookkeeping, returns are recorded as “contra sales,” which reduces total revenue while increasing the cost of goods sold (COGS). 

This will ultimately result in lower gross profit and net income for your business. However, chargebacks affect cash flow directly as they result in funds being withdrawn from your business account.

To ensure the accurate recording of refunds/returns and chargeback expenses, you must have separate accounts for each. 

This will allow you to easily track the frequency and amount of these transactions and properly adjust your financial records accordingly.

4. Use Integrated Payment Processing Solutions

The last thing you want to worry about is the hassle of manually reconciling payments and keeping track of multiple payment processing systems. 

Integrated banking solutions allow for seamless integration between your bank or credit card statements and your bookkeeping software. 

It eliminates the need for manual data entry. It reduces the risk of human error since all financial data is automatically synced to your books, giving you real-time visibility into your cash flow.

Instead of manually matching transactions from different sources, all transactions are automatically recorded, matched, and reconciled in one place. 

Another advantage of using integrated payment processing is its ability to manage multiple currencies seamlessly. This means no more juggling different exchange rates or struggling with manual conversions.

5. Automate Your Invoicing System

Manual invoicing can be a tedious and time-consuming process. However, it becomes tougher for ecommerce businesses with a high volume of sales.

You have to create invoices one by one, track them manually, and send them out individually to customers.

By investing in automated invoicing tools like doola, you can eliminate these manual tasks and ensure accurate and efficient invoice management.

You can create customized invoices and track all outstanding and completed invoices to see how much money your company has invoiced and received and how much money is still due.

doola Invoicing also allows you to link different payment processing options to the invoice so customers can pay you directly from their bank account or credit card.

Automating this process can save you time and effort, improve the overall customer experience, and ensure efficient financial management for small ecommerce stores.

6. Set Up Automatic Expense Tracking

Keeping track of expenses simply means using bookkeeping software that automatically records and categorizes your expenses in real time. This eliminates the need for manual data entry and reduces the chances of error.

doola’s automated bookkeeping system automatically categorizes expenses based on their nature (e.g., supplies, marketing, rent). 

You can track and manage all expenses as they occur, giving you an accurate picture of your business’s cash flow at any given time.

Bank statement reconciliation also becomes a breeze with automatic expense tracking since all transactions are already matched and recorded in the system. 

7. Simplify Payroll with Payroll Management Systems

If you have hired full-time employees or freelancers for your ecommerce store, you must set up a payroll management system like Gusto to handle employee salaries, benefits, taxes, etc. 

By using such a system, you can automate manual calculations of employees’ wages, taxes, and deductions. 

This minimizes the chances of errors in calculating paychecks and avoids discrepancies between what was calculated manually and what should be paid.

It tracks billable hours, so you no longer need to spend hours manually sorting through spreadsheets or paperwork to keep track of employee hours and wages.

You can integrate with your bookkeeping and accounting software so that accurate tax deductions can be computed automatically based on current legislation changes. 

This ensures compliance with federal and state laws without having to worry about keeping up with constantly changing tax codes.

8. Manage Cash Flow with Financial Reporting

Financial reporting involves creating reports used by businesses to forecast future financial trends based on historical data and patterns. 

These reports provide insights into cash inflows and outflows, allowing you to identify potential problems or areas for improvement, adjust your budget or pricing strategies, and manage tax obligations.

These reports can identify which products are selling well and which ones may need some marketing efforts or price adjustments to increase their demand.

Moreover, accurate reporting helps you clearly understand inventory levels, avoiding tying up excess funds in slow-moving products or losing potential sales due to out-of-stock items.

Apart from sales and inventory tracking, keeping an eye on accounts receivables (AR) is also crucial for managing cash flow effectively. 

Regularly running AR aging reports can help identify delinquent accounts so that appropriate actions, such as follow-ups or collections, can be taken promptly.

9. Automate Accounts Payable and Receivable

Nowadays, it has become imperative for small ecommerce stores to automate their accounts payable and receivable processes. 

Firstly, automating accounts payable means using a comprehensive bookkeeping and accounting software like doola that can help with invoice tracking, payment processing, and reconciliation. 

Instead of manually entering data from paper invoices, all information is automatically transferred into your accounting software, reducing the chances of human error.

Additionally, automated accounts payable systems can also schedule payments based on due dates and terms specified in the invoice. 

This eliminates the need for manual follow-ups and ensures timely payments to avoid any late fees or penalties.

Another advantage of automating both accounts payable and receivable is that it provides real-time visibility into your financial reporting. 

You can quickly access reports that show outstanding bills or unpaid invoices, making it easier to track cash flow and manage expenses effectively.

Make Bookkeeping Easy for Your Ecommerce Business With doola Bookkeeping

doola Bookkeeping, an all-in-one accounting solution, is a reliable partner that provides comprehensive tools and services for managing your ecommerce business’s finances. 

With a user-friendly interface and advanced features, doola simplifies bookkeeping and helps you stay on top of your finances.

The software records all financial transactions automatically, eliminating human error. As a result, your books are always up-to-date and error-free.

Moreover, doola offers real-time reporting, which is especially beneficial for small ecommerce businesses that operate on tight budgets and need to monitor their expenses closely.

We also simplify the tax preparation process by automatically categorizing transactions according to relevant tax codes, reducing the stress of tax filing for small ecommerce stores.

Our certified bookkeepers and accounting professionals are readily available to assist you with any financial tasks – freeing up time for you to focus on growing your businesses instead.

Book a demo to see how doola helps you stay on top of your financials and make informed decisions for the growth of your business.