Top 5 Challenges for Bookkeeping Ecommerce Businesses (And How to Solve Them)

Running an eCommerce business is like navigating a digital marketplace of endless possibilities — where every click can lead to a new customer and another sale. 

While you focus on captivating product listings and stellar customer service, your finances might be spiraling into chaos.

Luckily, there’s a crucial player that can help you get it right: doola Bookkeeping. From tracking sales/expenses to managing tax filing, it simplifies all the complexities of bookkeeping. 

In this blog, we’ll uncover the top five bookkeeping challenges faced by ecommerce entrepreneurs and provide actionable solutions to turn that financial clutter into clarity. 

Let’s dive in and empower your business with streamlined financial strategies!

The 5 Biggest Bookkeeping Challenges for Ecommerce Businesses

Running an ecommerce business can be incredibly rewarding, but it also comes with its fair share of challenges. 

One major aspect that often poses difficulties for ecommerce businesses is bookkeeping, which plays a crucial role in the success and growth of your business. 

However,  by being aware of the potential challenges and implementing strategies to address them, ecommerce businesses can ensure accurate and efficient bookkeeping processes, paving the way for long-term success.

⚠️ 1. Managing High Transaction Volumes

Multiple transactions, including payments, refunds, and fees from payment processors, need to be recorded with each purchase made. 

As the business grows and expands its customer base, managing high transaction volumes becomes increasingly difficult and time-consuming.

With so many transactions occurring at once, it can be easy for numbers to get mixed up or for small details to be overlooked. 

These mistakes can have serious consequences on the accuracy of financial records and can even result in incorrect tax filings.

Another challenge with managing high transaction volumes is organizing and categorizing all the transaction data.

Moreover, as sales increase during peak seasons or promotional periods, reconciling bank statements and accounts receivable can lead to delays in identifying discrepancies or potential frauds.

The good news is that there are solutions available to help businesses manage these challenges effectively.

doola Bookkeeping offerings include bookkeeping software that automates most processes and provides real-time visibility into financial data. 

 This means that you won’t have to enter every single transaction manually.

⚠️ 2. Handling Multi-Currency Transactions

With the rise of globalization and the ease of online shopping, ecommerce businesses are now open to more than just their local market. 

This means that they need to be able to cater to customers from different countries and currencies, making multi-currency transactions a top challenge for bookkeeping.

Dealing with multiple exchange rates, varying fees, and constantly fluctuating currency values can be overwhelming for business owners. 

Not only does this complicate your bookkeeping process, but it can also lead to errors and discrepancies in your financial records.

One of the most efficient ways to handle multi-currency transactions is by using doola Bookkeeping software, which has built-in features for tracking different currencies. 

This allows you to import all your sales and expenses in their respective currencies and automatically convert them into your base currency for accurate reporting.

Also, you won’t have to reconcile your accounts manually since all transactions have been accurately recorded directly from your records and bank statements.

⚠️ 3. Navigating Sales Tax Compliance

Sales tax compliance is an essential aspect of running an ecommerce business, yet it can also be one of the most challenging tasks for many online merchants. 

One of the main challenges when it comes to sales tax compliance is understanding which products are taxable and at what rate. 

Sales tax laws vary by state, with some states having a general sales tax rate while others have specific rates for different product categories. 

This means that as an online business owner, you need to know which products are subject to sales tax in each state where you sell your products.

Moreover, if you have nexus (a significant physical presence) in multiple states, you may be required to collect sales tax from customers in those states. 

The good news is that there are solutions available to help ecommerce businesses navigate these challenges effectively. 

One such solution is doola Bookkeeping, which is designed to track and calculate taxes based on current rules and rates for each location where you do business.

Furthermore, you get dedicated support from a qualified bookkeeper who specializes in ecommerce businesses and has knowledge about current sales tax laws. 

This can save you time and stress while ensuring that all necessary taxes are being collected accurately.

⚠️ 4. Tracking Inventory and Calculating COGS (Cost of Goods Sold)

For many ecommerce businesses, tracking inventory and calculating COGS can be a daunting task. 

This challenge becomes even more complex when businesses deal with a large number of products or have multiple sales channels.

The first step to overcoming this challenge is to set up an organized system for tracking inventory. 

This includes recording all incoming and outgoing stock movements along with relevant details such as product description, quantity, date received/sold, supplier/customer details, etc. 

Once you have established a system for tracking inventory, the next step is to calculate COGS accurately. 

COGS refers to the direct costs associated with producing or purchasing a sold product, such as raw material costs, labor expenses, shipping fees, and any other expenses.

To calculate COGS accurately for each product, meticulous records of all production or acquisition expenses are essential. 

In addition to these direct costs, indirect costs may also need to be factored into the calculation of COGS. These can include rent/utilities for storage facilities or warehouses where inventory is stored before being sold.

Having a solid understanding of your COGS can help you make informed decisions about pricing, purchasing, and other business strategies. 

By establishing a robust bookkeeping system for diligently maintaining accurate records, you can overcome this challenge and ensure the financial success of your business.

⚠️ 5. Reconciling Accounts Across Multiple Payment Gateways

One of the biggest challenges faced by ecommerce businesses is managing accounts across multiple payment gateways. 

While these payment gateways offer customers convenience and flexibility, they can create a significant hurdle for bookkeeping processes. 

Each gateway has its own transaction fees, processing times, and account structures, which can make it challenging to track and reconcile financial data accurately.

With numerous transactions co-occurring on different payment platforms, there is a higher chance of duplicated or missing transactions. 

This happens when a transaction gets recorded twice due to system glitches or human error, leading to incorrect balances and inaccurate financial reports.

In case of disputes or customer refunds, the money will be debited from your account on one gateway while credited on another gateway, making it challenging to keep track of the final balance in your records.

So, how do you solve these challenges? The key to keeping your accounts accurate is timely reconciliation. 

Investing in good bookkeeping software like doola can simplify reconciling accounts across multiple payment gateways. 

It is designed to integrate with various payment platforms, automatically categorize transactions, and generate reports, making it easier to keep track of your finances.

Make sure you have automated bookkeeping software like doola in place to reconcile your transactions in real time so that you catch any errors or discrepancies before they occur.

If possible, try consolidating all your transactions onto one primary payment gateway instead of using multiple gateways. 

This will reduce the complexity of managing different accounts and streamline your bookkeeping process.

How to Simplify Ecommerce Bookkeeping With the Right Tools

In an ecommerce business, bookkeeping can be time-consuming and prone to errors, especially if you have limited resources.

Thankfully, various bookkeeping tools are now available on the market that can simplify and improve this process.

One such solution is doola Bookkeeping — a comprehensive solution designed specifically for ecommerce businesses.

It specializes in simplifying tax compliance for both U.S. and international businesses, making it the ideal tool for ecommerce companies with global reach. 

With automatic data syncing from multiple account feeds, doola makes sure all of your sales data is accurately recorded in real-time.

One of the significant advantages of using doola is its ability to automate critical processes such as expense tracking and reconciliation. This not only saves time but also minimizes human error.

Plus, with customizable reports and dashboards integrated into the platform, you can track your business’s financial health at any given point in time.

With its specialized focus on tax compliance and transaction categorization, doola saves both time and effort while ensuring accuracy and data security — making it the ideal tool for any growing ecommerce business.

Pro Tips for Better Ecommerce Bookkeeping

1. Handling Merchant Fees

Building your store on top of popular e-commerce platforms like Shopify or BigCommerce offers many benefits, from quicker startup to easy search optimization. 

But for these perks, they may charge you a small cut out of every sale you make online. It’s how they make money.

However, this can complicate bookkeeping because the deposits in your bank account are net sales instead of gross sales. 

The correct way to show this in your books is to note the gross sale, then record the difference between that number and the final deposit to your bank as “merchant fees.”

That’s because the platform has already taken its cut before depositing the money in your account.

2. Tracking Inventory Across Sales Platforms

Many e-commerce platforms offer built-in tools to track and manage inventory for online sales through their store.

But if you sell online in multiple places, one platform won’t track any changes to inventory resulting from sales on another platform. 

To overcome this, you must have one central place to track inventory, whether or not it automatically updates your books. 

Then, if you choose to work with a bookkeeping service, they can use that information to create an accurate record of sales, returns, and restocks in your books.

3. International Sales

Ecommerce enables you to sell products globally, but when you sell and ship to other countries, your books may need additional information to reconcile those sales.

For example, you’ll need to reconcile the sale with the final deposit to your bank account, which will be in your local currency.

However, you’ll need to know the exact conversion rate that your e-commerce platform used to convert between currencies.

Sometimes, that conversion can lead to a discrepancy between the foreign sale and the final deposit in your account. 

When that happens, make sure to record these differences in your books as a “gain or loss on foreign exchange.”

Solve All Your Ecommerce Bookkeeping Challenges With doola Bookkeeping

As an online seller, you may have encountered a few hurdles in your bookkeeping process that are specific to your business.

From managing multiple sales channels to dealing with international currencies and taxes, various factors can make bookkeeping for ecommerce businesses a daunting task. 

But fear not, because doola Bookkeeping can solve all your ecommerce bookkeeping challenges in a jiffy.

Our services include automation and integration capabilities that will streamline your accounting processes. 

By connecting all your sales channels and bank accounts, we can automatically import all your transactions into one centralized location. 

This eliminates the need for manual data entry and saves you valuable time, allowing you to focus on running your business efficiently.

With top-notch reconciliation features and tax management, you can rest assured that your financial information is in safe hands. 

Book a demo today to learn how you can kiss goodbye to all the challenges of managing an ecommerce business’s books.