1st May, 2023
Today, eCommerce accounting systems are delivering powerful insights and more value to small and medium businesses.
With its roots in the mail-order catalogues of the past, eCommerce has grown to become a popular way for consumers to buy both goods and services from the comfort of their own home.
As a result, there are now millions of online retail businesses operating tens of millions of eCommerce sites around the globe. Not only has this business model become more valuable overtime, it’s become an increasingly competitive space to play in.
So whether you’re thinking of taking an existing business online, or setting up a new eCommerce brand, having a clear view of your business finances becomes a factor that can dictate your success or failure.
The good news is, the technologies that enable eCommerce also make it very easy to enable robust eCommerce accounting systems.
Such systems are enabled by solutions like Amaka, which enables businesses to automate the flow of data between their online accounting and eCommerce platforms.
Chief Operating Officer for Amaka, Francesco Martella explains further.
“The typical accounting processes are similar for eCommerce businesses as they are in other businesses. However, eCommerce accounting presents some key differences and new workflows to be aware of.”
“Multi-channel sales, international compliance as well as foreign transaction fees are only some examples of the challenging aspects that eCommerce businesses face when it comes to managing their books.”
With a good eCommerce accounting system, a business can more easily track online revenue, manage costs and all while staying compliant with tax regulation.
A busy online retailer could be processing dozens, if not hundreds, of virtual baskets through their checkout every day – that means there’s a lot of transaction data needing to be accounted for.
“It is always important that businesses are in tune with their top and bottom-line. Accounting correctly for eCommerce businesses allows them to have an appreciation for key financial components including revenue, expenses, cashflow and taxes,” said Martella.
“Instead of having multiple, manual data entry processes, data can flow between multiple systems in tandem to create real-time, accurate information.”
“eCommerce accounting allows for strategic decisions to be made across both operational and product-related areas.”
There are three common challenges that eCommerce businesses tend to face with their accounting and these all have to do with the volume and type of data that needs to be captured and processed in as close to real time as possible.
Specifically when considering physical products, a business operator needs to have worked out a system that integrates warehousing and delivery of stock with their eCommerce storefront, combining digital and physical systems.
So when things go wrong on either side, it can cause headaches not only in getting products to customers, but also in how to learn from those errors, or plan in redundancy to accommodate them.
“Handling inventory commonly leads to potential issues with despatching goods, purchasing new stock at the right time, managing stock levels, stock takes and the like,” said Martella.
The US-based Black Friday sales event continues to drive enormous amounts of purchases through online and brick-and-mortar retailers every year. More locally, Australian and New Zealand retailers can expect annual spikes of activity in November as their customers prepare for the festive season.
More than this, it can sometimes be difficult to predict when a particular digital marketing strategy might pay off, causing hundreds of transactions to begin flooding through.
“WIth cash flowing in and out of eCommerce businesses constantly, managing cashflow can become a major challenge,” said Martella, highlighting the need for superb accounting expertise in this space.
“Forecasting cashflow and maintaining positive cashflow needs is central to eCommerce accounting.”
One of the major benefits of selling online is also a double-edged sword, and that’s the exciting prospect of selling across borders to new customers in far-flung countries.
Problem is, your systems and compliance practices may be up to scratch for your country of origin, but that doesn’t mean they’re immediately suitable for international trade.
“eCommerce businesses that sell to customers overseas or import goods from overseas need to take into consideration international tax regulations.
“Sales tax obligations can vary dramatically across different regions.”
Online solutions like Amaka provide the unique opportunity to create a cloud-based ecosystem of apps that communicate with a cloud accounting platform like MYOB to deliver real-time, accurate data.
With MYOB running the backend, eCommerce businesses can then connect a range of apps to streamline a number of workflows whether they’re specifically eCommerce related or not.
“For example, integrations like Amaka’s can automatically sync transactions from eCommerce platforms to MYOB on a daily basis and help fast-track bank reconciliations,” said Martella.
Other apps that enable Customer Relationship Management (CRM), analytics or cashflow forecasting can all aid in stronger insights.
“Plus, online solutions allow eCommerce businesses to collaborate better internally and with their accountants.
“For instance, accountants can more readily make sure books are updated on a regular basis rather than holding a large backlog that is only addressed at relevant tax times.”
So if you’re considering the systems you’re using to deliver eCommerce, it’s advisable to consult with your accountant about how to also integrate them into your accounting platform.
“By putting the right systems in place sooner rather than later, eCommerce businesses put themselves in the best position to scale without running into issues,” said Martella.
Find out more about how Amaka can integrate with your MYOB product to deliver an eCommerce accounting system via the MYOB App Marketplace.