Ecommerce accounting

Accounting 101 for E-Commerce Business Owners

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Accounting 101 

Accounting for many business owners is an anxiety-inducing topic.

Clearinity clients come to us after finding an accountant, because they don’t have an accounting process in place. By the time the client is scaling their business, they have discovered that their books are messy, incorrect, and hard to navigate. We know this is because it starts in operations. Here at Clearinity, we look at the operations without losing sight of the accounting.

We want to make accounting and financial management something that is approachable and understandable for any business owner. Accounting has created a way for us to analyze and compare data that reflects what is working in our business and what isn’t. It has provided a standard language to describe your business and the overall health of it.

There is so much involved in the world of accounting, it is hard to tackle all in one article. For this reason, we offer Clearinity VU Courses that help break accounting down into manageable and digestible lessons. Today we want to focus this article on the bigger picture of why we care about Financial management, common problems clients come to us with, and some accounting tips!

An Accounting Overview

Accounting, in its most simplistic form, is a way to capture all of your business’s revenue and expenses. It allows you to understand the data in a common format that is commonly accepted across the United States and even internationally.

You may wonder if you aren’t an accountant and won’t handle those tasks, why you should care about the details of accounting. The simple answer is because accounting also provides us a framework to structure our data that allows us to analyze and evaluate where to invest our money, make changes, and scale our business.

Accounting Terminology

Income Statement: Shows your business’s profitability and tells you how much money you made vs lost

Balance Sheet: Is a snapshot of your businesses financial health at any given time

Profit & Loss Statement: is a record your income and expenses during a given period of time

Cash Flow Statement: an analysis of business operations, finances and investments to show how and where you are receiving your money

Bank Reconciliation: A comparison of your cash exposures and your bank statements

In our experience, we find that these questions are the most common :

  • What is the right data to use?

  • How can we get the right data?

  • How can we get the right data in one place?

  • How do we summarize the data we gathered??

  • We have problems reconciling the data between the bank and the PO’s , why?

  • How do I choose which accounting method to use? LIFO vs FIFO, Cash vs Accrual , there are a lot of options

Although we would love to give you the answers to all of these common problem questions today, the answers are dependent on your business and your processes. We want you to know you are not alone and every eCommerce business is affected by their accounting problems. However, we can offer you some accounting tips and what to look for in accounting software.

Accounting Tips 

  •     Don’t hesitate to outsource all or some of it

  •    There’s an app for that- You may not be ready to implement an app quite yet but it is good to know they exist. They have been developed to help curb human errors and reduce time spent on basic accounting

  •     When in doubt don’t hesitate to ask a professional – recognize you don’t know what you don’t know

  •     Implement Accounting principles early on, develop a process that allows for growth and scaling

  •     When looking at technology for solutions to your accounting consider the platform’s ability to forecast and budget as well as provide basic accounting features.

Accounting doesn’t have to be a panic-inducing topic. We hope these basic accounting tips will help you begin to understand the importance of accounting and how it relates to your supply chain management and business process. It may seem like a daunting task, but becoming familiar with accounting principles will only help your business in the long run. Whether you end up hiring a professional or take the accounting journey yourself, here at Clearinity we pride ourselves on being a resource for your product-based business needs and inventory management software.

If you are interested in learning more in-depth knowledge on accounting and your supply chain, please check out our Clearinity VU courses here.