Tax money is not the same as revenue; it’s a liability that you owe the government. Your books need to show the difference between revenue, sales tax, fees, and the final cash deposit in your bank account. Several ecommerce platforms will calculate and collect the necessary sales tax from your customers.
- You need to know exactly how much inventory you have on hand, how much you’ve sold, and how much you need to reorder.
- Whether you’re looking for in-house employees or seeking assistance from bookkeeping services or freelancers, there are multiple avenues to explore.
- If you reconcile your account regularly, these mistakes stay minimal.
- If you sell on multiple ecommerce platforms, you’ll need a single source of truth to maintain your inventory levels.
- Investments and outstanding invoices should also go on your balance sheet.
If a business doesn’t have sufficient money in their bank account, there’s going to be problems. As we mentioned earlier, the number one reason eCommerce businesses go out of business is a lack of cash flow. The accountant uses the results that the bookkeeper provides to summarize, analyze, and report on the company’s finances. If your business has scaled beyond a few million in revenue, you may want to look at hiring a full-time bookkeeper in-house. You can either record that fee as a general business expense, or set up a chargeback fee expense category. So, as soon as a vendor invoices you, you record the invoice as an expense—even if it hasn’t left your account yet.
Paint a clear picture of financial health
A chargeback happens when a credit card company asks you to return funds you charged to a customer’s credit card. This happens because the card’s user has told the company that the charges on the ecommerce bookkeeping card are fraudulent. You would send $40 cash back to the customer, reducing your revenue as if the sale never happened. Any time money enters or leaves your business, it needs to be recorded.
You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free. Starting a new Shopify store and considering whether dropshipping is worth it can be a big decision. Unlike dropshipping alternatives, dropshipping is a completely different way of working in 2024. Set your business up for success with our free small business tax calculator. From bookkeeping to tax consultations and filings, the Pros can help.
How to Utilize Dropshipping Platforms like Shopify?
This same definition applies to eCommerce bookkeeping, though the best ways of bookkeeping for a brick-and-mortar store can differ drastically for an eCommerce business. That said, like most traditional bookkeepers, an eCommerce bookkeeper must also categorize different types of income and expenses, track returned purchases, and review balance sheets. If you’re manually tracking your inventory levels, you’re wasting your time.
