So you’ve got the perfect business idea. You’ve just bought a domain, you integrated your ecommerce platform, and you’re ready to start selling. But before you open up shop, you need to consider how you’ll navigate finances, business accounts, tax preparation, and more. If you aren’t sure how to handle the general accounting of your business, it might be time for a refresher. Here are three accounting basics you need to have in place to run a successful online business.
Understanding your taxes
As an entrepreneur, it’s important to understand that not only will you have to pay your taxes a little differently but, especially if you’re selling a product, you may need to charge taxes, as well. Depending on your ecommerce platform, you may be in luck. Popular options like Shopify automatically update your account settings based on your physical location as well as where you ship your products.
If you’re managing your own platform, that’s where it gets a bit trickier. You need to have a solid understanding of what products and services are taxable and which ones receive tax exemptions. It’s also advisable that when it comes to paying your business taxes, the general recommendation is to file quarterly reports. Not only does this give you a better snapshot of how your business is performing, but you’re also able to see whether you’re over or underpaying and if tax adjustments need to be made on any goods. If that sounds like a bit much for you to handle on your own, reach out to an ecommerce accountant to handle the finer details for you.
Don’t forget about reporting
If you’re not running clear, accurate reports on several facets of your online business, you’re not only missing out on actionable data, but you may be blinding yourself to common missteps. Whether you’re running an online coffee subscription business or are selling handcrafted furniture, reporting is an absolute must. It’s the best way to understand how you’re performing and where there’s room for improvement.
In particular, inventory reports are especially important. Not only are they your best bet for gaining a total valuation of your current inventory, but you’re able to see which of your finances are tied up in stock and determine which products sell well and which don’t. This is essential for making informed ordering and stocking decisions. Otherwise, you run the risk of reordering a product that is proving especially difficult to move which loses you revenue that could have been reinvested elsewhere in your business.
How are your profit margins?
Once you’re accurately reporting on key aspects of your business, you’re able to see where you’re generating revenue and where you could be doing better. Remember that having a solid chunk of change in the bank doesn’t necessarily mean that you’re profitable. Depending on what bills you owe, site maintenance costs, and unforeseen expenses, you might not be as profitable as you’d suppose.
At any given moment, you should at least be able to calculate your current profitability so you can make real-time adjustments to your course of action. Remember, it takes time for many businesses to become profitable overall. This is another area that benefits from an ecommerce accountant’s expertise. With their knowledge, you’re able to get your fingers on the pulse of your business, as well as gain valuable insight into where your attention needs to go.
Always keep learning
If all of these accounting considerations seem a little intimidating, that’s because business accounting has a fairly steep learning curve. However, if you’re motivated and persevere, you should be able to easily pick up a few concepts that will help you run your online business a bit more smoothly. If you don’t have the time or resources to do so, contact an accounting professional to help you keep your finances in order. It very well might be one of the best investments you make.