Doing business via e-commerce can be very profitable if you do it right from the start and implement a viable plan. As buyers are shifting from being offline purchasers to digital buyers, there is a lot of growth in these markets.

Whether you are selling products on e-commerce platforms such as Amazon, Shopify, BigCommerce, or Etsy, you cannot afford to ignore a good bookkeeping system to manage your finances well. It is a must to have a good bookkeeping system for a financially stable and viable business. 

The Importance of Bookkeeping and Accounting on e–Commerce

By having a solid bookkeeping process for your business from the start, you can expect to gain the following benefits:

1. Bookkeeping will help build a reliable and financially stable business model.

The foundation of a strong and viable business, bookkeeping must be done with consistent regularity. The recording of financial transactions such as purchases, sales, receipts, payments by customers, and expenses can give you insights into how your business operates at any time.

2. Bookkeeping can help you with forecasting your business.

Planning for future activities will depend on the numbers. With up to date data, you can make more accurate forecasts and consider them as part of most decision-making processes. This includes drawing up budgets or planning for expenses by estimating future demand for your products or services.

3. Good bookkeeping processes ensure the preparation of your tax returns.

A up to date bookkeeping system can save you a lot of time and avoid problems when it is time for filing your taxes each year. Accurate financial records will help you will help you conform to relevant federal and state laws and comply with all sales tax regulations. Advanced planning can allow you to work with your accountant to help save money on taxes through applicable tax breaks and other means available. If you wait until the last minute, doing all the tax planning to maximize your deductions may not be possible.

Disadvantages of Neglecting eCommerce Accounting  

Many things can go wrong with your eCommerce business and you can run into a host of short-term and long-term problems when you neglect the accounting records.

1. Tax Ramifications

You can face tax ramifications if do not do your planning early. The tax process will be less stressful the earlier you plan.

When you act at the last minute, you frantically scramble to produce the documents your accountant needs to generate a tax return in compliance with state and federal state regulations. The accuracy of your tax returns will depend only on the inputs you have provided. Scrambling to produce the details of expenses by recalling when and how they were spent 12 months after will be extremely challenging. You also won’t have time to discuss proper tax planning with your accountant and may even have to pay rush fees just to meet your tax deadlines.

2. Penalties and interest charges  

Neglecting the financial records of your business may, probably will, result in the late payment of sales taxes and income taxes. This will result insignificant penalties being assessed by your local and state/provincial tax agencies. Left long enough the outstanding taxes, penalties and interest may result in the bankruptcy of your business.

3. Difficulty obtaining financing

Most successful eCommerce businesses require outside financing. Without current financial records your request for a loan may be disapproved. Most financial organizations will provide financing at a lower interest rate to businesses that demonstrate they manage their affairs well.