The survival of a business, both on the online and offline platforms, relies on its financial status. Major decisions to be made in the business venture are dependent on how your numbers are doing. But how do you keep track of these numbers?

Enter chart of accounts!

All businesses need it even accounting software like Xero and Quickbooks has their so-called Quickbooks chart of accounts
. It is the list of individual accounts that make up your general ledger or simply put, it is a summary of all the transactions you have made.

What’s in the Chart?

An effective eCommerce chart of accounts should hold all transactions, from small to major ones, in an organized and easy-to-track way. Primarily, your chart of accounts should be a balance sheet of assets, liabilities, and owners’ equity, plus a list of income and expenses. This chart of accounts is also helpful for calculating your cash flows and profitability, the best chart of accounts structure depends on how the expert accountants of the eCommerce business handle their records. Your business margins are the key indicator, especially for eCommerce sellers, as to how your business is going example of it are asset accounts and expense accounts. Meanwhile, your cash flow makes it easy for you to track your inflow and outflow in the form of revenues and expenses.

Keeping your Accounts Up to Date

The main purpose of your accounting records is to give you real-time updates on your business expenditures and inflows. Keeping them updated is just as important as replenishing your stocks before they run out. Your accounting records should be organized and if you keep putting off your account updates, chances are that you miss inputting some transactions. Then you would have to backtrack to find the missing entries, accumulated expenses and that will cost you a lot of time.

An up-to-date set of accounting records and account classification also helps expose hidden cost and inventory problems which is a common issue for online sellers. Addressing them as soon as they pop up will save you from having a pile of revisions to do in the future.

Optimize Decision Making

The most important reason why having up-to-date accounts is non-negotiable in eCommerce businesses is that it is the deciding factor for major business decisions. With your business swimming in the dynamic and ever-changing online market, you need to make optimal decisions quickly. Your accounting records, being a real-time list of your transactions, will show you what sells and what doesn’t so you can make plans ahead and adjust your business model as needed.
Keeping a financial accounts is essential in the survival of your business but constantly updating it with advanced eCommerce accounting techniques is what will scale your business exponentially.

Next Read: What are the Most Common Accounting Problems for E-Commerce Merchants?