10 Ways to Clean Up Your eCommerce Accounting with Outsourced Bookkeeping

Tax and spring cleaning season is rapidly approaching and business owners everywhere are looking for ways to improve their books. Whether they partner with an outsourced bookkeeping firm or manage their accounts on their own, these businesses realize that now is the perfect time to get everything in order.

In the accounting world, small mistakes often grow into larger ones. If there are any errors or inaccurate entries on your books, these mistakes might eventually create financial or legal problems. That’s is why it is crucial for businesses, especially those in the rapidly changing eCommerce space, to engage in proven bookkeeping practices.

Fully Accountable helps businesses clean up disorganized books. By working with an experienced, digital accounting team, your business can leverage better data, better bookkeeping, and expert advice to achieve long-term financial and operating success.

Depending on the current state of your books, you might not be sure where to get started. In this post, we discuss 10 ways your business can immediately improve its bookkeeping practices.

1. Reconcile Asset Values

One of the most common causes of “messy” books is that the book values of a company’s assets differ from their market (or “actual”) values. If your business has overvalued or undervalued assets, you may end up overpaying on taxes or taking unearned deductibles. If it has been a while since your business performed a professional evaluation on relevant assets, this might be a good place to start.

2. Account for Uncollectible Accounts

Over the course of doing business, especially in a credit card-reliant industry like eCommerce, uncollectible accounts will inevitably emerge. If your business is like one of many trying to limit its tax obligations this year, writing off bad debt is one of the simplest ways for your business to reduce its taxable income. Look back at debt that is more than a year old and ask yourself if these items still need to be on your books.

3. Double-Sided Accounting

Double-sided accounting is crucial for keeping your books balanced. This will directly affect your business’s ability to attract and appeal to relevant parties, such as lenders, investors, possible buyers, and regulators. To begin, ensure your business assets equal your liabilities plus shareholder equity (on the balance sheet). If this is not the case,  you have an immediate accounting problem that will need to be addressed.

4. Update Inventory Levels

Inventory reporting affects the health of your business’ books, especially when it comes to broader asset valuations. To start, your business needs to decide whether it wants to use a first in, first-out (FIFO) inventory method or a last-in, first-out (LIFO) inventory method. You will also need to decide how your inventory will be appreciated or depreciated. Straight-line depreciation is common, but you will have a fair degree of flexibility.

5. Track Appropriate Taxes

There are many accounting challenges unique to the eCommerce industry. Because eCommerce transactions often involve interstate or even international commerce, you may not be sure what—if any—taxes your business accrues over time. The best-outsourced bookkeepers help your business identify all relevant taxes and match tax obligations to each item. Identifying these variables in advance will also make filing your taxes much easier.

6. Check for Red Flags

As a business owner, you need to check your accounts for red flags on a regular basis. The longer a financial or fraud-related issue persists, the more difficult it is to address it. Working with an outsourced bookkeeper gives your books a broader, more comprehensive overview. Common accounting red flags include muddle personal financial and business accounts, unauthorized withdrawals, repeat expenses, and unexplained negative credits.

7. Reprioritize Debt Obligations

Even in the low-overhead eCommerce era, a majority of eCommerce business owners operate with at least some degree of debt. Beyond the minimum payments attached to each debt account, the order in which your business reduces its debt affects your bottom line. Both the size of each debt and the associated interest rate affect your business’s financial performance. When revisiting your books, as a whole, be sure to prioritize which debts need to be paid first.

8. Utilize Auto-Generated Statements

One of the best ways to clean your books and track your financial performance is to take advantage of auto-generated statements. Using QuickBooks and other platforms, your business can view an updated balance sheet or income statement as needed. The more you pay attention to these active accounting statements, the easier it is to identify errors and make data-driven decisions.

9. Create Future Projections

Making accurate future projections requires your business to have well-constructed models with relevant data. With the right entries and analysis, your business can predict how it will perform during a variety of different circumstances. By revisiting the entries used in each of these projections, your business can make valuations, budgets, and plans with greater precision.

10. Ask Lots of Questions

Fully Accountable realizes every business we work with is unique. The accounting challenges that affect one eCommerce business are often different than those affecting another.

We work hard to ensure that each of our clients has all of their questions answered. We explain the accounting process in easily understandable terms and position your business for sustained success.

Don’t leave your books to chance. Contact Fully Accountable today to find out the many ways your business can leverage eCommerce accounting to its advantage.