5 accounting basics you need to run a successful e-commerce business

Understanding accounting basics is paramount when it comes to running a successful and prosperous e-commerce business.

After all, one of the main reasons why e-commerce businesses fail is poorly managed finances. With this in mind, it’s incredibly important that you always have a tight hold of your day-to-day finances and fully understand where you stand.

And whether or not you already have a professional accountant to help you manage your finances and steer your business in the right direction, it also pays to take the time to understand the accounting basics of day-to-day management yourself.

We’ve created a helpful guide outlining the 5 accounting basics you need to know to run a successful e-commerce business.

Invest in accounting software

Thanks to significant advances in technology, there’s now a great selection of accountancy software to choose from, allowing you to access the best option for your business and preferences.

Accountancy software will not only allow you to keep on top of your day to day bookkeeping needs but it will also allow you to track sales, cost, and inventory and ultimately, help you to get to grips with accountancy basics in no time at all.

Always track your cash flow

Cash is king in any business and it’s incredibly important that you keep on top of your cash flow and always know where you stand.

Tracking the cash inflows and outflows will also allow you to establish whether or not your e-commerce business is making enough money to cover your outgoings. And remember, for optimum cash flow, you should always ensure that invoices are paid on time and that your bills are also paid no later than their due dates.

Calculate all other expenses

At the same time, you should also calculate all of your other expenses too including

like salaries, utilities, rest as this will also allow you to keep a tight hold of your cash flow.

And, whilst you are looking closely at these costs, you will need to remember that any fixed costs can impact your gross margin. Some of the most common fixed expenses that you should track include rent, utilities, insurance, interest on loan payments and salaries.

Work out your break-even sales requirement

If you want to optimise growth opportunities and maximise profit, it’s important that you take the time to work out your break even sales requirement so that your e-commerce business can flourish.

Your break-even sales amount will not only  show you how much you have to earn to cover all of your costs, but it will also allow you to plan and budget in line with your business needs and of course, maintain a healthy and consistent profit margin.

Track your sales and profits before tax

Finally, you should always be in a position where you know how many units you have to sell to break even, and the best way to do this is to track your sales and profits before tax. This will also help you to manage your money and ensure that you always have money put away for a rainy day.

Speak to an eCommerce accountant about accounting basics

For any eCommerce business, it’s important to stay on top of your accounting. The best way to do this is by seeking the advice of an experienced, specialist eCommerce accountant who will have the expertise to help.

Get in touch with Unicorn Accounting today!

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