- Aug. 18, 2022
-- Whiz Consulting is a reputed name in the field of accounting and bookkeeping. They have been providing accounting and bookkeeping solutions to a variety of businesses. They have a professional team with relevant expertise and years of practical exposure in their respective field. Such professionals' robust accounting and bookkeeping backgrounds help businesses resolve all accounting-related queries. In a recent interview with Whiz, the senior officials expressed their opinions on the importance of e-commerce accounting for e-commerce businesses. An organised accounting system serves as a strong base for the solid financial standing of an organisation in the long run.What is e-commerce accounting?
Regardless of any business, accounting and bookkeeping are the two critical determinants of long-term success. Things may fall out of place without an organised and strong accounting system. In the same way, e-commerce accounting holds importance for e-commerce organisations. E-commerce accounting is collecting, analysing, organising and reporting financial data related to business transactions and assets. The relevant information obtained through such procedures is valuable for business decisions. An e-commerce business owner needs to handle various accounting tasks regularly. It can be listed as:
What are the types of accounting?
- Categorisation of expenses and transactions
- Tracking inventory cash flow
- Tracking inventory
- Tracking expenses
- Tracking customer returns and chargebacks
- Calculation of break-even sales, etc.
Two accounting methods are- cash and accrual. The top executives at Whiz provided an elaboration of the two methods:
- Cash basis accounting- In this method of accounting, transactions are recorded as soon as they land in the accounts or leave as an expense. In the initial stages, e-commerce organisations can do well on a cash basis because of its simplicity. It is easy to report any money movements and see how much cash is left at any given point in time. This method works primarily for smaller e-commerce sellers, product on-demand businesses, dropshipping operations, etc.
- Accrual basis accounting- In this method of e-commerce accounting, transactions are recorded as they occur and not when the money reaches or leaves the account. An accrual basis is suitable for more extensive or growing businesses as it provides a more realistic representation of the business's monthly income. This leads to more accurate financial projections considering present and future obligations. The key benefit of this method is accuracy which is helpful for business analysis and better planning. However, the downside is that accrual accounting provides less awareness about the business cash flow.