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What you need to know about eCommerce Accounting

by with No Comment Business TipsMarketingMoney TalksSalesTax

Technology has undeniably made our daily lives easy. Not only at home, but at work too. To start off with the basics. E-commerce, also known as electronic commerce, is the buying and selling of goods and services over an electronic network, primarily the internet. 

Online shopping has become firmly established in South Africa: you can now buy food on Uber Eats, Mr. Delivery app, etc, from your favourite restaurant and get it delivered to your home, you can buy clothes online, and you can ever deliver a parcel to anyone via the Uber app! On the other hand, e-commerce accounting is the practice of recording, organizing, and managing all of the financial data and transactions relevant to the operation of the company. 

Ecommerce accounting, like all accounting for businesses, entails both fundamental bookkeeping duties (such as maintaining invoices, payroll, and balance sheets) and more intricate planning and reporting duties (like preparing financial statements and creating a strategic tax plan).

In this blog, we will only focus on only 2 of the major areas i.e. Bookkeeping and Tax management. 

Bookkeeping

Bookkeeping includes tracking and categorizing income and expenses, inventory management, and reviewing balance sheets, as well as tracking customer returns. If not done well, one return can throw off your sales, inventory, expenses, and sales tax records all at once. 

An e-commerce accounting system should take into account customer returns and allow you to accept returns without throwing off your financial reports.

Tax management

Ecommerce tax management includes tracking and setting aside all applicable taxes, calculating and filing quarterly estimated taxes, etc. Determining when an e-commerce seller must charge sales tax can be complicated. On a general note, if a seller has a significant business, that seller is responsible for collecting and remitting taxes for any purchase. 

Whether you hire a bookkeeper, or an account, or not, the choice is yours. Many operators of online stores rely exclusively on accounting software. As a result, a significant portion of bookkeeping work can be automated while also lowering the risk of human error. These services can interface directly with your e-commerce platform and bank account. Assisting with tasks like transaction categorization, invoice creation and mailing, and account reconciliation to ensure accuracy, an online bookkeeper can also help you use tax and accounting software.

Your balance sheet will surely become more complex as your company expands. Without a plan, what could initially appear to be a straightforward DIY project can turn into a nightmare of miscategorized transactions, missing monies, and unreconcilable accounts.

Save yourself a headache and hire a registered accountant/tax practitioner, or set up an accounting system tailor-made for an e-commerce business as soon as possible!

A – Z of Accounting | Basics of Accounting

by with No Comment Business TipsMoney Talks

First things first, Accounting is the practice of recording and reporting on business transactions. This helps you see how well your business is performing, in comparison with your expectations. 

Accounting methods 

Cash Accounting

Expenses paid and income received is accounted for when cash flows(when cash is paid or received)

Accrual Accounting

Expenses and income are accounted for when incurred

GAAP suggests Accrual Accounting. It portrays more accurate records

We touched a bit on this topic in our Bookkeeping workshop, here’s a skit:


Record Keeping

To enlighten you, this means setting up accounts in which financial information is stored. Accounts fall into the following classifications:

•Assets: business valuables, help the business make more money. E.g. product design 

•Liability: obligated to be paid by the business, they take money out of the business. E.g. loans 

•Equity: ownership of assets that may have debts or other liabilities attached to them. Eg. shares

•Revenue: this is the amount billed to customers in exchange for the delivery of goods or provision of services.

•Expenses: the cost of operations that a company incurs to generate revenue.

Transactions 

If you own a company, you should set up separate accounts for banking, credit cards, etc. Don’t buy business supplies with your personal credit card. Organize your accounts and protect yourself and keep these two separate. Amongst other reasons, this will help you if any tax or legal issues arise (might depend on your business structure). 

These transactions are recorded within the business’s accounts by the accountant. Key transactions include:

✅The purchase of materials and services from suppliers.

✅Selling goods and services to customers. (Send invoice to customer) 

✅Receive payments from customers. 

✅Pay employees. (subtracting tax and other deductions, resulting in net salary).

Reporting

Also known as Bookkeeping, recording all transactions that occur in the business account. Amongst other reasons, this helps you budget, know the financial health of your business, and prepare you for tax season. The most common books are Income statements, Balance sheets, and Cash flow statements. 

Just to expand the above mentioned:

Income Statement – it presents all revenues and subtracts all expenses. It essentially measures the ability of a business to attract customers and operate in an efficient manner.

Balance Sheet – it presents the assets, liabilities, and equity of a business as of the end of the reporting period. This can also determine the ability of an organization to pay its bills.

Statement of Cash Flows – it presents the sources and uses of cash during the reporting period. It is especially useful when the amount of net income appearing on the income statement varies from the net change in cash during the reporting period.

Another thing to look at is Budgeting and Forecasting. This has much more benefits other than getting funds from the bank or investors. Planning your finances helps you keep a healthy relationship with your money/accounts; thus helping you make better financial decisions in your business. Keep it realistic and achievable. 

Should you need assistance or have any questions regarding accounting, do get in touch with us here: 

📧: info@accasesolutions.co.za

☎: 0615238833