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!