Here’s A Detailed Guide In Understanding An Ecommerce Accounting Software

For eCommerce businesses, accounting is the least favorite task to do. Also, it sounds funny, that an eCommerce business does all its accounting work manually with a big team of accountants. 

But, here’s the deal: your finances will get more complicated, as your business grows. Various processes like online sales, returns, payments, banking transactions – all of the in-and-out money flow will need to be categorized and reported to the tax authorities in a simple manner to avoid any complications and compliance issues.

Again with all of this, you can get overwhelmed easily managing financial data and ledgers all by yourself, arising from the human errors in the accounting system. To save you from it all, eCommerce accounting becomes the smart choice. It manages all of your eCommerce accounting numbers with a proper categorization like online sales with the time period, refunds to customers, warehouse expenditures, etc. managing all the sales and expenses data smoothly, with high accuracy and low maintenance.  

To understand this further, you must start with five important eCommerce accounting tasks, which are automated by the eCommerce accounting software.

4 Important Ecommerce Tasks For Ecommerce Accounting Software

1. Categorization Of Transactions

It is a baseline practice of eCommerce accounting. You just need to categorize every transaction on the cash flow statement as income or expense. The accounting software automates this process, and you can review them or add new categories like returns, marketing sales, salary, etc. This practice helps you estimate the regular expenses and revenue for different time periods.

2. Prepare A Business Budget

You need to plan your business budget which includes all the expenses and financial obligations, summed up and stacked against the revenues earned during that period. This is also automated by the eCommerce accounting software with real-time sales data, which allows you to manage the ups and downs of the cash flows and avoid any business crisis. 

3. Tax Compliant System

Filing and managing the taxes of eCommerce business requires maintaining long transaction records, putting different tax values in front of each entry, calculating the taxes, and filing the same. But, with eCommerce accounting software, the system is updated with the changing tax compliances even for different states, and countries, which allows you to just verify and review the calculations, and file the taxes in time without any errors.

4. Maintain Accurate Recordkeeping

The eCommerce accounting software gives you the opportunity to store all the financial data in its cloud space without any charges, and maintain the sales and tax records accurately for future reference. 

Also, the accounting software allows you to verify the records with the bank transactions, which gives it a double-check for security and audit purposes.

With this, you must also know the best eCommerce accounting practices with your ecommerce accounting software.

Best Ecommerce Accounting Practices 

Your eCommerce accounting software will provide you with many advanced features which should not be made complex, therefore, you must keep these practices in mind to keep it simple and to the point.

1. Forecast For Big Expenses

With the real-time data updating every hour, you can keep track of your expenses and taxable income, which will help you figure out future investment opportunities like new warehouses, marketing programs, or extra inventory. Once your data gets updated, it automatically updates the accounting reports and the analysis of the key metrics on the dashboard to keep all the stakeholders informed, along with the opportunity for individual decision-making.

2. Keep The Tax Money Aside

Many businesses struggle with figuring out their tax money throughout the year. But, with eCommerce accounting software, your accounting numbers are updated regularly, and it automatically shows the taxable income deductions with the latest tax regulations. 

To avoid abrupt tax compliance changes, you must keep around 30-40% of your income aside for taxation purposes. The extra amount kept aside may also come in handy to pay off the non-compliance fee, if any.

3. Manage Inventory Smartly

Another important issue with eCommerce businesses is inventory management. You may incur huge losses if you build up the inventory unnecessarily as it impacts your liquidity, which reflects badly on your credit score and assets.

The eCommerce accounting software makes inventory management easy for you, by advanced metrics reports like a stock cycle, product cycle, category cycle, etc., which helps you strategize inventory management smartly. It uses in-built self-learning algorithms to track all the inventory and alerts timely before the product gets off the racks, as per the past inventory movement of that product.


With the right eCommerce accounting software, your accounting work becomes easy to manage and file taxes on time with accuracy. It keeps you updated with real-time data on the inventory, sales, and other financial numbers, which allows you to make strategic decisions timely. Your eCommerce accounting software will always keep you ahead of your competitors if you follow the best practices for the same.

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