As a business owner, understanding and keeping tabs on your business finances is imperative to allow your business to flourish. This is why bookkeeping is so important for any business.
If you’re still learning the ropes, the good news is that it is possible to manage the books on your own. Alternatively, if you prefer to have more time to focus on your core business, consider outsourcing your bookkeeping to us! At Osome, we take care of your daily bookkeeping and automate simple routine tasks to save on expensive labour.
Meanwhile, this is what you should know about managing your ecommerce store’s books.
What Is Bookkeeping?
Bookkeeping involves the recording and managing of all financial transactions incurred by your business, from sales, purchases to payments. Your bookkeeping process should include tracking all income and costs, so you can make an informed financial decision.
In a nutshell, bookkeeping allows you to see your business finances at a glance, so you can balance your accounts and improve business cash flow.
Make It a Daily Habit To Reconcile Your Receipts
It can be a nightmare when your receipts pile up, and you’d find yourself having difficulty sorting them out. Instead, make it a point to reconcile your receipts on a daily basis.
Keep good records by leaving a thorough paper trail for all your business transactions. This means that you should keep the receipts from your midday coffee sessions with your investor, or download the email receipt for your latest digital ad buy.
When it comes to tax season, you'd be glad you kept up with these records. This is because you will have to be able to support your claims in order to reap the full tax benefit of claiming legal business expenses.
- Set up specific folders for invoices and receipts, and sort them out every day
- Create a simple rule in your email inbox to direct your emails from specific senders (such as digital ads, suppliers etc) to a folder named "Invoices and Receipts"
Focus on 2 Key Aspects Every Week
If you're doing things right, bookkeeping shouldn't take up too much of your time. On a weekly basis, pay attention to 2 important things - your variable expenses and cash flow.
Tracking variable expenses
Although reviewing your variable expenses can be done on a monthly basis, we would recommend that you keep tabs on this every week instead.
As an ecommerce business, some of your allocated budgets in areas like marketing could be affected by seasonality. For example, when it comes to competitive sale periods like Black Friday, Cyber Monday or occasions like Christmas, this is when the competition toughens and will inevitably affect the cost of your marketing dollars spent on digital ad buys.
As such, you should keep a close watch on expenses like your marketing budget to ensure you are comfortable with the fluctuation, and carry out immediate measures before the end of the month if necessary and consider new initiatives.
Managing cash flow
Do you have enough funds in your business bank account? How much do you have at the moment and what can that amount of money cover? When it comes to cash flow, these are some of the things you should keep in mind.
Some business owners may have the misconception that having a revenue of $X amount means you have that amount of cash just waiting in your bank account, but your cash flow also involves daily decisions on items to purchase and other business expenses. Therefore, it is crucial that you have a good understanding of your cash flow to allow yourself to make better financial decisions.
Carry out a Monthly Review
Even when you’re practising daily and weekly bookkeeping, you should also take some time out once a month to keep your books in order. Here’s how you can go about doing a monthly review:
Review your expenses
For an entrepreneur, making business decisions can be stressful. Use your monthly review to think about your business decisions over the past month, and how you can make use of these expenses in a more strategic manner moving forward. Review how you can optimise cash flow over profits to ensure the smooth day-to-day operation of your business.
Get a snapshot of your business finances
Every month, you should look at your business's health as a whole, to understand the bigger picture and how things are going for your company.
Ensure you have recorded all your expenses and delve into your expenses, income, sales and cash position to ponder over how you will make financial decisions from the next month onwards. If you are handling any new campaigns or projections, you may also wish to look into those numbers to determine if they are affecting your expenses, sales, or both.
If you are doing bookkeeping all by yourself, you will have to be more organised than ever. Make it a point to sieve through all your email receipts and organise them into expense categories in preparation for tax season. This also allows you to have a better understanding of the amount of money you are spending on advertising and your inventory orders.
Make adjustments where necessary
No two businesses have the same business model, and what works better for another business may not work as well for you. This is why it is crucial to do a monthly review, so you can evaluate if your revenue and expenses may require a different set of bookkeeping needs. For example, if your business only requires the overall monthly sales, consider if it is even necessary to log and track every single order that you receive. Perhaps for your case, it may be easier to streamline things and look at the monthly sale figures instead.
Free Yourself From the Admin Work and Grow Your Business
If you prefer to relieve yourself of the accounting work for your ecommerce business, fret not for we are here to help.
We connect directly to all your marketplaces and upload financial statements from there. We then transform them into books, reports, and tax filings. Simply leave the administrative work to us to take the routine off your workload, so you can focus on more important tasks.