There is a great deal to think about when you operate your ecommerce business. You must juggle income and outgoings, keep on top of cash flow, stay tax-compliant, and recognize how your business performs across key performance indicators. It’s natural to look for some help when you handle such tasks – and ecommerce accounting software can provide this help.
But which piece of ecommerce accounting software is right for you as we look toward 2024?
There are several options out there on the market, each with its advantages and disadvantages. Check out our guide for what to look out for, and make the right call for your business.
The role of accounting software in ecommerce businesses
What does accounting software do for your ecommerce business? It does quite a lot.
With accounting software, you can:
- Record and review your income and outgoings for valuable performance insight.
- Isolate specific areas of sales performance and income to help you gain even more insight into performance.
- Keep on top of your tax obligations.
- File your tax returns quickly and easily.
- Maintain a record for any potential audits in the future.
- Commission reports regarding business performance and tax status.
The ecommerce market relies on digital solutions, and accounting is another area in which software can make a real difference for small business owners.
The benefits of using specialized software for ecommerce accounting
Do you need specialized software for ecommerce accounting? Can’t you make do with a general accounting solution or even just a set of spreadsheets?
Here are some benefits:
- The software is designed for ecommerce, so all features are geared toward online retail success.
- Specialized solutions will integrate directly with your ecommerce platforms and other pieces of software.
- These solutions make it easier to stay tax-compliant and up-to-date on your records.
- Ecommerce business accounting solutions will help you gain real insight into how your online store is performing.
While other pieces of software may offer limited capabilities, specialized ecommerce accounting solutions provide a range of benefits.
Key features to look for
As you compare and contrast accounting systems for ecommerce businesses, there are several features to consider. Here are a few that can provide real advantages to your business.
Inventory management and tracking
A well-managed inventory is critical to the success of ecommerce businesses across all sectors. Your accounting solution needs to offer features that help you manage and track inventory so you keep on top of stock levels and product availability.
Inventory tracking refers to ongoing monitoring of stock levels and availability. This feature integrates with inventory data stores to offer real-time insight into the goods you have ready to go.
Inventory management software features are more wide-ranging. These features offer a variety of analytics tools and capabilities to keep your inventory well-stocked, including placing replenishment orders and attaching product and category tags to your stock.
Integration with ecommerce platforms
This one is a must – your accounting software has to integrate with your ecommerce platform. The accounting solution requires up-to-the-minute sales and inventory data, which comes directly from the ecommerce solution itself.
If there are manual data entry processes, or if there are intermediary steps between accounting and ecommerce solutions, the whole thing becomes inefficient. There is even the risk that sensitive data could be lost or inputted wrongly. When there is direct integration between ecommerce and accounting software, data sharing is secure, automatic, and completely seamless.
Order and expense tracking
It’s not just about how much money your business brings in – it’s about how much it costs to run simultaneously. Ordering new inventory, manufacturing products, and marketing to customers all represent business expenses, and your accounting software needs to be able to track this.
When you order products to replenish your inventory, this is not just a cost. There is also the time element to consider – it takes time to order and receive new inventory. Tracking orders through your accounting software helps you forecast product availability and plan to avoid any shortfalls in stock levels.
Financial reporting and analysis
We’ve talked about insight earlier in this article, and this is a big part of your accounting solution’s functionality. Your solution needs to be able to drill down into the data, providing smart analysis based on sales performance and other key performance indicators (KPIs). From profit and loss statements to next quarter predictions, your accounting program should provide a wealth of information you can use as you plan your next moves.
All of this must be provided with up-to-the-minute data. Direct integration ensures that accounting software uses real-time data, providing timely and accurate reports for you and your ecommerce teams.
Multi-currency and tax capabilities
In the digital age, small businesses can reach global audiences. If this reflects your business model, or if you plan to develop your ecommerce business internationally, multi-currency capabilities are necessary. The data insight and bookkeeping features must support multiple currencies – both fiat and digital currencies in some cases.
There is also the tax aspect to consider. An international business may have a complex array of tax duties, and you will need to make sure you are meeting all of these requirements. Look for accounting solutions that help you achieve this compliance.
Automation and integration with other tools
Many accounting tasks can be automated, easing the burden on your human personnel. Data entry, for example, can be handled quickly and easily via automated solutions, eliminating the risk of errors or corruption within the data set. Calculations and other tasks can also be handled automatically, boosting accuracy and precision.
When accounting software integrates directly with other tools and solutions, data migration and other tasks are handled smoothly and seamlessly. All pieces of software in your tech stack are working from the same centralized datasets, and your teams can collaborate and work remotely with confidence and security.
Top ecommerce accounting software options
The right solution is the one that supports your ecommerce business completely, providing all the functionality your company needs. Weigh up your options in the following categories:
Scalability and customization
Your business’s needs will change over time as your organization grows. The accounting software you choose will need to grow too, offering scalability that ensures the solution remains fit for purpose for longer. This is a crucial aspect to look out for when you choose an ecommerce accounting solution.
At first, a standard solution may meet your requirements – and this is especially true for smaller businesses. However, customization may become necessary as your organization evolves, and you might want to conserve a solution that you can tailor to meet the specific needs of your ecommerce company.
Integration with ecommerce platforms
Which ecommerce platform are you using? There are many options, each with its own benefits and unique aspects. Make sure that the accounting solution you choose is fully compatible with the ecommerce platform you already have in place.
Remember, you will need full compatibility and integration so that you can leverage the full capability of the solution. When you weigh up your accounting software options, look at all the different features each candidate offers and ensure that these features are compatible with your current setup.
Cloud-based vs. on-premises solutions
A cloud-based accounting solution gives you additional freedom and flexibility. Your teams can access this solution securely wherever they are – whether working from home on a different block, from your office on the other side of the city, or in a foreign country or continent altogether.
Some teams prefer a more traditional on-premises solution, which requires everyone to be in the office and working together from the same system. However, most modern businesses are better suited to a secure cloud-based solution.
Data security and compliance
All modern businesses need to protect the data of all their stakeholders. This is particularly true for ecommerce businesses, which handle sensitive information via payment processing solutions and customer databases. Your solution will need watertight data security features and fully compliant data handling and capture processes.
Different countries and states operate their own data security legislation and regulations. You will need an accounting solution that meets these requirements across all the areas you work in. From data privacy to sales taxes and income tax practices, your business needs to stay compliant.
Making the decision
You’re almost ready to make your decision. Take a look at these final points before you make the call:
Creating a checklist of your business’s specific requirements
No one knows your business quite like you. So, consider the specifics of what you need.
Here are a few things to bear in mind:
- Cloud capabilities – How is your business structured? If you have remote teams spread across multiple locations, you’ll need cloud-based accounting software that supports remote access. More complex businesses may need cloud accounting software supporting multiple users collaborating in real-time.
- Size and scale – Small business accounting software can offer significant advantages to startups and similar organizations. However, what happens as your business grows? These small business accounting tools might not be fit for purpose anymore, and you might want something more scalable.
- Advanced features – What specific features does your business need from its bookkeeping software? If you require support for different types of payment processors, fixed assets handling capabilities, bank reconciliation, or other aspects of your business’s finances, make sure your chosen solution provides this.
Considering the trade-offs and aligning with your long-term goals
There are various trade-offs you should consider when you decide on your ecommerce software.
Read more below:
- Prioritizing features – Advanced features are undoubtedly helpful, but you must consider your budget. Prioritize which features you need for your business accounting software to make sure you get the best set of features at a reasonable price.
- Automation and artificial intelligence – Some of the best accounting software for ecommerce now incorporates automation and AI into their mix of tools. These features can help you free up your personnel for other tasks, but they may make the system more expensive.
- More comprehensive systems – You may need invoicing software, project management tools, or other additional solutions that integrate with your accounting programs. This may be possible with a more comprehensive system, but this may come with a higher price tag.
- Thinking about your long-term goals – Remember to think long-term. Making savings now may be useful, but make sure your system meets your needs long into the future. The best ecommerce accounting software for you is the one that grows alongside your business.
These trade-offs typically involve cost vs. functionality, so you may need to decide which capabilities you’re happy to pay extra for and which you might not need.
Find an ecommerce accounting system that streamlines and supports your business
The software you choose should eliminate many of the ecommerce accounting issues and headaches associated with this market. It should provide the capability to handle various tasks – from financial reports to expense tracking and sales tax calculations. However, above all of this, it has to match the specific needs of your business.
Remember to prioritize your objectives and requirements before you decide, and make sure your solution checks all of these boxes.
Frequently asked questions
Can you integrate accounting software with ecommerce solutions?
Many accounting solutions can integrate directly with your ecommerce platform for enhanced ease of use and better security.
What are the benefits of ecommerce accounting solutions?
Ecommerce accounting solutions, such as NetSuite, Xero, and QuickBooks Online, provide features specially designed for the ecommerce market. This means your business can handle online selling bookkeeping and financial workflows with ease.
What tax features do ecommerce accounting solutions offer?
The best ecommerce accounting software will help you calculate sales tax rates commission tax reports on financial data, and remain fully compliant with all regulations.