As your eCommerce store grows, one of the things that grows with it is the administrative work around bookkeeping and accounting. These two are not interchangeable, as accounting for eCommerce stores encompasses a broader set of things. Bookkeeping refers to recording of transactions, and costs or payments for your store. However, accounting refers to recording, summarizing, and analyzing this information for your store, and reporting it for tax purposes.
In this post, we’ll take a look at what most accounting services keep track of, the benefits of automating accounting for your store, and a few plugins to help you manage accounting for WordPress stores – with a focus on WooCommerce and Easy Digital Downloads.
Bookkeeping is a part of your accounting strategy, but it shouldn’t be the only tool you use in tracking your eCommerce store’s financial health. Many new store owners choose to do bookkeeping themselves, which involves:
- tracking new transactions and income (such as orders or services you’ve invoiced)
- categorizing these transactions (e.g., recurring revenue or one-time income)
- tracking payments or costs (such as purchasing inventory)
- categorizing payments (such as payroll, costs of goods, or office expenses)
As your business grows, managing your bookkeeping and reconciling transactions and / or payments is essential for properly tracking costs, revenues, and growth, but it can be cumbersome to manage your business direction while keeping your books. If you want to outsource your bookkeeping, I highly recommend AccountingDepartment.com, who we use at SkyVerge, and they do a great job of tracking, reconciling, and categorizing income and payments (tell them SkyVerge sent you 😉 ).
Good bookkeeping ensures that your accountant has the information needed to help with analyzing revenues, sales tax responsibilities, corporate taxes, and other financial measurements for your business. While bookkeeping is essential for proper accounting, your store’s accounting strategy should not end here.
Accounting typically covers almost all of the metrics associated with conducting business. This includes revenues, inventory, cost of goods, margins, sales tax, and more. Through recording all this information, accounting can provide you with a snapshot of the financial health of your company, including:
- comparison to previous periods
- sales tax calculations
- issues in cash flow
These are metrics that are vital to measuring your success, but aren’t obtained just by simple bookkeeping and tracking payments.
Since you get an overview of where the money is sitting, you can see cash flow problems like having too much money in the form of inventory, having too many unpaid invoices, or losing money in order returns or shipping.
In addition to business information, accounting services help you prepare for your tax filing by also keeping track of sales tax collected during transactions. In case of an audit, your transaction records are what help justify the money that your business earns.
There are a few ways you can manage accounting for your business. First, as we’ve mentioned, you can outsource bookkeeping with services like AccountingDepartment.com to ensure your transaction history is accurate and categorized properly.
Next, you can hire an accountant who will keep track of all the financial information you pass along and derive conclusions from it. Accountants are trained to analyze finances and understand the tax rules to help grow your business and do accurate tax filing.
As a small business owner, you can do basic bookkeeping and accounting yourself using spreadsheets or online services. However, as your business grows, manually logging transaction information can become very tedious. This is where online services integrated with your eCommerce store come in.
These integrations help sync transaction information between your store and the accounting service. These services are cheaper than hiring an individual for bookkeeping and / or accounting, and are faster to provide you with information as reports are created instantaneously without having to wait days. As your business grows in size and complexity, you can consider hiring a professional accountant for help. However, automated online services can provide a good start to managing your accounting.
There are a number of different services you can use for accounting. Below we’ll take a look at plugins that can help integrate these with your stores. You can also use other services for specific things that may fall within accounting, like using Avalara for automating sales tax calculations.
Note that for the below, you will need an account (typically paid) with the online service in addition to the below integrations:
For WooCommerce, the extension helps you sync order, customer, payment, discount, and tax information with your Xero account. In addition, you can automate creation and sending of invoices to customers whenever a purchase is made.
For Easy Digital Downloads, the extension creates customers in your Xero account and generates invoices to send after a purchase is completed.
The Quickbooks Online service can be integrated with WooCommerce using a third-party connector extension. The extension cost starts at $29 per month along with a $249 activation fee for U.S.-based merchants.
The extension allows you to automatically sync inventory, customer, transaction, and product information with Quickbooks Online. You can add multiple channels to keep track of, create and send invoices to customers, and create reports for your business. In addition, Quickbooks helps you manage sales tax reporting by adding the appropriate calculation as a separate line item.
Here’s a short video from the developers taking you through the basic setup and some features:
Shop Plugins also has a WooCommerce – QBO connector coming soon ($129) that you can get notifications for.
The integrations allow you to sync your store’s orders and transaction information with your FreshBooks account. You can use the service to automatically create and send invoices to your clients, and log payments.
For WooCommerce, the extension can sync client information, payment status information, product information (using FreshBooks products), and add shipping and taxes as separate line items. For Easy Digital Downloads, the extension can create an invoice, payment, and client in FreshBooks.
Accounting can help guide your business decisions based on past transactions for your store. While good bookkeeping ensures your transactions are properly logged and categorized, accounting provides you with an overview of the financial health of your business through measuring certain key metrics. Think of it as the financial information backbone based on which you can focus on the right things to improve.
Instead of tracking all this information separately, automate your accounting (or at least parts of it) by connecting your accounting service with your online store. Once connected, these services will automatically log order information for your store and can provide some additional functions. Both WooCommerce and Easy Digital Downloads provide you a few options for integration based on the accounting service you want to use.
What service do you use to manage your accounting? What hurdles have you seen so far? Please share in the comments below.