You’re running an e-commerce business. You’ve set up your store(s), ensured sales tax is administered appropriately, set up your initial shipping fees, and added your inventory. Now, you’re selling, and realizing your e-commerce accounting problems are just beginning!
Don’t panic! Most of our e-commerce clients go through this very same thing. Below are the common e-commerce accounting problems we see and the solutions that work.
Tracking Inventory and Income Across Multiple Channels
This is what we call the big one—managing and tracking your inventory accurately across multiple channels and ensuring it is up to date is HARD. Inaccurate inventory can lead to erroneous sales, missed sales, and can mean huge losses. Additionally, when it comes time to order a restock of popular items, tracking down how much you have on hand and what’s sold where becomes a headache every time.
Then, there’s the income component. It’s important to know what is selling best where in order to make strategic choices about where you invest your business efforts. (i.e. if you sell on Amazon and Etsy, but see more conversions on Etsy, you may change your inventory strategy).
What usually works: There are inventory management softwares that can track your stock levels and support multi-channel selling. In addition to real-time stock linking, you’ll also get helpful features like bulk uploads, automated re-ordering when stock gets low. Some platforms like Shopify have add-on apps (usually via paid subscription) that will integrate with other platforms. If you’re not sure if this is the right solution for your inventory issue, our e-commerce accountants can offer expert advice tailored to your business situation.
Getting Your E-Commerce Software to Play Nice with Your Accounting Software
If you’ve ever found yourself asking why you are looking at your online sales data and manually entering it to Quickbooks, wondering why you have to pay for an app to connect an e-commerce platform you pay for with an accounting platform you also pay for, or simply finding your e-commerce platform won’t generate the kind of reports you’ve need, then you know getting your e-commerce software integrated with your accounting software is important, and also a frustrating process to set up.
What usually works: The solution here is clear—connecting your e-commerce software to your accounting software, but it’s not always a smooth road. Not every accounting software integrates with all e-commerce softwares, so it’s a bit of mix and match. And, if you add inventory management software to the mix, you may need to completely rethink your software choices. You absolutely can make this system work, it simply takes time, expertise, and often training. As part of our e-commerce accounting services, we offer software selection, setup, integration and training, simply because we know how complicated it is.
Getting Accurate Data On Sales Funnels Through Multiple Channels
This is a tough one, because if you’re selling on multiple platforms (i.e. your website, Amazon, eBay, Etsy), you’re probably also advertising through multiple channels (i.e. on-site ads, Instagram and Facebook ads, and your own newsletter marketing). What this creates is splintered sales funnels, each with their own sales journey, strength, and weaknesses. Given this, it can be an incredible challenge trying to understand what is working, what your conversion rates actually are, and getting consistent analytics.
What usually works: There are a few ways to get around this. The first is conducting a cross-channel analysis, which essentially identifying and tracking how your customers move through your channels in the sales process (i.e. do they find you on Instagram, go to your individual store, and also check Amazon before buying?). Understanding this behavior can give you clues as to how the journeys overlap. From there we recommend a channel-specific analysis, meaning you evaluate each channel to understand its conversion rates, ROI, and other valuable data. The final action we recommend is collecting data across all of your channels and evaluating performance as a whole. You can compare and contrast data across channels (note: these are often different depending on the platform) based on the information available.
You Simply Can’t, or Don’t Want to Be Managing Every Aspect of It
When it comes to e-commerce, most of our clients fit into one of two categories—rainmakers: the big picture, 360°, high-level strategic thinkers, and details people: the in the nitty-gritty, data-oriented, knowing exactly what’s going on in every channel all the time type. Both are exceptional approaches to have in e-commerce. What we often see in new clients is a rainmaker who’s burnt out on also trying to be a details person, or a details person who is frustrated their strategies aren’t working.
The fact of e-commerce is that it’s not designed to have one person doing it all. It’s true that some people thrive on building their own business, and true also that some function fine without an overall strategy or get by without knowing the details. But, for most, a little help is usually necessary.
What usually works: Supplementing your skillset. Meaning, if you’re a rainmaker, finding someone who can analyze the details, generate reports, manage inventory, and get you the data you need to make your strategy will make your day-to-day worklife easier. If you’re a details person, consider bringing on a strategist who can look over your thorough data and offer insight and guidance. No matter what your need is, our team of e-commerce accountants fill both roles, meaning we are ready and able to complement your approach and step in where you need us.
Conclusion
It’s no secret that with the proliferation of online shopping, e-commerce has become an incredibly valuable and competitive business to own. If you’re experiencing any of these common e-commerce accounting problems, don’t be afraid to reach out for support from a CPA who has helped guided others through these same problems. It turns out, you don’t have to figure everything out on your own!
