Bookkeeping is one of the tasks that is all too easy to ignore. But if you let it pile up, you’ll only have a bigger headache to deal with come tax time. In order to help business owner in powering your overdue e-commerce bookkeeping, we’ve put together a step-by-step guide about bookkeeping for e-commerce sellers to balancing your books and keeping them under control.
Ready to get started for the guide on bookkeeping for e-commerce sellers? Grab a (big) coffee, block out a hefty chunk of time in your calendar, and work your way through the following steps.
Organize Your Paperwork
Dealing with a disorganized pile of paperwork could be the single biggest culprit in driving up the cost of business tax filings if you are not into any accounting services. While handling paperwork may seem unpleasant , you’re better off organizing documents and business records yourself than paying a CPA a high hourly rate to do it for you. If you’ve got a lot of paperwork to organize, now is the time you should start bookkeeping for e-commerce sellers.
You can keep your record keeping system simple by using a filing cabinet, or you can invest in software like Shoeboxed to store all of your paperwork digitally. Whichever option you choose, the key is to stick with it.
If you’re not sure how best to organize your documents, here are some simple categories to get you started. Most online document services will also have a list of pre-set categories to guide you through the process.
Remember, your business’s needs are unique, so the documents, receipts, and tax records you’ll need to keep may be different from those listed above. If you’re unsure about which documents you need to hang onto, read our guide to small business recordkeeping as a primer, and chat with your CPA to confirm that you’re keeping everything you need to make the IRS happy.
Separate Your Business and Personal Expenses
If you don’t have separate bank and credit card accounts for your business and your personal finances, separating your finances is a crucial step in getting your bookkeeping under control.
Going through your business account statements and highlight any expenses that are unrelated to your business is important to do before you attempt to reconcile your accounts because any personal expenses will throw off your balance. Once you’ve highlighted all personal expenses, you can start reconciling your accounts (excluding the highlighted expenses) and in order to reconcilation of accounts, bookkeeping for e-commerce selllers plays an important part.
In case you are managing your business expenses through your personal bank account, then you’ve got more work ahead of you. You’ll need to go through your personal bank and credit card statements and highlight all of your business transactions. You will then have to balance your books against these highlighted transactions only while reconciling your books. We also suggest you follow the steps in our guide How to Separate Your Finances, open a business bank account, and start managing your business expenses in separate accounts immediately.
Reconcile Your Accounts
Reconciling your accounts simply means “comparing two accounts and making sure they are in agreement.” So when you reconcile your accounts, you’re simply comparing the transactions on your business bank and credit card accounts with the numbers on your financial statements (income statement and balance sheet) and making sure that they’re equal.
Reconciliation is one of the key tasks a bookkeeper or online bookkeeping service would handle for you every month, and bookkeeping for e-commerce sellers is becoming quite popular among businessmen these days. One important note: if you don’t have any financial statements for your business, you will have nothing to reconcile your accounts against.
Collect employee and contractor tax forms
If you hired anyone to work on your business last year, you will likely have additional tax obligations to fulfill. The IRS has different filing and tax requirements for independent contractors than it does for employees, so it’s important to know which is relevant to your business. If you’re unsure, check out Employee vs Independent Contractor for more information.
As a business owner, you are responsible for knowing the total amount paid to each contractor; the rest of the required information can be gleaned from a Form W-9, which you should submit to every contractor.
While Form W-3 is only submitted to the IRS, you will need to submit a copy of Form W-2 to each employee in addition to the IRS.
Find a Professional to Review Your Books
Being an entrepreneur means that you’re accustomed to wearing a lot of hats, but the accountant is not one that we would recommend trying on, simply because tax filing is a complicated area that calls for the expertise of a pro.
Once you’ve completed all the steps above, it’s a good idea to hire a CPA or tax professional to review your books and file your taxes for you. The good news is that having organized and up-to-date books are the easiest way to reduce your accounting bill because your accountant won’t spend additional hours cleaning up your books.
If you’re more interested in the end results (i.e. having tax-ready financial statements) than the process of doing the bookkeeping yourself, you might consider outsourcing this task altogether. Bookkeeping for e-commerce sellers try to put an hourly value on your time and estimate how much it’s going to cost you to do this yourself. If you’ve got a lot of work to do, chances are you could find an outsourced option like Bench to do it for you more cost-effectively.Bookkeeping for e-commerce sellers becomes naturally vital for a growing buisness nowdays and it is a great way to manage your finances and books.