After the past year, nobody needs convincing on the importance of eCommerce and the ability to service your clients beyond your brick and mortar establishments. Due to the low barrier to entry, many businesses have taken that first step to trade online. However, there are many challenges that business owners never knew they would have until after they had already started. Having an online store is one thing, managing inventory and accounting for the transactions that happen in your store can be challenging if you do not have the right tools in place. In this guide, we discuss six common eCommerce Accounting challenges and how to overcome them.
Sales Tax
Trading in different geographies means varying sales tax liabilities. Perhaps your ERP solution has multi-currency capabilities, but how do you bridge your ERP and eCommerce storefront disparities? eCommerce store owners have to juggle multiple tax locations. Choose a solution that enables you to account for taxes within multiple geographies. I
Inventory Management
You have probably had strict control over your inventory over the years, however, you may have realized that it becomes more complex as you add more sales channels. It is crucial to track what inventory you have, where it is, and how much it is worth. Every sale you make online or at your physical store changes these values. How do you maintain accurate inventory when you trade on multiple channels? Through an integrated ERP and eCommerce solution that streamlines your inventory management.
Inventory management is the backbone of every retailer’s cash flow. It is complicated enough on its own. Let alone having to tie it in with your accounting. Adding a third layer, eCommerce, to what is already complex. Invest in solutions that automate these processes and gain a real-time view of your inventory across all your sales channels and warehouses.
Tracking eCommerce Platform Fees
Everything has a cost. Your preferred eCommerce platform, shipping partner and payment gateways are no exception. Shipping costs often vary depending on the weight and size of the product. At the end of the month, these expenses are recorded together as “Operating fees” giving sellers zero granularity. The lack of insight makes your budget planning that much more difficult.
It’s more sustainable to use automation so when your business scales, you have less busywork to do. This will let you focus on future growth.
Managing Returns
Returns are a natural part of eCommerce, even in brick and mortar retail stores. Most sellers let their customers return items that don’t fit, arrive damaged, or don’t work for any other reason. However, returns throw a wrench into the accounting process. Customers are issued a refund, and the returned product(s) may have to be re-added to the inventory.
The key to handling returns is a careful attention to detail. Sellers have to decide whether to write off inventory so they don’t expense it twice and mess up their books. Returns management is a feature of many advanced inventory management systems.
Manual Data Entry
One of the biggest challenges in eCommerce in South Africa, is bridging the gap between your storefront and your accounting system. Manual entry of all this data becomes overwhelming as the business grows. Some sellers outsource this process to an accountant, but you might be surprised by the cost. Simply put, manual data entry is a major pain point because it is time-consuming and rife with potential for errors.
Automation can help online retailers overcome this challenge by taking over the task. Accounting automation software can connect ecommerce stores to your accounting solution by posting all transactions.
Access to Data Analytics
eCommerce platforms such as WooCommerce offer basic reports. When it comes to analytics and reporting, some ecommerce platforms offer more than others. This poses a challenge to sellers who have limited access to store performance data. They would get delayed information, constantly reacting to what has already happened. Solid reporting allows you to be proactive based on up-to-date analytics and performance history.
You need greater visibility into your accounting to be proactive. With a real-time store performance tracker, you can see how quickly inventory is moving and which channels are the biggest revenue drivers.
Ecommerce accounting is complex and full of unique challenges. But none of them are impossible. You can invest in your tools early on to make navigating this subject a breeze.
