Accounting Challenges Faced by e-Commerce Businesses.

Accounting challenges e-commerce businesses.

Managing the financials of an e-commerce business is not an easy job. It comes with various accounting challenges and it can be hard to do it on your own. The significance of proper accounting practice is very high if you run a successful e-commerce business. You should understand the market, and customer needs. Find or develop the right product and market it the right way to acquire more customers. You will need in-depth knowledge about how it works, and how to record all sales, returns, and exchanges. You should have proper knowledge of your numbers to scale your business. This is a vital step to being compliant and growing your business.

Some of the major accounting challenges faced by e-commerce businesses are

  • Sales taxes

Sales taxes are simply the taxes added to the cost of a product during sales. You should add the sales tax to the amount customers have to pay and pay those taxes to the authorities. This might sound simpler but when it comes to e-commerce business it can be a burden, The sales tax regulations and rates vary from place to place. This can be a huge problem if you’re doing your accounting manually. You should always be aware of when you should pay the sales tax and to whom. If you sell your products on third-party marketplaces like amazon, you should know how they handle sales taxes. Investing in good accounting software that calculates and applies sales tax will make things simpler for you.

  • Understanding the costs

The major cost for running an e-commerce store includes; the cost of the product, packaging cost, selling fees on marketplaces, customs fees, and taxes, customer support costs, rent, utilities, marketing, etc. You should track every cost related to your business. You need to understand and analyze all these costs to decide on a reasonable margin for your product.

  • Merchant fees

 You should be a registered seller to sell your products through multiple third-party online marketplaces like Amazon. Amazon’s sales commission varies by product. Your net transaction amount will be shown in your account after deducting the merchant fees.

  • International payments

If you’re selling your products internationally, you will have to accept payments in the buyer’s currency. Converting foreign currency into yours while depositing it into your bank account will have some hidden charges. You should do enough research on this while you’re choosing the shopping cart software and it should accept payments in multiple currencies. You should also understand the exchange rate for credit card payments and their processing fees.

  • Inventory management

The inventory management process can be quite tricky when it comes to e-commerce. if you’re selling your product on multiple platforms, you should have a common platform to record and track your inventory. You should forecast estimated sales to meet the demand for your product and be prepared with enough inventory, also you should carefully track all the inventories to make sure you’re not stocking up more than enough.

Managing your business and taking care of your financials can be really stressful. Hiring an accountant will help you take care of all your challenges and will help you generate more revenue. They will take care of all your taxes and are up to date with tax rules and regulations across the country. Accurate financial reports will help you scale your business and forecast future sales to be prepared.

At Agile e-Platform provides customized accounting solutions for e-commerce businesses. Our expert accountants will scale your business and guide you to understand your numbers. Feel free to reach out to us for more information

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