E-commerce continues to win over customers at the expense of brick-and-mortar businesses.
Last year, Americans spent more than $600 billion on online shopping, representing a 15% year-over-year increase.
And this trend appears primed for an even bigger jump in 2020, with the coronavirus outbreak forcing millions of people to buy products they would otherwise purchase at the store. You name it, it’s probably seen a spike in online sales. Computers, meals, clothing and, of course, toilet paper, anything can be purchased online. Overall, the U.S. e-commerce market saw a 25% spike in sales last month.
This is good news if your company already emphasizes online sales. And if not, but you’re looking to add an e-commerce component to your business, that’s great as well. While the tides are clearly shifting, you can still enter e-commerce at a relatively early point; online sales represented 6.4% of total retail sales spending in 2010, and in 2019, online sales represented 16% of all retail spending.
The continued gravitation towards buying and selling online shopping has shined a brighter spotlight on how companies are managing their e-commerce businesses. But simply utilizing QuickBooks isn’t enough for businesses in 2020.
Using QuickBooks without a process for efficiently transferring data from third-party platforms like Amazon is a recipe for disaster. This can lead to disorganized books that hurt your business both on a day-to-day basis and when it’s time to do your taxes.
At MISSION Accounting, we streamline the process for getting businesses using QuickBooks effectively for ecommerce. There are many challenges e-commerce businesses face when using QuickBooks. We’re breaking them down here and sharing how we can help your business overcome them.
The Main Hurdle E-Commerce Businesses Face
By definition, e-commerce businesses are complex because sales transactions occur on a variety of platforms. Platforms include: Amazon, Shopify, eBay, and Etsy to name a few.
Online retailers aren’t handcuffed to one store. You can sell your products on multiple platforms. The key challenge then becomes managing your sales on these different platforms and integrating the sales data back into your accounting system.
This creates complications for most businesses, even online businesses with a solid Intuit QuickBooks foundation. You’re making sales and receiving payments, on a platform — or platforms — that isn’t your typical accounting system. In the end, you still need to find a way to get those sales and payments into QuickBooks Online.
This isn’t a major headache when your business only has a handful of e-commerce sales each day. With few daily transactions it’s easy enough to manually enter those sales into your system. Yet, if you’re like most of our clients, you’re growth minded or have moved well beyond that point. If you have dozens, hundreds or even thousands of sales to manage per day you need a solution.
A thriving e-commerce business is a good problem to have, and most businesses in this position look to QuickBooks apps to help. Quickbooks apps can automate sales tickets from platforms like Amazon and Shopify. A popular app for pulling in sales data to QuickBooks,Webgility, which was featured in our recent blog post on must-have QuickBooks apps.
When QuickBooks Apps Become a Problem
One challenge many e-commerce businesses have when researching QuickBooks apps is that there are too many options to choose from.
Many times MISSION is hired to step in and help streamline incoming sales data. This is especially true for companies that lean too heavily on apps. When companies rely too much on apps it leads to information overload. Too much information is added to their accounting software and logged in the wrong places.
It’s easy for an e-commerce business owner to fall into this trap. Often it happens because the information collected by the QuickBooks app sounds like good information to have. But when your apps start adding data that isn’t necessary, it only clutters QuickBooks.
Business owners get apps for Quickbooks, not because they need them, but because it’s easy to sign up, free to try, and relatively inexpensive to keep connected to their account. They add an app without thinking about the bigger picture. This doesn’t help, instead, it counteracts the purpose of using QuickBooks, which is to gain a comprehensive and easily-accessible view of your business.
In short: apps offer automatic data syncing between your sales platforms and your QuickBooks software — but automatically syncing too much information in the wrong places and frequently just means you can create a mess faster than if you were manually entering your data.
Less is often more when it comes to apps. The key is to know which combination of apps are the best for your business to integrate your sales and billing information into QuickBooks.
Why “Good Books” Are Essential
Making sure you have “good books,” or a clean QuickBooks setup, is critical.
There are two reasons for this. The first is that good books offer an important snapshot of how your business is performing. You should be able to quickly look at your accounting system and know your sales, costs and especially your gross profit, whether it’s for a month or a year. Having a firm grasp on gross profit is essential, since it guides small business owners when it comes to how much they can spend on salaries and other general expenses.
The second reason it’s important to have a clean QuickBooks setup is the compliance aspect. When it comes to filing taxes, even if you’re simply transferring your information over to TurboTax, you need to have your QuickBooks in order. This will help your business avoid pesky IRS audits, while also providing insight into whether your company qualifies for any small business tax breaks.
How MISSION Can Help
At MISSION Accounting, we believe QuickBooks is the best accounting software available for small businesses. (We touched on the benefits of QuickBooks versus other accounting tools in a previous podcast episode.) And we want to make sure you’re getting everything out of it that you need.
What that means is optimizing QuickBooks to tackle the specific needs of your e-commerce business. This goes beyond simply adding apps and having them pull in data from various platforms. It’s about finding the right QuickBooks apps to help your business easily track its sales and costs. This is a unique process and should be chosen on a select company-by-company basis with the big picture in mind at all times.
By crafting a tailored game plan for your business, we can help alleviate the stress that comes with tracking daily online sales, especially if sales are on multiple platforms. We work with you to develop a concise, user-friendly QuickBooks workflow for your business. If you need help bringing your books to the next level, please reach out to MISSION Accounting today.