Love counting cash from sales, but hate crunching numbers for tax time?
Without dedicated ecommerce accounting software, keeping up on the books can be exhausting and time-consuming. If you’re selling nationwide, tracking taxes by state might feel like a full-time job by itself.
Accounting and tax mistakes can be costly, so skipping steps or rushing the process isn’t an option. The best way to speed up bookkeeping while maintaining perfect accuracy is by using a business accounting system.
Why Your Ecommerce Business Needs Accounting Software
I used to do my own bookkeeping. The worst part, I’d wait to do it until the last possible minute. On top of that, I didn’t use any software! Yes, it can be done. I would export all my transactions from my website into a google sheet, match them up to the transactions in my bank account, do the same thing for PayPal, credit cards. Yeah, an absolute nightmare. But yes, I did it.
Now, I use software – and I have a bookkeeper to manage it for me. Outside of avoiding the stress dealing with accounting, there are several reasons why you should use software.
Clear Financial Reporting
Having all of your finances clearly in front of you in charts and graphs helps you visualize bookkeeping information. This clarity makes a huge difference in helping you fully understand your company’s financial statements at any given time.
Get insights about individual trends and big picture perspectives at the press of a button. This kind of clarity lets you consider your finances at any second, rather than consulting with multiple departments and waiting until the end of the month.
You can also learn important information about customer spending habits. In-depth customer research is one of the essentials of being a successful ecommerce startup.
No matter how good you or your bookkeeping team are at doing the math manually, humans are prone to error in a way that computers just aren’t. Integrated payment processing is more accurate in individual transactions. It is also able to screen for mistakes across informational categories to maintain the overall accuracy
Collaborate Between Departments
Most companies agree that cross-departmental collaboration is good for business. This is also true for bookkeeping. Making your business finances accessible to sales, marketing, payroll, inventory, etc., makes it easier for everyone to work together to make the right decisions for the management of company finances.
Types of Accounting Software
Online accounting software designed for your ecommerce business allows you to customize reporting in a way that makes the most sense for your company. It also enables you to quickly skip any areas that aren’t relevant to your type of business. At the same time, it ensures that all relevant areas for your business are covered.
For instance, ecommerce that operates nationally or worldwide must calculate taxes per sale per state, which can be challenging without specially-designed software. Selling different types of products requires different business licenses with additional associated costs. You want your software to understand the particular needs and potential snags of your business type.
Cloud vs. Desktop
In the early days of accounting tools, everything was based on desktop software that kept the vulnerable information off the internet. However, security on cloud networks has advanced, and more and more people put vast amounts of essential information onto cloud networks. Therefore, accounting tools have also been developed in cloud options.
- Cloud accounting software relies entirely on the cloud to keep all of your financial data, where you can conveniently access it from your smartphone or any computer. This is incredibly convenient, but it does open up your data to potential hacking on a cloud, so you’ll have to trust in the security of the cloud you choose.
- Cloud and desktop software allows you to put some kinds of information on the cloud and keeps other information only on a desktop. This can be convenient when you want to have some reports accessible online, but you don’t necessarily want all of your company’s financial data on the cloud.
- Desktop software keeps all of your data firmly on the desktop. Unless you export it and share it in some other way, you will not be able to access it on any cloud networks. If you don’t want to take any risks while having your information hacked into on a cloud, this will be the most secure choice.
What to Consider When Looking for the Best Accounting Software
There are many options to choose from, so it can be nerve-wracking to determine which small business bookkeeping tools are necessary for your company. As you compare the options, keep in mind what features your business needs and what you can do without.
Be conservative in what you can afford to spend, especially when you’re getting started, but don’t compromise on the features that you need. Here are a few features to look for in quality software that may be helpful for your business.
Constant Updates to Stay Current
You want your bookkeeping software to stay current on best practices. Your software should always be evolving to utilize new tools, improve functionality, and be easier to use. Automatic software updates and easy-to-use tutorials make it convenient for you and your company to make use of every new tool as it becomes available.
Supports Multiple Users
You may only need a single license software if you just want a small accounting department to have access to your finances. However, if you have more departments that need to access the software, you need to have the capacity for many people to sign in at once. Multiple users are a necessity if you want to allow cross-department collaboration.
Automated Billing, Payments, and Cash Flow
The more that your software can do for you, the less you’ll have to do yourself. Look for software that allows you to automate multiple functions if you have a company that has many repeat customers and transactions.
Automated billing and cash flow let customers purchase from your business or ecommerce store, be billed, and pay. They do all of this without anyone in your company facilitating the transaction. Recurring invoices make it easy to bill and collect regularly. Make sure that you have a great ecommerce platform to integrate with, and you’ll find that a lot of the legwork in billing and tracking inventory and sales are done for you.
If your ecommerce bookkeeper is doing manual accounting and inventory tracking, you’ve probably realized how challenging it can be. It’s hard to keep track of everything. It is frustrating when you think you have something in stock, but you don’t, or you order more of something you already have plenty of.
Software that keeps track of inventory management enables you to reduce what you need to store. It also ensures that customers are never promised something that you don’t have in stock.
Sales Tax Calculation
If you are in the ecommerce business, one of the most important aspects of your accounting is sales tax compliance. Lots of accounting programs can calculate sales tax, but often you have to enter and file manually.
Automated sales tax programs make it much easier to handle the thousands of sales tax jurisdictions throughout the United States. When you are doing ecommerce bookkeeping sales tax and income tax are important parts of your accounting needs.
For small businesses that operate locally or do not sell retail, automated sales tax compliance may not be as important.
Payroll, Timesheet, and Billable Hours
If you have employees, managing their time and cash flow can get exhausting. Most companies can’t fully automate payroll. That said, bookkeeping software can automate a lot of the calculations for you and make it a lot easier for your personnel department to sign off on payroll and billable hours. Clear, easy to understand timesheets make it easier for your personnel department and for your employees to understand their hours.
Integration with Ecommerce Platforms and Payment Processors
If you are selling things online using ecommerce platforms, an accounting package that integrates smoothly with your ecommerce selling platforms is essential. You don’t want to have to enter business expenses or bank transactions manually. You want every aspect of your financial data to smoothly integrate with your ecommerce platform and banks so that you always have access to accurate financial data.
For businesses that don’t utilize online platforms, ecommerce integration won’t be as important. Integration with your banking system is something that all businesses find convenient. Whatever kind of business you have, if you ever think that you may sell retail online, good integration with an ecommerce platform is something you should look for.
Use on the Go
Accounting options that have highly effective accounting apps make it much easier for you to handle a lot of the important aspects of running your business on your phone. Software that also operates on a cloud enables you to access the information that you need from any computer or device that is handy.
Scalable/ Tiered Pricing
There aren’t very many business owners who hope to remain at precisely the same size in the future as they are now. You want your company to be able to grow and you don’t want to have to worry about switching to new software when it does. You want a business accounting solution that offers you the functions you need at a price you can afford now and gives you room to grow down the road.
Plans offered at tiered pricing let you start at an affordable level and make a smooth transition to a more advanced or powerful program down the road. Programs that let you pay for only what you need make it easy to customize your plan without spending more than you have to.
Best Accounting Software for Ecommerce Businesses
When you’re just starting out with your ecommerce bookkeeping, you can’t afford to spend a lot on small business accounting tools. What better price point could there be than free? You won’t find all of the features of the more expensive options in a free plan, but you might be surprised by how much you actually can get for free. Keep in mind that to get the most from these plans, there are paid plan options available or you may pay by transaction.
When you are checking out these apps, make sure you double check if they integrate natively with your ecommerce platform. Zapier is ok, but I always recommend direct integration where possible. If they don’t have a direct integration, you can still use it – but it won’t be as robust in terms of tracking inventory costs. If you are a more established business with high inventory costs, make sure your software has direct integration with your platform.
QuickBooks has stood for a very long time as an overall solution for managing cash flow and taxes. Over the years, it has developed an interface that is much easier to use than much of the competition. Quickbooks has also integrated with all kinds of third-party tools to make it easy for you to utilize QuickBooks in your ecommerce store.
QuickBooks online has options for businesses of all sizes, which makes it a good option if you want easy software to help you scale. Choose from options online to make your accounting easy wherever you are or a desktop option to keep things as secure as possible.
Always a first choice for the self-employed, QuickBooks makes it easy to manage expense tracking, balance sheets, invoicing, inventory tracking, and a range of business essentials all-in-one place. Options start beneath $30 a month to give you all kinds of accounting solution functions like tracking income, billing, running reports, and allowing up to two accountants to access the account. If you want to scale up, pay more for accounts that cover more of what you need. Quickbooks has been the standard for a long time for good reason. For many small businesses with plans to grow, Quickbooks is the ultimate solution at a great price.
Wave accounting software lets you connect as many credit card and bank accounts as you want, making it much easier to keep track of all of your finances. Income and expense tracking is easy and free. You can take care of invoicing and scan receipts without any charges.
For your customers to pay through your invoices directly, you’ll have to pay a percentage. If you want payroll to go through Wave, you’ll pay for this as well. Wave integrates directly with Shopify.
Xero has been giving QuickBooks a run for their money over the past couple of years, with a few features that may be a tremendous benefit for your company, depending on your needs. Xero offers three plans to help you scale from small business up to mid-size and even into a larger company.
Even in the more affordable plans you can still have unlimited users, so if you want great collaboration between departments, this might be the best software for your needs. Live bank feeds enable constant bank reconciliation so you can see exactly how much money you have at any given second.
As you go into the higher-paying plans, there are fewer restrictions on how much invoicing and how many quotes you can produce. Higher paying plans also feature support for various currencies. If you have no intention to scale up, this might not be the best company for you, as it is not ideal for small businesses unless you want to grow.
If you’re looking for an intuitive and easy-to-use accounting solution and don’t mind paying a bit more at the beginning for it, Freshbooks might be right for your company. It does an excellent job of meeting the needs of small businesses and freelancers and offers a user experience that is hard to beat.
If collaboration is important to you, you’ll appreciate the number of tools designed to make it easier for everyone in your company to understand your finances and contribute valuable information from their own experiences. Great mobile apps and simple record-keeping makes it easy to use this software on the go.
This may not be the best software for helping you handle taxes. If you want to create highly customized invoicing, it might not be ideal for your needs. However, if you want an easy to use but powerful accounting tool to help you scale up, this might be the best software for you.
If you want a complete accounting solution for your small business that can keep up with you as you grow and you’re willing to pay some of the higher prices in the business, this might be the right solution for you. Despite its name, Sage 50cloud does not have to be exclusively on the cloud. Hard-drive based software integrates with the cloud so that you can get the reports you want where you need them without opening up all your finances to the cloud.
If you have a lot of inventory to manage, Sage may have even more value for you, since they offer some of the best tools available for inventory tracking. This makes it a great option for ecommerce businesses with plans to grow big. Sage is an excellent option for anyone with employees who work remotely.
The interface on Sage is not as easy to use as some of its competitors, with awkward traits like links opening its new windows and a busy interface. The lack of a good mobile app is a big problem for many small businesses. However, this software offers customizability, good invoicing, and in-depth records that more than make up for a bit of clumsiness for many business owners.
ZipBooks offers a feature-packed account for free. It makes invoicing, financial reports, etc. very easy. If you’re already using Square or PayPal to handle a lot of your transactions, you’ll appreciate that ZipBooks integrates smoothly with these platforms so you can still take online payment through them, but in a much easier way than before. You will, of course, still pay the standard rates required from these services.
If you decide to beef up your subscription, you can add on a payroll option, Gusto. This plan lets you integrate payroll to make it much, much easier on your personnel management.
If you don’t have products to sell but need robust software with a great app to help you manage your accounting tasks on the go, FreeAgent might be right for you. You can access it from any browser with the cloud. It has a very easy to use mobile app that makes it convenient for you to bill, handle invoicing, track time, etc on the go.
This isn’t the cheapest option on the market, but it offers a lot for the price. This software offers the kind of time-saving features that small business owners will love. It offers great insights to help you understand your income and spending thoroughly. Customizable invoices could be especially helpful for anyone who bills out large projects.
NetSuite isn’t cheap, but it offers plans for niche businesses that set it apart from some of the other big company options. It also has some things that set it aside from the competition, like great customer relationship management tools and a simple reporting style that makes it very easy for you to understand.
Business owners looking for specific solutions like retail software often turn to NetSuite. If you’ve been frustrated by accounting dashboards in the past, you’ll appreciate how easy it is to navigate NetSuite.
There are a lot of features offered in invoicing, financial reports, etc., and it may be confusing for you to figure out what is useful for you and what isn’t, especially at first. However, if you need a robust software solution for your business niche, this might be the right software for you.
If you want to make it as simple as possible to manage your business account simply and easily, Kashoo might be right for you. It may be a bit basic for businesses that want more robust features, but if simplicity in the basics is what you’re looking for, this is a great solution.
Kashoo comes at a reasonable price and is even more affordable when paid annually. Multiple businesses can be added to your account as well, making it simple to keep track of all of your enterprises at once. It’s easy to set up and has great time-saving features like recurring invoices and auto connection to bank and credit card accounts for simple reconciliation.
Calculating taxes for your ecommerce business is one of the most challenging aspects of accounting. It makes sense that small business accounting tools for calculating taxes would be popular for ecommerce business. Taxjar automatically figures out the sales tax for each state that you sell products in, so that you won’t have to calculate it manually.
This app plugs easily into your existing ecommerce store. It even lets you file your taxes automatically. You may find that this simple program saves you an incredible amount of time and effort while keeping you in good standing with the IRS.
Do You Still Need an Accountant?
Whether or not your business will still need an accountant depends on how much accounting you need to do and how much of it you’re comfortable handling yourself. You may decide to take care of most of your business accounting internally, but outsource your taxes to an accounting firm.
Maybe you’ll hire an internal accountant to manage your accounts year-round, including taxes. ecommerce accounting will have different needs than other small businesses.
Think about what you need now and how you intend to grow when choosing the right accountant. Whatever accountant you choose, make sure they have specific experience in your area of business. Taxes and best practices for bookkeeping often vary by business type, so using an accountant who understands your field is essential.
Choose the Right Accounting Software for Your Company
Whether you have an ecommerce company or are running another small business, great bookkeeping is essential for your business to thrive and grow. Accounting tools that let you see insights about your business expenditures and income at a glance make it much easier for you to make decisions based on the financial data available to you.
Software that reconciles effortlessly between ecommerce platforms, banks, and other income and expenditures constantly make it clear to you just how much capital your company has and avoids over or understocking.
Automated invoicing and payroll functions can make your life easier whether you are in retail or service. The right software for your company makes all the difference between how smoothly your company runs by taking control of the lifeblood of your company: it’s money.