8 accounting practices to use for an online business

During the pandemic, online shopping increased as high street stores were forced to close. E-commerce can have a high volume of everyday transactions which are kept on the selling channel, rather than in the bank account making it difficult to keep track of.

Here are a few pointers which should help

1. Hire an Accountant
2. Keep accurate financial records
3. Understand tax payments
4. Have a separate business account
5. Use accounting software
6. Review your finance statements
7. Have a budget
8. Manage your stock

 1. Hire an Accountant

A good accountant can prepare and file your taxes and advise you on financial matters. While you may be able to manage with an accounting software program, the professional advice of a qualified accountant is invaluable.

 2. Keep Accurate Financial Records

Keeping accurate financial records from the start of the on-line business is essential. Tracking all income and expenses, keeping receipts and invoices organized, and recording transactions promptly, is not only a good accounting practice, but it’s also a legal requirement. The HMRC requires all businesses to keep accurate records of their income and expenses. It is essential for keeping an eye on your business’s financial health.

 3. Have a separate business account

Besides the potential confusion that can arise from not segregating your personal account from your business accounts, maintaining separate accounts will provide you with a distinct overview of your cash flow. This clear distinction will help you better understand your financial situation. 

 4. Use Accounting Software

There are several accounting software packages available, and choosing the right one can save you time and money. Look for one that is easy to use and offers features that you need. You should also ensure that the software you choose can generate reports that you require. The most expensive is not always the best so make sure you shop around.

5. Review your Financial Statements regularly and pay close attention to your cash flow

You should review your financial statements monthly, at the minimum. These should include your income, balance, and cash flow statements. Reviewing these statements will help keep a check on your business’s financial health and growth. 

6. Understand Tax payments

All online or offline businesses must pay taxes. Therefore, understanding and filing your taxes on time is important. If you’re unsure, an accountant can help you and ensure that you comply.  

7. Have a Budget

Creating a budget enables you to monitor both your earnings and expenditures, identifying areas of potential overspending. Your budget should encompass all sources of income and expenses. Once established, sticking to the budget is crucial to prevent overspending and maintain a healthy cash flow. Regularly reviewing your budget and making necessary adjustments will further support your financial stability. 

8. Manage your stock

If you’re selling products online across different channels, it may be difficult to manage your stock list. An effective way to solve this is to store a minimal amount of stock you want and never let your stock get lower than this amount. 

To conclude

Accounting is essential for online and offline businesses as it provides insights into your business’s financial health; ensuring that your business is enroute to long-term success. 

If you need some advice on your accounting and the best methods for you contact the team for a chat.