7 Accounting Mistakes That Is Killing Your Ecommerce Business

• Reading Time: 4 Minutes
• Published: May 7, 2021
• Last Updated: February 12, 2025

Running an e-commerce business is not for faint hearts. It requires a multifaced approach and someone who understands e-commerce financials. While accounting is what every e-commerce business has in mind, profit is something every business owner is looking forward to. For this reason, an e-commerce business owner must also take an interest in the accounting process of their business. We understand that with the diverse task you have to undertake as an e-commerce business owner, it might be challenging to pay undivided attention to the accounting process. However, you must hire a full-time accountant or accounting service provider to help you with this process.

However, it is your responsibility to do a quality check on all business processes, and for this, you must have minimal understanding of each process. Today in this article, we will talk about 7 basic accounting mistakes that you or your accountant might be committing that will impact your bottom-line and overall business efficiency. So, let us delve into the 7 accounting mistakes that you might be committing as an e-commerce business owner-

Unaccounted Cash Flow

The revenue of any business is the result of the excess of cash inflow over cash outflow. You must be accountable for all cash flow, and you should have a proper record of each transaction. Missing out on the recording of any transaction can lead to cash leakage and inaccurate representation of your business’s financial health.

Losing track of Inventory

Inventory is the most essential component for an e-commerce business. If you have a growing business, you will have many inventories that might be difficult to manage. However, neglecting your inventory will affect your accounting process and affect your customer’s satisfaction level. It is beneficial to use inventory management software and follow the correct inventory management technique to help serve your customer better.

Disregarding Cost Accounting

The profit margins of any e-commerce business are pretty steep, and many costs are involved apart from production cost, which needs consideration. It is critical to conduct cost accounting for your products and services then assign a price that is inclusive of the production cost and marketing, delivery, and every cost involved in making the product and service reach the final customer.

Along with this, a profit margin has to be set while ensuring your final price is competitive enough compared to all your competitors. Cost accounting is an early-stage process and starts even before you start your production. It will be beneficial to consult an ecommerce accounting services provider at the early stage of your business to avoid any loss of potential income in the future.

 Sales Channel Cost

A sales channel is a part of the cost involved in ensuring your product or service reaches the final customer. While this is a part of the cost accounting itself but considering the amount of importance it holds for an e-commerce business, we thought it would be best to discuss it in detail.

You might be conducting your sale with the help of different channels, and each channel has a different margins cut-off. Choosing the right sales channel that doesn’t take up much of your profit margin while ensuring to select a medium that could help you reach out to a broader range of potential customers is the key.

Manual Accounting Process

Since we are talking about sales channels, it is crucial that you know that recording all the transactions from different sales channels in itself could be a massive task for your accounting team. Not just the sales channel, if you are using different inventory management software, imagine the chaos that your accounting team will be facing while recording all these transactions. Manual accounting is a thing of the past, and if you think you can survive with manual accounting, you are just calling out for trouble.

You need to start automating your bookkeeping and accounting process. Choose accounting software that can support multiple e-commerce sales channels, multiple warehouses, inventory management, multiple payment modes, and similar e-commerce specific activities. You can also opt for software that allows integration with other software that helps an e-commerce business.

Wrong Accounting Method

Out of the two accounting methods – cash and accrual, one has to make use of the method that fits the business needs perfectly. While many factors can influence the selection of accounting methods, however, if you have a growing e-commerce business, we suggest opting for the accrual method. Another point to note is that changing accounting method is not an easy process and you might need the help of online accounting services to help you transfer you accounting data from one method to another.

Confusing Chart of Accounts

Charts of accounts is a tool that helps organize all the financial transactions that a company conducted into categories and subcategories. You must understand the nature of each transaction and ensure to park the money in the right accounts. This will make all the users of financial statements and other financial documents understand the nature of the transaction and a clear presentation of the business finance.

Whether you are a new e-commerce business who need assistance with cost accounting or an existing business who needs help with changing accounting method otherwise simply need assistance with day to day bookkeeping and accounting, our experts at Whiz Consulting can be an excellent fit for your need. Contact us today for a free 30 mins consultation with our experts.

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