How Your Accounting Software Should Help Overcome Ecommerce Bookkeeping Challenges

Bookkeeping for ecommerce presents unique challenges for even the most well-run brands, including the need to keep pace with high transaction volumes, manage sales across channels, and accurately reconcile payouts from various platforms.

In this blog, we’ll explore those challenges in detail and offer a perspective on how the right technology can help to address them.

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Key challenges with ecommerce bookkeeping

First, let's look at some of the major ecommerce bookkeeping challenges that your accounting software can help to address. While this isn't an exhaustive list, these are some of the most common issues that brands face.

High transaction volume and velocity

The number of transactions that occur on an online store create a constant stream of financial events that need to be meticulously recorded and managed — everything from sales to processing refunds to the costs associated with outbound fulfillment. For businesses processing thousands of orders per month, this can quickly become unmanageable without the right processes and technology in place. 

Common pitfalls include inaccurate revenue recognition, miscalculated COGS, and an excessive number of hours spent investigating discrepancies that could have been prevented.

Multichannel financial management

To maximize reach and revenue, many ecommerce businesses adopt a multichannel sales strategy, selling across their own direct-to-consumer (DTC) website, marketplaces like Amazon, and social commerce platforms. While this expands your customer base, it also introduces significant bookkeeping complexity. 

The platforms supporting each channel typically have their own unique reporting formats, fee structures, refund processing policies, and payout schedules (more on this below). This disparity makes it difficult to consolidate financial data and gain a holistic, accurate picture of a brand’s overall financial health. 

This lack of clarity can have serious strategic implications. For instance, as we’ve highlighted previously, inconsistent financial records and an inability to clearly demonstrate profitability per channel can be a major roadblock for a DTC brand looking to be acquired.

Reconciliation and payouts

One of the most error-prone aspects of ecommerce bookkeeping is reconciling payouts from sales platforms. Payouts are often disbursed in lump sums, not on a per-transaction basis. They typically bundle sales with deductions for refunds, various platform or vendor fees (e.g., transaction fees, referral fees, advertising costs), and sometimes even sales tax collected on behalf of the seller. 

This forces brands to spend an excessive amount of time and effort manually evaluating each payout to identify and correctly categorize underlying transactions, making it difficult to analyze the actual performance of the channel.

Complex outbound fulfillment

Modern ecommerce businesses often employ a variety of fulfillment methods to get products to their customers efficiently. This might include fulfillment from a number of their own warehouse(s), partnering with a third-party logistics (3PL) provider for some or all of their volume, or utilizing dropshipping for certain products. Operational challenges then lead to bookkeeping challenges.

For example, the same order can consist of items that were pre-ordered, dropshipped, or personalized and bundled on the fly. Fulfillment costs vary across different warehouses for the same item, complicating COGS calculation. Additionally, revenue recognition timing will vary depending on when specific line items are shipped.

Inventory is often the largest asset on an ecommerce business's balance sheet, and accurately tracking its movement, value, and associated costs across multiple locations and systems is critical. Poor inventory accounting, stemming from disjointed fulfillment processes, can lead to operational challenges such as overselling popular items (leading to customer dissatisfaction) or unnecessary stockouts (resulting in lost sales). Bookkeeping challenges in this area can directly translate into operational headaches, making them all the more important to address.

How your technology should help to manage the complexities of ecommerce bookkeeping

Modern accounting software goes beyond providing a system for managing a GL; it's a powerful engine for automation, integration, and insight that can help to address the challenges above.

Handling high (and growing) transaction volumes

The automated integration and entry of financial data is critical when it comes to keeping up with transaction volume. Your accounting platform should be capable of pulling data directly from your ecommerce platforms, payment gateways, and bank accounts using methods via API, EDI etc. Eliminating manual data entry here saves time and drastically reduces the risk of errors. 

Your technology should also automate the calculation of COGS for each sale, based on your preferred inventory costing method . Ideally, your technology should also help to flag discrepancies or anomalies that require attention, allowing your team to focus on exceptions rather than sifting through every single transaction.

Managing multichannel sales

Similar to handling high transaction volumes, your technology should also integrate with all the platforms you sell on — not just to pull in raw data, but also standardize it to align with your company's Chart of Accounts (COA). This ensures consistency in how revenue, fees, and expenses are categorized, regardless of their source. 

Centralized and standardized data also powers comprehensive performance reporting, allowing you to easily view and analyze the efficacy and profitability of each sales channel side-by-side, enabling data-driven decisions about where to focus your marketing spend and inventory investments.

Streamlining reconciliation

Modern accounting software should offer automated payout matching capabilities that map the lump-sum payouts received from ecommerce platforms back to the individual sales transactions, refunds, and various fees they represent. 

Beyond reducing the manual effort involved in this traditionally time-consuming process, this also helps to reduce the risk of errors, have a better understanding of your cash position, and close your books faster.

Processing complex outbound fulfillment

For brands with intricate fulfillment networks, your accounting technology needs to act as a central hub, which further creates the need for seamless integration. Your technology should connect to your system of record for inventory to access quantities and valuations across all locations, as well as the technology used by your 3PLs or dropship suppliers to facilitate the automated receipt of shipment confirmations and tracking data. 

Once orders are confirmed as shipped, your system can then record the associated COGS and account for the entire landed cost of your inventory, including elements like freight, customs fees, and duties to ensure accuracy.

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Conclusion

By leveraging accounting software designed with the specific needs of online sellers in mind – with a focus on integration, automation, and detailed reporting – brands can simplify complexity and improve their ability to scale. 

If managing increasing bookkeeping complexity or moving to a more scalable accounting solution is a priority, reach out to our team here to discuss your use case and see if Fulfil can help.