If you are like most BigCommerce sellers we talk to, you didn’t start your business because you love numbers and accounting.
However, knowing your numbers and taking control of your finances is the most important thing you can do for your business. The earlier you set up systems and processes to do just that, the better offer you’ll be.
In this guide, we’ll discuss everything BigCommerce merchants need to know about accounting.
Why is accounting important for BigCommerce merchants?
Accounting is often the least favorite part of running an online store for eCommerce founders. However, it’s a critical piece of business for several reasons. First and foremost, it gives your company the financial insights necessary to make better business decisions.
This starts with investing in cloud accounting software, like Xero or Quickbooks, which allows for more accurate reporting and financial records. This allows you to understand the profit levers in your business. You can also use this for cash flow management, cash flow forecasting, inventory planning, and to effectively predict your taxes so you don’t overpay or accumulate fees for late payments.
What’s the best accounting software for BigCommerce?
There are plenty of cloud accounting software options out there for eCommerce sellers. In our experience, two stand out above the rest: QuickBooks Online and Xero.
Both have their advantages but we recommend Xero due to its ease of use, cost and ability to easily integrate third-party applications for most BigCommerce stores.
Sync Xero and BigCommerce
One of the best things you can do for the efficiency and accuracy of your eCommerce business is to automate wherever possible, especially when it comes to your finances. When dealing with large catalogs and SKUs in particular, you can waste a lot of time with tedious data entry tasks. There’s also an element of human error that occurs when you calculate your numbers by hand or spreadsheet.
That’s why we recommend automating your accounting.
By syncing Xero with your BigCommerce account you can save time, improve the accuracy of your recorded finances, and keep your operation running smoothly behind the scenes. This integration allows you to sync sales orders and customers from your online store, product information, and stock levels.
Pro Tip: We are aware of beta testing of an integration between A2X and BigCommerce going live later this year!”
How to do accounting for BigCommerce merchants
Switch to accrual accounting
There are two primary types of accounting methods to consider for your business: accrual or cash accounting. Accrual accounting is more effective for eCommerce merchants than the cash method. If you’re currently using a cash-based accounting method, it’s time to make the switch.
Accrual accounting is the best fit for eCommerce companies and larger businesses in general because it records transactions at the time sales or orders are made before money is exchanged. In this way, it focuses on value over immediate cash handling. For instance, let’s say someone purchases a widget on your website on the 1st of the month, but your payment processor doesn’t deposit the funds into your account until the 8th. Accrual accounting would record the income on the 1st, not the 8th.
Cash-based accounting would record the transaction when the funds were deposited on the 8th instead. This can be extremely difficult to track with payment delays and high-volume transactions. Switching to accrual accounting can help simplify this process.
Make sure your chart of accounts are up to date
The importance of maintaining an accurate chart of accounts cannot be overstated. A chart of accounts is where all of your general ledger accounts reside and it houses every financial transaction your eCommerce business makes.
You can expect to see 5 types of accounts in your chart of accounts: assets, liabilities, equity, revenue, and expenses. This helps you categorize transactions. For example, computers and equipment would be recorded as assets. Owner withdrawals would fall under equity.
Maintain proper inventory reporting
Inventory management is particularly important for eCommerce merchants, especially those with a high volume of SKUs. Without proper inventory reporting, it’s unlikely that your finances and taxes will be accurate.
Luckily, cloud inventory management software is available to help eCommerce sellers manage, track, and control inventory across multiple platforms. For example, if you sell your product on your website and Amazon, your software would alert you when you run out of stock regardless of platform. This way, you don’t sell any product you don’t have on one platform after selling out on another.
As your business scales, you’ll likely come to a point where manual inventory management becomes too tedious. Especially on multiple platforms. Using an inventory management software solution like DEAR can help improve the efficiency and accuracy of your inventory tracking.
Reconcile your accounts regularly
Reconciling your accounts means comparing your book balance to your bank’s records. The practice may sound tedious but it’s absolutely essential to keeping accurate financial records. At the very least, a small business should reconcile their bank accounts monthly. However, larger enterprise companies should reconcile their accounts daily for cash flow purposes.
The biggest advantage to reconciling often is that you can catch mistakes as they happen. For example, let’s say your website and domain hosting auto-renewed. The transaction appeared in your bank account, but not in your accounting records. You can add the expense as a transaction so your records match.
Another plus to regularly reconciling your accounts is mitigating the risk of fraud. By checking your accounts, you’ll notice right away if there are fraudulent charges on your card or checks being issued without authorization. Reducing the risk of fraud includes internal threats as well. Reconciliation allows you to monitor for theft by employees or contractors.
Create repeatable financial systems and processes
The key to efficiency with your accounting is creating repeatable systems and processes instead of developing them from scratch each time.
For instance, using your accounting software you can customize certain reports that are generated on a set monthly basis. Instead of manually going into the software and setting the report parameters each time, you can save yourself the hassle and set it to run the same parameters automatically.
There are several reports that can be generated and automated this way. For instance, a profit and loss report (P&L) that details expenses and revenue to report the overall net profit or loss. Other automated reports include a balance sheet to show the ending balance at any given point, a cash flow statement to show where cash is coming and going, a cash flow forecast to predict future revenue, and an inventory forecast to help with fulfilling customer orders.
Automating these systems helps ensure accurate bookkeeping and financial reporting. It also makes tax time easier when all of your accounts and reports are in order.
4 additional apps to make managing your finances easier
In addition to the accounting software mentioned above, we recommend 4 additional apps to streamline your finances. You’ll want to take advantage of any available demos or free trials to see if the app is the right fit for your business. Here’s a bit about each and the price points you can expect.
A2X is an app that makes it easy to sync your transactions from Amazon, eBay, Etsy, and Walmart into Xero. It’s designed to simplify bookkeeping and automation for merchants selling on 3rd party platforms .
Pricing for A2X varies depending on the channels you sell on. You’ll want to explore your different options based on your platforms and sales channels. A multi-channel option is available for merchants that sell on more than one platform. Free plans are also available for smaller eCommerce businesses.
TaxJar was made to help sellers comply with U.S complex sales tax laws for online sales. It makes sales tax compliance a breeze by automating the sales tax life cycle across all sales channels.
Pricing for TaxJar begins at $19/month for a starter account. 30-day free trials are available for all plan sizes to allow you to test the tax compliance software before you start a plan.
Gusto is a payroll and HR app designed to help businesses successfully manage and grow their teams. Once you have a handful of contractors and employees, you’ll need to keep close tabs on your staffing expenses. Gusto helps you do just that.
Pricing for Gusto starts at just $39/month for their most basic, core plan plus $6/month for each additional person. You’ll need to contact their sales team for a custom quote for enterprise-level accounts.
If you are selling on multiple channels, like your BigCommerce site, Amazon, eBay, and wholesale, DEAR by Cin7 makes the process of managing your inventory and orders across every channel you sell on easier. With DEAR, you have instant access to managing stock levels, orders, and adjusting prices across each listing. Merchants, who sell on 2 or more channels or who have higher inventory levels will benefit the most from DEAR’s inventory automation and accounting software integration.
Pricing for DEAR starts at $375/month. However, there is a 14-day free trial.
Pro Tip: Looking for a detailed guide of more Xero third-party integrations? Check out this post with the top 19 Xero integrations.
BigCommerce accounting key takeaways
When it comes to eCommerce, the best thing you can do early on is to get in the habit of automating and streamlining your finances.
Utilize a cloud accounting software, like Xero, as quickly as possible to get your finances in order, and stay on top of your reports and transactions. Switching from cash to accrual accounting, monitoring inventory and bank reconciliations, and creating repeatable financial systems are key to effective accounting.
Remember, the most important thing for BigCommerce accounting is to be proactive. Putting systems and software in place now can save you a major headache in the future.
Want help getting your finances organized and up-to-date? Schedule a free consultation with our team.