Keeping Track of Your E-Commerce Business Expenses
Brody Hallon February 28, 2022.
For a business to stay competitive, the importance of tracking finances cannot be overstated. By keeping track of key financial indicators such as revenue, expenses, and profits, business owners can make informed decisions about where to allocate their resources in order to grow.
If you’re ready to take control of your e-commerce business’ finances, let’s look at how to keep track of business expenses and income.
Importance of Tracking E-Commerce Expenses
A business must track its financials in order to make sound decisions about where to allocate its resources—whether that be scaling back strategies that aren’t working or scaling up ones that do.
In particular, the ability to track tax-deductible expenses is imperative to receiving the best possible return. Tracking these expenses can be complex, but it is worth the effort to save money. By taking advantage of all deductions, e-commerce businesses can improve their bottom line and remain competitive in a fast-growing industry.
Typical E-Commerce Business Expenses
Like any business, operating an e-commerce store comes with running expenses. These include, but are not limited to:
- Product and cost of goods sold
- Marketing costs
- Secure payment methods
- Website hosting
- Warehousing and storage
- Administrative costs
External Expense Tracking Assistance
Professional bookkeepers can help a business track its finances by creating and analyzing financial statements, recording and paying bills, and providing other consulting services. By using complex accounting methods and tools, bookkeepers can help businesses make sound financial decisions to improve their overall profitability.
The use of an online business expense tracker, like BeProfit's profit and expense tracking tool, can help businesses track their finances by providing a comprehensive view of expenses over a given period. By recording all expenses as they are incurred, businesses can better understand where money is being spent and identify areas for cost-cutting.
Additionally, businesses can use historical data from profit tracking to create reports that illustrate trends in spending, which can be helpful for budgeting and forecasting purposes.
By using specialized formulas and functions reported in spreadsheets, businesses can get a better understanding of their financial standing and make more informed decisions about their future. That way, business owners can keep track of spending, budgeting, and revenue with minimal effort.
Tips to Simplify Expense Tracking
Keep Personal and Business Expenses Separate
When business and personal expenses are mixed, it's challenging to determine which costs are for which use, leading to inaccurate expense tracking and incorrect tax deductions.
By keeping expenses separate, it is easier to track and categorize them. This can help ensure that all expenses are accounted for and that no deductions are missed.
Choose the Right Accounting Method for You
The benefit of choosing an accounting method is that it can help keep expense tracking simple. For example, the cash basis method only records expenses when cash is paid out, while the accrual basis method records expenses when they are incurred, even if no cash has changed hands.
This difference can mean that the accrual basis method results in a more accurate picture of a company's financial health, as it considers payments that have been promised but not yet made.
Use Cloud-Based Software
Cloud-based software can help keep expense tracking simple by allowing employees to access the software from any computer with an internet connection. This eliminates the need to install and maintain software on individual computers and also enables employees to track expenses from anywhere. The cloud-based software can also automatically import bank statements and credit card transactions.
Keep Track of Receipts
A system for tracking receipts can help stay on top of expenses and provide an easy way to keep track of what has been spent and when. This can help avoid confusion and ensure that all expenses are accounted for. Having a system for tracking receipts can also help make tax season less stressful as it will be easier to determine what expenses can be claimed on taxes.
Know Which Expenses Are Tax-Deductible
When tracking expenses, it's helpful to know which ones are tax-deductible. This can help keep the e-commerce tracking process simple as you only need to worry about tracking those expenses that have a tax benefit. Additionally, it can help you plan your tax strategy for the year, as you may claim more deductions if you know which ones are available to you.
Managing Income and Expenses for Business Growth
In order for a business to grow, it is important to manage income and expenses. Although not an attractive venture at first, when a financial tracking system has been established, tracking finances becomes much easier.
This may include making strategic decisions about how much money to reinvest back into the company, how much to save, and when to make investments. Focusing on growth can be key to long-term success as it allows you to expand your operations, improve efficiency, and serve more customers.