Is your online store making money?

Do you know whether your business is profitable?

Let’s rewind a bit…in order for you to know whether your business is profitable this year (and this month), your books need to be up-to-date.

Most small business owners don’t like looking at their accounting. Who can blame them?

First, you need to do manual data entry (possibly for hours, maybe days) just to get your books up-to-date. Then, you will come face to face with your numbers. And then, who knows? When you see all the expenses, payroll, and taxes coming out of your hard-earned revenue, you might not have any motivation (not to mention money) left to actually do your job.

What is one to do?

Getting your books up-to-date sounds painful and time-consuming, but without your numbers you cannot make informed business decisions.

Here is some good news: you can automate the process of getting your online sales data into QuickBooks.

Steps to Automate Your Data Entry into QuickBooks & Be Profitable

Step #1: Match SKU’s and Item Names

Not having matching Product SKU’s in your online store and the “Item Name” field in QuickBooks is the most common mistake that we see among small business owners.

If your product name in your online store does not match the product name in QuickBooks how can you keep track of your sales and inventory? If you hire someone, how will they know it’s the same product if it has a different name in your Shopify store, your Amazon store, and QuickBooks?

Before you implement any automation, be sure to have matching SKU’s and Item Name, either manually or via a spreadsheet.

Step #2: Use a tool to Manage Your Inventory

When your inventory is mismanaged, you run into several problems:

  • -Overstocking: having a bigger than necessary inventory can tie up a lot of your capital. It may also be expensive to rent the space necessary to stock your inventory. In addition, if your products have a shelf-life, they may expire or deteriorate if you cannot sell them on-time. The value of your inventory is listed on your taxes.
  • -Over-selling: if customers buy products that are out of stock, you will need to process refunds and you will ruin your reputation. Your seller rating on Amazon and eBay will decrease and fewer customers will purchase.
  • -Lack of scalability: whether your challenge is overstocking or over-selling, you cannot scale if you don’t have a system for managing your inventory.
  • -Poor business decisions: it is impossible to make good business decisions if you don’t know how much of each product you are selling. For example, one of our customers realized that almost 90% of his sales came from Amazon. After that, he stopped selling his products on almost all other sales channels.

Unless you have reliable data on the sales of each of your product through your individual sales channels, you will not be able to manage your capital, market your products, or partner with other companies.

We recommend a tool such as Ordoro to automate your inventory as well as shipping.

Step #3: Set up Deposit Matching to your Bank Account

If you fail to match deposits to sales, income is recorded twice and no merchant fees are recorded. You will pay taxes on any expenses that you fail to mention! As your business grows, it becomes even more important to have a system to match deposits from all the different sales sources with your bank.

Whether you use Stripe, Paypal, or another processor, be sure that you have automation set up to match deposits from your online sales with what shows up in your bank account.

Here is an example of how you can use Connex to match deposits

Step #4: Mark Up Shipping As Needed

If your online store is selling internationally, or offer different shipping options, you need to mark up your shipping accordingly and reconcile your QuickBooks accounts.  Unless you have a system for syncing your shipping fees with QuickBooks, you will need to enter all the shipping fees manually, which quickly leads to many hours of labor as well as human errors.

Here is an example of how you can use Connex to mark up shipping.

Step #5: Map Sales Tax Correctly

If you sell across the United States, you need to collect sales tax in multiple states. Sales tax is levied at different rates in different states, and there are also different rates at the county and city levels. Merchants risk getting audited if they use the wrong tax codes when entering sales tax data into QuickBooks.

We recommend a tool such as Avalara, to comply with your taxes. It integrates with ecommerce platforms and QuickBooks and it can help you avoid getting audited.

 

This is an excerpt from a blog article originally published on August 10, 2020 by Dora Farkas. You can read the article in it's entirety by clicking here.

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