5 Tips for Successfully Tracking E-Commerce Sales and Profitability in Quickbooks
Online shopping has become more popular than ever, and as a result, e-commerce has boomed in recent years. However, it's not all sunshine and rainbows for online retailers - they face several challenges when it comes to accurately tracking their sales, profit, and margins. With so many sales channels, product variations, shipping costs, returns, and payment portal fees to take into account, it can be challenging to keep track of everything. Luckily, there are ways to overcome these challenges and make informed business decisions. In this blog post, we'll explore 5 common challenges that e-commerce retailers face when tracking their sales and profitability, and share tips on how to handle them within an accounting software like Quickbooks.
Challenge #1: Multiple Sales Channels
When dealing with multiple sales channels, it can be challenging to ensure that all sales are captured in your financial records. To address this, check to see if your e-commerce platform integrates directly with Quickbooks, such as Shopify or WooCommerce. In this case, all of the sales will be captured in the platform and automatically logged into Quickbooks.
For retailers who are not using an e-commerce platform that integrates with Quickbooks, it can be more challenging to track sales from multiple channels. In this case, it's essential to have a standardized system for recording sales across all channels, such as using unique order numbers or SKUs. You can then manually enter this data into a spreadsheet and import the data as a CSV into Quickbooks. It's crucial to ensure that all sales data is accurately recorded in your financial records, so double-check your entries to avoid any errors or omissions. Additionally, regular reconciliation of your sales data across all channels can help identify any discrepancies and ensure that your financial records are accurate.
Challenge #2: Product Variations
If the e-commerce platform being used already includes product management functionality, you can take advantage of this feature to track inventory and sales data for each product variation. By setting up each product variation as an item in Quickbooks and assigning the correct cost of goods sold to each item, you can accurately track sales and profit for each product variation and calculate profit margins. Properly setting up Quickbooks items enables businesses to better understand product performance, identify areas for improvement, and make more informed decisions based on accurate financial data.
Challenge #3: Shipping and Handling Costs
Assuming that you are already using a shipping platform, such as ShipStation or Easyship, you can leverage this tool to streamline their shipping processes and keep track of associated costs. By entering shipping expenses correctly in Quickbooks - either by creating a bill or expense transaction and assigning the expense to the correct item - you can accurately track shipping costs and include them in their profit calculations. Properly tracking shipping expenses helps you better understand above the line costs so that you can optimize your pricing and profitability.
Challenge #4: Returns and Refunds
It's also important for online stores to keep track of returns properly, so they can calculate their profit margins accurately. To do this, you can use returns management software like Returnly or Happy Returns. These tools help automate the returns process and track the costs involved. You can then set up each returned item as an item in Quickbooks and assign the correct refund account to each item. Not tracking returns properly can lead to inaccurate profit calculations, which is not good for the business's bottom line.
Challenge #5: Service Fees from Payment Portals
Retailers should track payment portal fees separately to accurately calculate their gross profit, net profit, and profit margins. Payment portal fees should be deducted from gross sales to arrive at the net sales figure. You can create a vendor for each payment portal in Quickbooks and assign the payment portal fee to the correct expense account.
Incorporating the above tips into an accounting software like Quickbooks can help e-commerce retailers overcome the challenges of tracking their sales, gross profit, net profit, and margins accurately. Here are some additional ideas that can help e-commerce retailers make the most of Quickbooks:
Use the "Classes" Feature to Track Sales by Channel
Quickbooks offers a "Classes" feature that allows retailers to track sales by channel. Retailers can set up classes for each sales channel (such as Amazon, Shopify, or eBay) and assign each sale to the correct class. By using the "Classes" feature, retailers can track their sales by channel and make informed decisions about their marketing strategies.
Use the "Projects" Feature to Track Profitability by Product Line
Quickbooks also offers a "Projects" feature that allows retailers to track profitability by product line. Retailers can set up a project for each product line and assign each sale and expense to the correct project. By using the "Projects" feature, retailers can track their profitability by product line and make informed decisions about their inventory management.
Reconcile Bank Accounts Regularly
It is important for e-commerce retailers to reconcile their bank accounts regularly in Quickbooks to ensure that their sales and expenses are recorded accurately. Retailers should compare their bank statements to their Quickbooks records and make any necessary adjustments. By reconciling bank accounts regularly, retailers can avoid errors and ensure that their financial statements are accurate.
Get Outside Help
If managing your e-commerce business finances feels overwhelming, or if you don't have the time or expertise to handle it, consider hiring a third-party bookkeeper. A bookkeeper can help you stay organized, ensure accurate financial reporting, and provide valuable insights on how to optimize your business operations. By outsourcing your bookkeeping, you can free up more time to focus on growing your business and leave the financial details to a trusted professional.
Conclusion
E-commerce retailers face several challenges when it comes to tracking their sales, gross profit, net profit, and margins accurately. However, by using the right tools and techniques, such as e-commerce analytics platforms, product management software, shipping and fulfillment software, returns management software, and Quickbooks, retailers can overcome these challenges and make informed decisions about their business. By tracking their sales and expenses accurately, retailers can improve their profitability and grow their business.
