Online… in today’s world so much is being done online from purchasing, reservations, research, you name it, it’s online. Have an issue with something? There’s an app for that. With so much changing so quickly, the one constant in your business should be your financial reporting accuracy and timeliness. Understanding your business financially becomes more important than ever in a changing eCommerce environment. You need the ability to pivot strategically as conditions change and that starts with knowing your financial data. A few hot topics in today's eCommerce world are what accounting software to use, how to integrate your information and what the deal is with sales tax.
I have worked for both large Fortune 500 companies and small family-run businesses. I have seen very large companies implement very expensive ERP systems but use only half the functionality available. It’s not the system you have, it’s how you use it and make it work for your business. For small to mid-sized companies, I am partial to Quickbooks Online (QBO). It is relatively inexpensive and there are so many integrations that can be directly synced to QBO (payroll, banking and expense reporting just to name a few). You can have real-time financial data in minutes. Years ago before comprehensive software solutions existed, we would make a forecast on where we thought the month would end, but still needed 3-5 days after the month ends to close the ledgers and report results. Why wait so long before you know if you are going to make a profit for the month when you don’t have to? Having up-to-date data allows you to pivot and change course as needed. QBO isn’t the only path to take — there are several other accounting programs that work similarly, find the one that fits your needs and your pocket book.
I have struggled with wanting to have all financial detail and source data in one place for years. I’m working on getting over it. I held the belief that if all information was in one place then my financials would be more accurate. As it turns out, this is not the case at all. With so many eCommerce platforms available and designed to meet your company’s specific needs already, why make things more complicated by trying to integrate that detail into your accounting software? I only need the breakdown of the sale (sales, discounts, refunds, shipping, tax, etc.) in my accounting software to run a P&L and begin analyzing my costs. I don’t need the customer name, address and what they ordered. Let your CRM handle that information and let accounting software handle the financial data. Similarly, with inventory, do I need to maintain all the BOM and inventory items in my accounting software? No, I just need the total raw materials, finished goods and WIP. If I need to run detail reports, then I will run them on my inventory platform. Keep it simple! Integrate what you need and leave the detail in the source system.
Nobody likes to talk about sales tax. There are so many questions regarding what creates nexus and which states are implementing the dreaded economic nexus. Historically, we would associate the term nexus with a physical presence in a state. As the world of eCommerce grows, so do the states’ need to collect sales tax that is being lost by consumers purchasing online, and that is when economic nexus began to take shape. Economic nexus establishes a presence based on a dollar or transaction threshold established by a state. Much as I’d love to go into more detail on each state’s requirement, that would be impossible. The information would more than likely be outdated before we post this blog. Every state is looking into economic nexus and setting up their own requirements, with some states having already moved forward and others trickling behind. The important take-away from this is simply to know that economic nexus is here to stay. Keep an open communication with your tax advisors to ensure you are in compliance with each state in which you are shipping product.
There is a lot more conversation happening around the world of eCommerce, but that’s all for now. The only constant you can count on is that the world of eCommerce will change. The best any of us can do is know our financials so we can pivot when that happens.