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E-commerce sellers - prepare your accounting file

E-commerce sellers - prepare your accounting file
 

Introduction

Global e-commerce is complex. This article will provide an overview of the 3 key tasks necessary to best configure your accounting file for e-commerce transactions.

  1. Create the necessary clearing accounts
  2. Create the necessary Products & Service item records
  3. Configuring product SKUs and Inventory (if applicable)

Clearing Accounts

The vast majority of e-commerce sales are processed electronically by credit card or other digital payment tools. Sellers rely on a number of 3rd party providers to support their e-commerce sales including seller marketplaces such as Amazon, payment processors such as Stripe and PayPal and e-commerce platforms such as Shopify and Squarespace.

To properly account for your e-commerce sales, you will need to maintain a ledger for each provider that collects funds from your customers. These providers should be configured much the same way you would a business checking account.

You may be tempted to manage your e-commerce sales by booking transactions to an “undeposited funds” account. However An undeposited funds account will not adequately address the numerous transaction types (sales, sales related expenses, refunds and reimbursements) nor will it simplify the process of reconciling payout deposits.

The solution is to configure a clearing account for each provider that collects funds from your customers and makes payout deposits to your business bank account. Clearing accounts are configured the same way you would any other bank account within your accounting file. Clearing accounts will provide a clean way to manage the ledger from each provider, tracking your itemized sales, sales related expenses, refunds and reimbursements.

For example, let’s assume you sell on Amazon marketplace. To properly track your e-commerce sales and expenses, you would configure a bank account within your accounting file titled “Amazon Marketplace Clearing”. You would then configure all of your Amazon sales, expenses, refunds and reimbursements to export from Greenback to the new clearing account within your accounting file. Lastly, as Amazon makes payout deposits to your business bank account, you will simply treat those deposits as transfers from the Amazon Marketplace Clearing account to your business bank account.

Step by step guide to creating your clearing accounts

Products & Services

When exporting sales transactions to QuickBooks Online, Greenback will map your itemized sales to the “Product/Service” items configured within your QuickBooks file. All sales exported to QuickBooks must map to a product/service item. Each “Products & Services” record is directly correlated to an account from your Chart of Accounts in QBO.

When exporting sales to Xero, Greenback will allow you to map your sales to a "Product & Service" item, revenue account, asset account, equity account, expense account or liability account.

Regardless of the accounting program you are using, it is good practice to configure your "product & service" items before exporting transactions from Greenback. By mapping your sales to a product or service, you'll make full use of the reporting capabilities provided by your accounting program. In addition, mapping your sales to a product or service is imperative if you plan to use your accounting program to manage inventory.

Step by step guide to adding products & services to QuickBooks Online.
Step by step guide to adding products & services to Xero

Inventory & SKU Matching

If you plan to use your accounting file to track inventory, it's important that you configure your product items properly. In addition to automating your accounting, Greenback can also help you automate the tracking of your inventory when inventory is properly configured within your accounting file. Check out our step by step guides to tracking inventory.

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