You’ve worked hard and now your small business is starting to take off. Now it’s time to sit back and relax, right? Not if you don’t have your accounting in order. All retailers should have some sort of accounting in place, especially if they are selling through multiple online platforms. Filing away your receipts in a shoebox and leaving them for another day can be a tempting proposition, but developing some basic accounting practices isn’t necessarily as intimidating as it seems. Here are some accounting tips for small retailers:
Step one requires getting rid of those shoeboxes. Yes, receipts and invoices definitely need a home, but at the very least, they should be filed by date and type. Documentation comes in all shapes and sizes, and it can be easy to lose track of paperwork that you might eventually need. This is one reason why many small retailers invest in accounting software.
Whether cloud based or out-of-the-box, most accounting software allows users to upload and print documents, create basic financial reports and even communicate with customers. Many popular accounting software programs can be integrated with Amazon and eBay seller accounts, to make the accounting process more fluid.
Don’t Forget Taxes
If you’re selling a product online, you are required to account for certain taxes. In some cases, certain sales tax rates are automatically calculated through selling platforms. Other online platforms, such as Amazon, require sellers to enroll in third-party tax programs if they’d like automatic calculation. The longer you wait to account for taxes, the more difficult it is to avoid errors. If you collect taxes when a sale is made, you won’t find yourself liable for a huge lump tax sum at the end of the year, or incur penalties for delayed payments.
You’ll also want to have a solid strategy for filing your personal and business income taxes so that you don’t get caught off guard when tax season rolls around. Whether you choose to file on your own or enlist the help of an accountant, you should keep track of any and all documents that could be helpful during this process.
Invoices are not just a tool for getting paid. In reality, they serve as records of the terms of a transaction, so they should be as complete as possible. Sending invoices can be a tedious process, but never one that should be ignored. If payment is ever denied, or a refund is owed, you’ll be glad you took the time to prepare an invoice. In the event that you find yourself facing an IRS audit, having consistent, accurate invoices on file will also save you time and hassle.
Create Basic Reports
Periodically reviewing financial reports will help you to get a big-picture view of just how well your retail operation is doing. At a minimum, monthly and quarterly reports should document cash flow (how much money is coming in, vs. going out), projected expenses and inventory valuation. If you are using accounting software, these reports can be generated directly through your program, and basic templates are also available through various online sources.
No matter what stage your retail business is in, it’s imperative to have some sort of accounting system in place. The more you prepare now, the better you’ll be prepared to take advantage of every opportunity that presents itself.