The rise of eCommerce has offered vast opportunities for growth and reach for small and medium-sized businesses (SMBs). However, these potentials often bring obstacles, particularly when it comes to money management.
Traditional accounting techniques frequently don’t match the changing requirements of eCommerce businesses. Enter virtual accounting solutions: a modern approach designed to address these specific challenges.
This article explores the accounting challenges faced by payroll for startups and the benefits of using virtual accounting for it.
Accounting Challenges Faced by eCommerce Startups
One primary issue eCommerce startups face is the sheer volume of transactions. According to Statista, worldwide retail eCommerce sales reached close to $5.8 trillion. This shows the large number of transactions occurring at a quick pace in the digital retail world. The sales revenue is further expected to reach $8 trillion by 2027.
Unlike brick-and-mortar stores, eCommerce businesses can process thousands of transactions daily, making accurate record-keeping difficult. Additionally, the global nature of eCommerce complicates matters further. Customers may want to buy in multiple currencies, which can impose different tax jurisdictions and varying regulations to consider.
eCommerce startups must also:
- Keep track of stock levels
- Manage suppliers
- Ensure timely order fulfillment
Preventing stockouts or overstock situations requires accurate inventory accounting. Both these scenarios can negatively impact the overall business. Moreover, the need for precise financial forecasting and budgeting becomes critical as these startups strive for scalability and growth. Financial planning errors can cause problems with cash flow, which makes growth initiatives more difficult.
Virtual Accounting Solutions
Virtual accounting solutions have the potential to solve some major accounting challenges for eCommerce startups navigating these complexities. By utilizing cloud-based technology, these solutions let companies handle their money from any location.
Virtual accounting services provide access to professional accountants and bookkeepers who specialize in eCommerce. This ensures that startups receive expert guidance tailored to their needs.
Automation is another essential component of virtual accounting since it can automate repetitive operations such as:
- Transaction recording
- Invoicing
- Payroll
This can assist business owners in saving important time and lowering the possibility of human mistakes. Integration with other eCommerce platforms and tools also streamlines processes, creating a cohesive financial management system.
It may also assist in lowering accounting expenses by allowing businesses to employ accountants from other nations where their currencies have more worth. Consider the example of the US businesses seeking help from Philippine freelancers.
A recent study shows that around 75% of these freelancers give their services to the USA, the UK, Canada, and Australia. Moreover, the demand for virtual accounting from these freelancers is constantly rising. LinkedIn data shows that there are over 21,963 jobs to take worldwide as of the month of September 2022.
This cost-saving angle can be extremely useful for small eCommerce startups or other businesses. For instance, the number of businesses in New Canaan is growing every year.
New Canaan Advertiser states that the town saw the number of empty village storefronts cut in half since 2021. Moreover, several new companies have recently registered there. Virtual accounting can help these businesses.
According to 1-800Accountant, these businesses can help you save on business taxes. Powered by real certified professional accountants, these organizations can save you hundreds of dollars that can be reinvested in your company. They can also help SMBs with other important tasks like bookkeeping, payroll for startups, and starting a business.
In fact, Mike Savage, the CEO of 1-800Accountants, states that helping SMBs save on taxes is one of the reasons he started the venture. He wanted to offer SMBs the same accounting resources that Fortune 500 companies have. You can learn more about Mike Savage of New Canaan to understand how he helps small businesses save money.
Benefits of Virtual Accounting for eCommerce
There are many key benefits of leveraging virtual accounting for eCommerce businesses.
Access to Expertise
Many CFOs are not able to keep and hold the most talented individuals in their in-house team. Moreover, some SMBs don’t even have a dedicated budget to hire the right professionals. This can result in a skills gap and prevent access to the right experts for accounting.
A recent survey from BlackLine Inc. shows similar outputs that highlight the growing skills gap in this field. Around 31% of the CFOs responding to the survey said they do not have enough people with technology expertise. They feel that they should have more individuals with experience in technology in their financial teams.
Virtual accounting connects eCommerce startups with professionals who understand the industry’s unique demands. These professionals may provide firms with ideas and insights to assist them enhance their financial operations. With access to specialized knowledge, startups can navigate regulatory requirements, implement best practices, and make informed financial decisions.
Enhanced Security
For eCommerce companies managing sensitive financial data, security is a top priority. Cyber attackers are constantly enhancing their attacks to access this sensitive data. This requires eCommerce companies to keep innovating and advancing their cybersecurity measures. Therefore, it has become a never-ending challenge for eCommerce startups.
One such attack happened in 2023 when Honda’s eCommerce platform was hacked. The event exploited a password reset mechanism on the platform and put dealers’ information at risk. Anything like this can happen to any eCommerce company as the entire firm operates online and stores sensitive data.
Virtual accounting solutions employ advanced security measures to protect this information. Encryption, secure login protocols, and regular data backups make sure that financial data remains safe from breaches and cyber threats. With this degree of protection, company owners can relax and concentrate on expansion rather than worrying about the integrity of their data.
Real-Time Financial Monitoring
Real-time financial monitoring is one of virtual accounting’s biggest benefits. Entrepreneurs in the e-commerce space have constant access to current financial data. This enables them to make swift decisions regarding finances, resources, and operations.
Businesses may measure sales performance, keep an eye on cash flow, and spot patterns with the use of real-time data. It makes proactive financial management easier, which helps you stay competitive and adapt to changes in the market.
Scalability and Accessibility
eCommerce firms have increasingly sophisticated accounting requirements as they expand. Virtual accounting solutions are inherently scalable, accommodating businesses of all sizes.
Whether a startup is just beginning or expanding rapidly, these solutions can adjust to meet increasing demands. Additionally, the cloud-based nature of virtual accounting ensures accessibility from any location. This provides flexibility for business owners and their teams.
Frequently Asked Questions
What Is eCommerce Accounting?
E-commerce accounting is the process of monitoring and controlling an online store’s financial transactions and documentation. This includes keeping track of, sorting through, and evaluating financial information on purchases, costs, inventories, sales tax, and other topics.
Which Emerging Technologies Have The Potential To Change The Future Of Accounting?
The accounting sector is about to undergo significant change due to a number of developing technologies. Some of these technologies are data analytics, blockchain, and artificial intelligence (AI). All of them are able to store and analyze a large chunk of data and generate insights from them.
What Are The Benefits Of Online Accounting?
Online accounting can offer numerous benefits, especially for eCommerce or other online businesses. For instance, it can improve accessibility, collaboration, security, automation, and cost-effectiveness. These benefits can help SMBs save money in the long run and make their financial and accounting tasks less hectic.
To conclude, virtual accounting solutions represent the future of financial management for eCommerce startups. These solutions deal with the particular difficulties faced by the eCommerce industry. They provide efficiency, scalability, security, real-time monitoring, and knowledge.
The potential of virtual accounting is further enhanced by technological advancements like blockchain, cloud computing, and artificial intelligence. The amalgamation of these technical advancements renders it an important instrument for contemporary enterprises. As eCommerce continues to grow, startups that adopt virtual accounting will be better positioned to succeed.
