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Best accounting practices for online businesses

Online businesses are becoming a big part of the economy. And they have always enjoyed a good level of success. Their importance has only increased more with the sudden onset and relentless continuance of the coronavirus pandemic. By using online shopping and e-commerce platforms, consumers have sought ways to buy the things they need.

Since many traditional businesses have moved online it has allowed them to keep going through national lockdowns and social restrictions. Online businesses need accounting practices that help them stay in line with their business regulations like debit note format, or contra entry and additionally can offer a lot more than just keeping track of who owes what to whom.

There are many ways for an online business to use accounting practices to help improve their business practices, as well as keep up with tax regulation laws. So let’s take a look at some of the best accounting practices and some tips and tricks that you can use in your online business

  • Accounting software

In an online business, you need to consider what your accounting needs are. So you need to make a note of the following:

  • What type of business you’re running
  • How much inventory do you have
  • How many staff do you have
  • Whether you’re selling through Amazon or eBay

 All these different factors will influence the accounting software that you choose. So it’s important to know exactly what your needs are, before deciding which software would be best for your business. However, whichever software you use, make sure you are well-versed with it before you employ it. You should know how to perform different basic tasks in it like cost centre in tally, invoicing etc. You can check out Khatabook for a quick step-by-step guide.

  • Don’t use your personal account

Just about every small business owner needs to keep track of finances. There are a few ways to do this, but one of the best ways is to budget and keep track of an online business account. A lot of business owners like to use personal bank accounts for their businesses because they don’t want to waste money on a separate account, but this can lead to problems down the road. If you don’t have a separate account, it can be easy to lose track of your finances.

  • Don’t overlook your cash flow

 Cash flow is a term commonly used in accounting. It refers to the money that flows into and out of a business over a certain period. Cash flow is important because it helps you to spot any issues with your business quickly before they become more serious problems. In particular, it looks at how much you’ve made in sales and/or other income versus how much you’ve spent on costs such as salaries and materials.

We use the term ‘cash flow’ to avoid confusion with accounting terms such as profit and loss, which refers to money coming in (revenue) and money going out (expenses). It’s important not to confuse cash flow with profit or loss, because although the two are related, they aren’t the same thing.


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