Complexity in eCommerce Accounting
Every business envies the farmers market. Why? Because it represents the simplest transmission of goods from manufacturer to end consumer. A farmer grows the goods, brings them to the market, and sells them to directly to consumers. That’s it. Not every business has it so lucky, least of all retailers who are trying to sell goods via e-commerce channels. If the diagram for a sale at the farmers market looks like a straight line, the one for e-commerce today contains a plethora of twists and turns. That’s a pain for a business owner, but an opportunity for a savvy accounting firm.
If you understand the nature of e-commerce accounting and have the tools to turn that knowledge into actionable insights for your clients, you stand to differentiate yourself from competitors. To do that, though, you need to identify some of the factors that make e-commerce accounting unique and challenging. Here are three of the big ones.
Supply chain management
Unlike the other two points we’ll discuss, supply chain management is not a new concept. Retailers have interacted with different supply chains for decades. In fact, almost no retailer sources their products exclusively from one wholesaler. Effective supply chain management allows a retailer’s products to arrive in a timely fashion without having to spend too much to do so.
While supply chain management is a concept all retailers will be familiar with, it is rapidly changing in the context of the modern marketplace. A recent report from consulting firm McKinsey details how Amazon is forcing other competitors in both the brick-and-mortar and e-commerce retail spaces to adapt. “Recent moves toward same-day delivery and a growing network of self-service lockers show Amazon is pressing its advantage,” the report states, “setting a new industry standard others will find expensive and difficult to follow.” As such, optimizing supply chains is crucial for any retailer competing with giants.
In the past, most retailers sold their goods one type of way: in stores. They may have had multiple locations, but transactions didn’t come in myriad varieties. Today, the average retailer sells their goods through more than one channel. Most have an e-commerce site, an amazon marketplace account, and more. When a company uses both digital and physical methods of selling its goods, it’s known as omni-channel retail.
Given that Amazon accounts for 49 percent of all e-commerce sales, it’s not hard to see why retailers don’t rely on their e-commerce platforms alone to market and sell their wares digitally. Leveraging multiple channels provides a retailer with the greatest possible reach. However, it requires extremely diligent inventory management. Stock units need to update instantaneously across all channels. If they don’t, you may end up with a customer placing an order for a unit that’s already sold. Poor inventory management can create confusion and dissatisfied customers, defeating the purpose of using multiple channels in the first place.
If navigating the supply chain and multiple sales channels wasn’t trick enough, many retailers are now also offering dropshipping to their customers. Dropshipping is a process by which a retailer sells goods to a consumer without keeping inventory on hand. When the customer requests a product, the retailer contacts the vendor to place an order for the desired unit. The product can then be picked up in store or delivered directly to the customer.
Of course, this adds yet another layer to the complex accounting process for e-commerce businesses. Imagine a retailer who has both a physical and online presence, works with multiple suppliers, and sells goods via dropshipping. Things can get messy in a hurry. But if all of these facets can be managed effectively, retailers who deploy them have a huge advantage over those with more narrow options.
Software for the modern marketplace
AccountingSuite comes packed with best-in-class inventory management features that meet the needs of the 21st-century retail environment. It can help you turn your retail clients from scattered to streamlined.