Setting up your ecommerce chart of accounts for success
Tips and tricks to getting the most from your ecommerce financials.
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Your P&L is crucial to knowing how well your Shopify and ecommerce business is doing.
We’ve seen the structure behind the brands that scale to 8 figures and beyond and have delved deep into their ecommerce bookkeeping and ecommerce accounting.
They all include a well-defined Chart of Accounts. Here’s how the best structure theirs.
Your Chart of Accounts (CoA) directly shapes how you make decisions. That means it should be airtight and totally relevant for ecommerce accounting. The only way to do that is to ditch the generic CoA (sorry, Quickbooks) and make something specific to your ecommerce business.
There are five major sections to your P&L statement:
- Sales
- Cost of goods sold
- Operating expenses
- Other income and expenses
- Interest & taxes
Your CoA may look different from another brand, but there are some general best practices. Let's dive in.
1. Sales
Your sales section should include your gross and net sales amount for each of your various income sources. Amazon, Shopify, Walmart, Ebay, Faire and other wholesale platforms, etc. You should be able to see the sales data from each channel as their own accounts.
You’ll need this visibility to understand which channels are actually bringing you income.
2. Cost of goods sold
There are different ways to track your COGS depending on whether you track it based on the cash basis or accrual basis.
Either way, your ecommerce COGS should include shipping-out costs to ship your product to customers and merchant transaction fees.
3. Operating expenses
The key to breaking down your expenses is including enough detail to give you the data and insights you need but not too much detail that it becomes impractical and inefficient to manage.
Here is an example of how we break down opex for our customers:
4. Other income & expenses
Not all income and expenses are part of your regular operating expenses. Some accounts should be included in a separate section of your P&L.
5. Interest and Taxes
Last but not least, paying Caesar what belongs to him *sigh*.
Financials are a tool to make better decisions, not just an admin task. Setting up the right chart of accounts for your ecommerce business creates an opportunity to get real value from your financials. Tailor yours to your business. Use AI accounting and AI bookkeeping. And if you need help, feel free to reach out!
.Sign up HERE to get your financials set up today.
About Finaloop
We are a technology company providing automated end-to-end accounting service to ecommerce businesses. Our system connects to your apps, syncs all your data and reconciles your books in real-time, replacing your bookkeeper, your accounting software, and your ecomm integrations. We offer reconciled books available 24/7, tax-saving insights, and a single place for all your financial data.
*The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns.*
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