The rise of online businesses, especially after the pandemic, has changed the way we operate and manage finances. Unlike traditional companies, online operations have different structures and accounting needs. With high transaction volumes, international orders, multiple sales channels, and digital expenses, maintaining accurate financial records becomes critical.
This guide shares the 12 best accounting practices to help online businesses thrive in a digital environment. These practices ensure regulatory compliance, efficient cash flow management, and better decision-making.
Table of Contents
12 Best Accounting Practices for an Online Business
1. Use Cloud-Based Accounting Software
Choose accounting software like QuickBooks Online, Xero, or FreshBooks that stores your financial data in the cloud. This allows 24/7 access and real-time collaboration with your team.
Bonus: Cloud platforms offer automatic updates, backups, and secure access from any device.
2. Integrate Your Online Store With Accounting Software
Connect your Shopify, Amazon, WooCommerce, or Etsy store with your accounting software. This eliminates manual entry errors and ensures that every transaction is tracked and categorized.
3. Open a Separate Business Bank Account
Keep business and personal finances distinct. A dedicated business bank account simplifies reconciliation, reduces audit risk, and improves financial transparency.
4. Reconcile Accounts Monthly
Reconcile all transactions (sales, expenses, refunds, chargebacks) with your bank and payment processor monthly to ensure there are no discrepancies.
Use reconciliation reports built into your software for accurate tracking.
5. Track COGS (Cost of Goods Sold) and Inventory
For online sellers, it’s essential to track inventory levels and the cost of goods. To calculate true profitability, include packaging, shipping supplies, and storage expenses.
6. Maintain Daily Bookkeeping Habits
Record transactions daily or weekly to prevent a backlog. Regular updates make monthly reporting and year-end taxes more accurate and stress-free.
7. Automate Recurring Expenses
Use software features to memorize or auto-categorize recurring bills like subscriptions, software licenses, rent, or utilities. This improves accuracy and saves time.
8. Track Refunds and Chargebacks
Log return categories properly—customer damaged, carrier damaged, defective, etc.—to prevent inventory from being written off incorrectly. Record chargebacks as a separate expense.
9. Record All Business Expenses
Beyond product costs, include digital ads, marketing platforms, hosting, insurance, office supplies, and salaries. Classifying these properly helps monitor burn rate and ROI.
10. Set Proper Tax Rates
Configure regional/state tax rates in your store. Transparent tax handling reduces customer complaints and prevents penalties.
Consult a tax professional to remain compliant with cross-border regulations.
11. Work With Accounting Professionals
Outsource bookkeeping or hire a virtual CFO for expert insights. A qualified accountant ensures compliance, prevents penalties, and helps interpret data for growth decisions.
12. Leverage Built-In Reports & Dashboards
Use your accounting platform to generate reports on cash flow, net profit, expenses, and sales by channel. Real-time visibility leads to faster strategic decisions.
Final Thoughts
Online businesses are thriving, but their success hinges on financial clarity. From automation to regular reconciliations, adopting sound accounting practices from day one ensures long-term scalability.
