The life of a dropshipper is quite tedious, especially when bookkeeping is involved.
While running a dropshipping business makes it easy to sell products to customers, you might find that managing your finances is a hurdle you didn’t expect.
Admittedly, things like tax obligations and budgeting can be missed, but that comes with a lot of hassle later, which is why bookkeeping services prove to be useful.
Bookkeeping services help plan out and manage finances to keep a business on the right track, without breaking the bank in the process.
What is Dropshipping?
Dropshipping is often defined as a business model where an individual entrepreneur sells products to a consumer while never actually holding the said assets.
In an ideal scenario, once a customer order is placed, the seller automatically places the details of the order with a supplier who ships the product directly to the customer.
Although this business model eliminates the need for managing inventories and warehousing, it still requires some spending attention in terms of finances.
Why You Need Bookkeeping for Your Dropshipping Business
Here is why maintaining stellar books will help your dropshipping business:
Cash Flow Management: Money management is crucial in dropshipping for two reasons, profit margins are often narrower than expected and payments to suppliers are made much in advance. Bookkeeping as a concept ensures that you do not run out of capital to cover your costs about your returns.
Tax Compliance: Like any other business, dropshipping firms also have tax obligations. Inadequate record keeping could lead to either losing some tax deductions or misreporting your income which could result in penalties. A bookkeeper can sort out your records and help you meet your tax obligations on time.
Profit and Loss Monitoring: Bookkeeping processes income and expense records which can reveal the most profitable product or service and areas where costs can be cut. It can also pinpoint inefficiencies such as excessive expense of shipping or advertising that does not convert to sales.
Financial Reporting: Routine reports such as balance sheets, income statements, and cash flow statements are essential no matter what size the business is and they inform management in making decisions. These reports give an idea of how the business is performing and if financing is needed, these documents can also help get the required funds.
Benefits of Online Bookkeeping for Dropshipping
Although old-fashioned accounting is still relevant today, dropshipping logistics companies focus greatly on online bookkeeping for the following reasons:
Time-Saving Automation: Online bookkeeping systems can greatly ease accounting work by automating expense tracking, invoice generation, and account reconciliation. This helps you devote more effort to the growth of your business.
Access to Real-Time Data: For accountants on the go, cloud-based accounting software comes in very handy as it is compatible anywhere and provides real-time updates. All of your critical financial data can be shared through the Internet, which is very useful for managing multiple teams or stores over a distance.
Cost-Effective Solutions: For small businesses especially, outsourcing online bookkeeping services tends to be much cheaper than employing an accountant. Most services have set pricing which scales with the size of the business, making them even more affordable.
Integration with Dropshipping Platforms: Online bookkeeping software can also easily integrate with major e-commerce platforms such as Shopify, WooCommerce, and Amazon. This feature enables automatic updating of sales and expenses, which greatly reduces the workload and the chances of making mistakes.
Expert Guidance: Several online bookkeeping services grant access to professional accountants or certified bookkeepers who know the ins and outs of your business. This is of immeasurable value when it comes to complex tax laws and optimizing your business finances for growth.
Key Features to Look for in an Online Bookkeeping Service
Not all online bookkeeping services are the same. When considering a service for your dropshipping business, consider these features:
Ease of Use: You should always look for software that has a user-friendly interface. An effective accounting solution will be able to function without advanced accounting expertise.
Connecting to Your Dropshipping Platform: Find a bookkeeping service that connects with your eCommerce platform, payment gateways, and suppliers to automate syncing all data points.
Flexibility: Every business wants to scale, thus, the bookkeeping solutions need to grow alongside. Ensure the service can keep up with your increased transactions, new product additions, and new sales channels.
Customer Service: If there are ever questions or issues regarding your financials, having approachable customer service is of utmost importance. Seek out a service that has easily accessible support through chat, email, or phone.
Reporting and Filing Taxes: Tax season is always difficult; a great bookkeeping service will offer tools to aid in tax filing preparation. Some services assist in tax filing as well.
Most Popular Dropshipping Online Bookkeeping Services
EasyBooks: EasyBooks features a bookkeeping service focused on dropshipping businesses. Automated activities, expense and tax tracking, and multi-currency capabilities are offered as well.
QuickBooks Online: With one of the most sought-after accounting solutions, QuickBooks is helpful when running a dropshipping business and ensures proper invoicing, expenses, and taxes are taken care of.
Xero: Whenever eCommerce businesses need accounting software that can integrate seamlessly, Xero is their go-to. Apart from its powerful inventory management and financial features, it is known best for its real-time reporting features.
Bench: The bench is perfect for those who want hands-off bookkeeping. Bench employs your team of bookkeepers who manage your accounting functions. This is a great solution if you want a single accountant to manage all of your bookkeeping needs.
Freshbooks: FreshBooks was created to assist small businesses with income and expense tracking, generating financial reports, and creating custom invoices.
Getting Started with Online Bookkeeping is as Simple as This.
The process of using online bookkeeping with your dropshipping business is simple.
Choose a Service: Your first step is to choose a bookkeeping provider. Look for one that meets your requirements, and budget, and integrates smoothly with your platform.
Set Up Your Account: The next step is linking your eCommerce business accounts along with payment processors and bank accounts. This way, the service can sync your financial information.
Stay Organized: Ensure you’re always keeping a record of receipts, invoices, and other relevant financial documents. You have to keep updating your bookkeeping software so everything is up-to-date and accurate.
Work with an Expert (Optional): If you require more assistance, try hiring a specialized accountant or bookkeeper who can help you understand dropshipping from a finance perspective.
How EasyFiling Can Help with Bookkeeping Services
EasyBooks provides a complete bookkeeping service through EasyFiling, making sure that dropshipping companies have full visibility of their finances. Below are details:
Automated Data Entry: EasyFiling integrates with several sales channels and payment processors enabling the automatic capturing of transactions to eliminate manual bookkeeping.
Sales Tax Compliance: EasyFiling comes with industry-specific VAT, GST, and other regions’ tax compliance features to make recording business transactions easier.
Bank Reconciliation: EasyFiling simplifies the reconciliation process through transaction matching for better finance control.
Multi-Currency Handling: This helps dropshipping businesses that deal with overseas suppliers to keep track of currency exchange rates as well as conversion.
Financial Reporting: EasyFiling creates automated real-time financial statements, profit and loss accounts, and cash flow reports to simplify decision-making for business owners.
Cloud-Based Access: EasyFiling does not restrict business owners to a single location, achieving utmost flexibility.
Expert Support: EasyFiling has professional bookkeepers who offer assistance with taxes, and audits, and even provide specific needs for financial planning.
Conclusion
Proper monetary management is necessary for success in the highly competitive realm of dropshipping.
Online bookkeeping services make the task much easier, providing help with cash flow, and proper payment of taxes, and giving you the financial analytics needed to make good decisions.
By making use of these tools, you can minimize errors and save time, all while feeling confident and secure in the growth of your business.
Seize control of your bookkeeping for dropshipping now and provide your business with the cornerstone of tools that will lead to long-term prosperity.
Frequently Asked Questions (FAQs)
1. Why do I need bookkeeping for my dropshipping business?
Bookkeeping helps you track income and expenses, ensures compliance with taxes, helps prevent losses due to fraud, and helps you in making financial decisions. Without bookkeeping, keeping track of cash flow and growing the business becomes impossible.
2. How does EasyFiling automate bookkeeping for dropshippers?
EasyFiling connects to eCommerce businesses and payment processors to complete the bookkeeping cycle. It records sales and purchases, allocates expense accounts, and produces accounting reports that replace labor with automation while decreasing paperwork and mistakes.
3. What are the tax implications for dropshipping businesses?
Every jurisdiction has a different set of requirements. You may have to charge your customers for Sales Tax, VAT, or GST based on where your clients and suppliers are. A bookkeeping service like EasyFiling helps keep track of these and ensures regulatory compliance.
4. Can I use online bookkeeping services if I sell on multiple platforms?
Yes, most online bookkeeping services including EasyFiling are designed to accommodate multi-channel selling. They pair you with Shopify, Amazon, eBay WooCommerce, and other services so you do not have to scatter your financial information across several different places.
5. What bookkeeping service is suitable for a growing dropshipping business?
It depends upon your needs. If you need compliance and automation, EasyBooks from EasyFiling is perfect for you. If extensive integrations are what you’re looking for, then go for QuickBooks Online. For more hands-off professional bookkeeping support, try Bench.
Nabin Adhikari
