Year-end is an essential time for eCommerce businesses. It is the time to step back from the transactions, review their financial health, and make all the proper arrangements to face the smooth transition into another financial year. But amid all these moving parts, transactions, inventory, and taxes, it might become very burdensome soon.
That’s where having a year-end accounting checklist makes all the difference. It helps you stay organized, meet compliance requirements, and uncover actionable insights to boost your business performance. In this guide, we will walk you through the key steps every eCommerce business should follow and how simplifying the process can help you with the experts at MeticMinds.
Key Accounting Checklist Every eCommerce Business Must Complete by Year-End
Closing your financial year needs to be conducted systematically. This is a detailed year-end accounting checklist to guarantee no critical task is missing.
1. Reconcile Financial Accounts
Start by reconciling your bank accounts, credit cards, and payment processors (like PayPal, Stripe, or Shopify). It simply means matching every single transaction in your accounting software with the statements from these accounts.
Why does this matter? Discrepancies can lead to incorrect financial reporting, missed tax deductions, or even penalties from regulators. For instance, duplicated entries can inflate your costs or revenues, distorting your profit margins.
Pro Tip: Use accounting software to automate reconciliations whenever possible, but always review flagged discrepancies manually.
2. Review Accounts Receivable and Payable
Next, Make sure that all outstanding invoices and payments are accounted for.
- Chase overdue invoices by sending polite reminders to customers.
- Pay outstanding bills to vendors or suppliers to avoid late payment fees or strained relationships.
Maintaining a clear view of what you’re owed and what you owe will give you accurate cash flow insights as you plan for the new financial year.
3. Conduct a Comprehensive Inventory Audit
For eCommerce businesses, inventory is one of its most important assets, and its value has a direct impact on your financials. Take a physical inventory count, so that what is in stock is reported in your system.
Here’s what to look for:
- Identify slow-moving or dead inventory and consider offering discounts to clear them out.
- Account for shrinkage or damaged goods.
Why is it important? An incorrect value in the inventory will over or undervalue your business net worth, leading to misleading financial reports.
4. Analyze Sales and Revenue Data
Review your sales performance over the year. Break down revenues by product category, season, or sales channel to identify trends and patterns. Are there any products that always perform well? Are there any sales channels that are emptying your profits?
This exercise prepares you not only to report taxes but also in making wiser decisions about doubling down on profitable products or scaling back on the underperforming sales channels.
5. Categorize Business Expenses
Proper expense categorization is also necessary for accurate tax filing. Therefore, go through your expense reports and ensure that every cost is assigned to the proper category, such as advertising, shipping, or operational expenses.
Pro Tip: Don’t miss out on any deductions! Many eCommerce expenses, like website maintenance or marketing costs, can reduce your taxable income.
6. Prepare and Review Financial Statements
Generate the three key financial statements:
- Profit and Loss Statement (P&L): This shows your revenues and expenses throughout the year.
- Balance Sheet: Assets, liabilities, and equity are represented in this statement
- Cash Flow Statement: This statement tracks the flow of cash in and out of your business.
These documents are not just for compliance; they’re essential tools for understanding your business’s financial health and planning ahead for the future.
7. Verify Compliance with Tax Obligations
Tax compliance is non-negotiable. For UK businesses, make sure that you’ve calculated VAT correctly and submitted returns on time. Additionally, double-check other tax obligations, including corporation tax and income tax for any employees.
Do not try to cut corners on these ones because they might incur penalties that cost a lot of money. If you are still in doubt, ask experts or outsource the work.
8. Evaluate eCommerce Platform Fees and Costs
For any platform like Amazon and Shopify, it has fees such as a transaction charge, a subscription cost, and more. Reviewing these charges will help you identify areas where you might save some money.
For instance, could upgrading to a higher subscription tier reduce your per-transaction fees? These are small adjustments leading to saving money long-term.
9. Review Employee Payroll Records
Ensure all employee salaries, bonuses, and tax withholdings are properly recorded. This is especially critical if you’ve hired seasonal workers for the holiday rush.
Payroll errors can lead to tax discrepancies, so take the time to double-check everything before closing the year.
10. Document Key Metrics and Plan Ahead
Finally, utilize this time to assess your business’s overall performance holistically. Document key metrics like:
- Conversion rates
- Customer acquisition costs
- Average order value
These learnings will help you set SMART goals for the new year, be it sales lift, cost reduction, or expanding into new markets.
Simplify Your eCommerce Year-End Accounting with MeticMinds.
If this checklist seems too much to handle, don’t worry; managing year-end accounting and running your eCommerce business is not a small task. That’s why most businesses turn to year-end accounting outsourcing services, like those offered by MeticMinds.
Here’s why MeticMinds is the ideal partner for your year-end accounting:
1. Expertise in eCommerce Accounting
MeticMinds understands the unique set of challenges you have as an eCommerce business. Multi-channel sales, complex tax rules, inventory adjustments, etc. You would know that your financials are in capable hands.
2. Compliance and Accuracy
MeticMinds assures that your accounting is aligning as per UK requirements and HMRC guidelines, right from the VAT submissions, payroll, and various other financial statements, which leaves no room for mistakes at all.
3. Technology-Driven Solutions
By using advanced accounting software, MeticMinds automates tasks such as reconciliations and expense categorization. This not only saves you time but also reduces the chances of errors to a great extent.
4. Customized Services
Whether you want to outsource your entire accounting process or just need assistance with specific tasks, MeticMinds can customize the services to suit your needs.
MeticMinds will help you grow your eCommerce business while they do all the heavy lifting of year-end accounting.
Conclusion
Year-end accounting is not just about getting things done, but about being able to review how your business performed in the previous year, streamline its financial processes, and then create a strong foundation for the coming year. You can sail through this hectic time by having a structured year-end accounting checklist to follow.
Partnering with experts like MeticMinds makes this process even smoother. With their deep expertise in eCommerce accounting, commitment to compliance, and custom-made solutions, MeticMinds alters a traditionally stressful process into a streamlined one. Let us help you close your financial year seamlessly and start the next with renewed focus and financial clarity.
Want to know more about how we can help your business? Contact us today and see the difference that experienced accounting outsourcing can make.