Are you attempting to set up a functional WooCommerce accounting system for your online store? Although accounting is not a struggle for many WooCommerce store owners, it is a tedious but essential job. It lets you know how much money you make as a business.
A quality accounting system will also prevent any legal trouble from happening. Fortunately, a good WooCommerce bookkeeping system is easy to set up.
Why Is Accounting Important for Businesses Using WooCommerce?
Whether you sell through Amazon FBA or in your own store with the help of the WooCommerce or Shopify platform, it is crucial to know your figures. This is essential if you want to run a profitable and sustainable business.
Most store owners track their top revenue numbers. However, these financial KPIs are just as important as they determine the health of your business:
- Profit: the remainder after revenue and operating expenses
- Incoming cash flow: the amount of money that comes into the business each month
- Outgoing cash flow: the amount of money that comes out of the business each month
- Operating expenses: all the costs of running your business, including employee salaries
- Assets: what the company owns
- Liabilities: any debt or loan owed by the business
- Customer acquisition cost (CAC)
- Cost of goods sold (COGS)
For example, some businesses get in trouble when they focus too much on revenue and profit but not enough on the cash flow cycle. As a result, the companies struggle to get payroll or buy enough inventory, even though they are technically profitable. Implementing efficient accounting practices becomes paramount in such situations. Utilizing tools like WooCommerce accounting plugins can streamline financial management processes, providing accurate insights into sales, expenses, and inventory levels. Additionally, integrating tools like Microsoft Word Invoice Template can further enhance efficiency by simplifying the invoicing process and ensuring professional-looking invoices are sent to customers promptly. Implementing payroll automation software can also play a crucial role by streamlining payroll processes, ensuring timely payments, reducing errors, and freeing up resources for other essential accounting tasks.
How to Set Up a Quality Accounting System for WooCommerce Stores?
Link WooCommerce with Accounting Software
A good accounting platform has an extensive feature list, ensuring that every transaction submitted through your WooCommerce store is recorded and ready for future reports.
Finding such an accounting platform is the first step in setting up an accounting workflow for WooCommerce stores. Some even provide a free plugin or extension to streamline the process.
Therefore, the goal is not only to find a reputable accounting platform, but also one with a viable plugin and sync process.
Below is some of the best accounting software for WooCommerce:
WooCommerce Sync for QuickBooks Online
This plugin integrates your WooCommerce store with one of the most popular accounting tools for businesses of any size—QuickBooks Online. It provides real-time synchronization for inventory, products, and sales numbers.
Just link it to your bank account to track expenses and use QuickBooks global tax and currency support to record all taxes and transactions from everywhere.
Xero
Xero is another reputable accounting software that has a WooCommerce extension. The extension does everything, from reconciling your bank account transactions to checking inventory and tracking payroll.
The great thing is that all tax, product, and shipping data is seamlessly sent to Xero directly from WooCommerce.
QuickBooks
When most people come across the term “small business accounting software,” they probably think of QuickBooks. Intuit introduced the product 20 years ago. It has evolved into one of the most popular and widely used financial management platforms in the world today. Their only real competitor is Xero.
QuickBooks is currently used by more than 80% of all small businesses. Many small and medium-sized businesses value it as a valuable resource. QuickBooks can be used to meet accounting, reporting, and invoicing requirements. It also provides a number of add-ons for credit card processing, inventory tracking, and payroll processing.
One thing to keep in mind is that QuickBooks and WooCommerce are not directly connected. Third-party extensions are required to complete the integration.
This task can be completed using a variety of resources. Knowing the differences in how WooCommerce and QuickBooks transmit data is the first step in selecting the best solution for your company.
The connection between WooCommerce and QuickBooks is made possible by MyWorks, Zapier, and other third-party plugins. Integration can be as simple as integrating sales information or as complex as updating your inventory in real-time as changes occur. The plugin or extension you select should be based on the needs of your company.
You’ll need an active QuickBooks account that can be integrated with your WooCommerce store before you can make any type of connection. QuickBooks Online is an excellent solution for many small businesses.
It’s a cloud-based solution for tracking your customers, expenses, income, and sales transactions. QuickBooks Online can also be used to manage inventory, invoices, purchasing, and much more. Prices start at $20 per month, making it a very affordable resource.
QuickBooks and WooCommerce integrations communicate and send information back and forth in a variety of ways: Integrations for One-Way Transfer and Two-Way Sync
Knowing what’s important for your company will help you find the best QuickBooks solution. A sole proprietorship or small start-up business may only require a one-way plugin with a small one-time fee to have their WooCommerce orders automatically post in QuickBooks for them.
Larger organizations or businesses with high order volumes may require a two-way integration to keep their data as up-to-date as possible. This is a useful feature, but it frequently comes at a cost in terms of monthly fees for these services.
FreshBooks
FreshBooks is another WooCommerce accounting plugin that can automatically connect to your WooCommerce website.
You can use FreshBooks to automatically generate invoices from invoice generator whenever an order is placed on your WooCommerce site. A customer account will be created, and any payments made to that account will be recorded.
Furthermore, you can choose which accounts to link to FreshBooks based on order source, fulfillment status, or payment status. Advanced options give you more control over how your accounts are integrated.
You can also map tax codes to FreshBooks automatically. Products in WooCommerce online orders generate new items in your FreshBooks account.
You can either designate a specific clearing account for payments or assign different payment methods (cash, credit cards, bank transfers, Apple Pay, Google pay) that are currently accepted.
When products are updated or created in the WooCommerce store, items can also be created in the FreshBooks account.
WooCommerce Zapier
The WooCommerce Zapier extension is an alternative for those who already use an accounting platform besides QuickBooks or Xero.
Zapier acts as a universal integrator to link your WooCommerce store with any accounting software that does not have an official WooCommerce extension/plugin.
Aside from accounting, WooCommerce Zapier integration can automate other aspects of your WooCommerce store, too, such as marketing, customer support, order tracking, and more.
Set up Tracking and Reporting for Important Figures.
Ideally, with a single click, an accounting platform will start synchronizing sales data and putting it into the proper columns and tracking reports.
However, you should also track other key metrics to see how your WooCommerce store progresses over time and build reports more easily in the future.
The WooCommerce accounting reports help maintain control of your finances. You can also send them to stakeholders who need to check the financial stability of your business. Finally, you may have to re-read these reports before the tax deadline.
Set up WooCommerce Tax Rates
While accounting software does a lot of the work to synchronize your revenue and expenses, you are still responsible for another prominent area: taxes. You need them so you can comply with the law and ensure you do not have to pay penalties when tax season arrives.
In short, if you do not configure tax rules on your WooCommerce store, your business will not last long as invoices pile up quickly.
Additionally, accurate tax calculation makes for better reporting in the accounting software. Those payments are classified as taxes and may be set aside to pay the government when the time comes.
Because the subject is complicated, we already wrote an article specifically on WooCommerce tax rates that you should definitely check out!
Alternatively, tax plugins exist—ranging from simple, small business tax calculators to more complex eCommerce tax organizers—for you to utilize.
TaxJar is an example. This free plugin integrates with WooCommerce seamlessly and pulls real-time tax rates from various locations. Therefore, you do not need to know your region’s tax rates.
In addition, TaxJar offers advanced reporting, automatic filing, and real-time tax calculations that let you know when tax thresholds have been met in each of your regions.
Top WooCommerce Accounting Tips
Below are some accounting and bookkeeping best practices for WooCommerce stores that you should follow.
Create a Monthly Accounting Process
You need accurate financial data if you want to make data-driven decisions. This means building a monthly process (ideally weekly if you sell numerous items) for the accountant to update the account chart.
Don’t forget to host accounting applications like Quickbooks or CaseWare in the cloud, and you can securely access your financial data process anytime remotely.
Switch to Accrual Accounting
There are two forms of accounting: cash accounting and accrual accounting. The former works well when you are just starting out or running a simple, small business.
However, if you have a WooCommerce store where you tend to see spikes in sales—such as during the holiday season, you should switch to accrual accounting.
Accrual accounting means that revenue and expenses are recorded in your account charts when they are earned, not when the money arrives or leaves your bank account.
Use an Inventory Management Plugin for Your WooCommerce Store
If you have more than a dozen SKUs, investing in inventory management software that syncs with your accounting software will save you lots of time and headaches. That is because you can also use it to forecast stock, calculate inventory shrinkage, etc., besides tracking your inventory.
Know Your Tax Deadlines
Tax deadlines vary depending on your company’s location. You should remember them if you want to avoid potential fines and inspections.
Let’s look at the US as an example. Traditionally, Tax Day is April 15 here. Each year has its extended tax filing deadline, which you can find online if there is any reason you are late.
Also, you may have to pay estimated taxes as a business owner. You may encounter form 1099K, form 965-A, and a number of other tax-related forms that you may not be accustomed to. Also, you may have to pay estimated taxes as a business owner. While this is not always required, most sole proprietors, partnerships, corporations, and S-Corps have payment requirements.
Set up a Financial Dashboard
A sustainable way to run a business (and save your mental health) is to build a financial dashboard with all the essential financial KPIs that show the health of your business.
If you keep track of your bookkeeping and view this dashboard at least weekly, you will always be on top of how your business is doing.
Final Thoughts on WooCommerce Accounting
The world of tax and accounting is not always fun. But your best bet is to set up a WooCommerce accounting process correctly from the beginning. So you will never have to worry about scary surprises from the government.
Hire an accountant, synchronize your sales data with quality WooCommerce accounting software, and ensure you run reports regularly.
Finally, find more ways to improve your WooCommerce store and its workflow by checking out our collection of the best free WooCommerce plugins.
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