Online retailers, ranging from small businesses on platforms like Etsy to large operations on Amazon or independent websites, all require effective accounting systems. These systems help manage the financial aspects of running an e-commerce business.
For online retailers, accounting software is not just about tracking income and expenses. It’s about managing sales from different channels, understanding inventory costs, dealing with various tax scenarios due to international sales, and integrating with multiple payment methods and e-commerce platforms. Moreover, given the often slim profit margins in e-commerce, having a clear financial overview and the ability to forecast is essential.
The right accounting software can simplify these processes, provide crucial financial insights, and ensure regulatory compliance. Popular options known for their e-commerce-friendly features include QuickBooks Online, Zoho, Xero, NetSuite and FreshBooks.
This article will review these top accounting software solutions, highlighting their features and benefits to help online retailers make an informed decision that fits their business needs.
Table of Contents
1. QuickBooks Online
Overview:
QuickBooks, developed by Intuit, is one of the most recognized names in accounting software. While it offers multiple versions, QuickBooks Online is a cloud-based solution tailored for businesses seeking accessible, real-time financial management. There’s also QuickBooks Desktop, a locally-installed version, which, while powerful, may not offer the same level of integration and real-time access as its online counterpart, making it potentially less suited for online retailers who need constant, anywhere access to their financial data.
QuickBooks Online Modules and Features Used by Online Retailers:
- Sales and Revenue Tracking: Monitor sales from various channels seamlessly.
- Sales Tax: Automated tax tracking as per location to ensure accurate sales tax collection.
- Expense Tracking: Categorize and track business expenses for financial reporting purposes.
- Inventory Management: Keep track of stock levels, costs, and sales metrics.
- Invoicing: Send custom invoices, accept online payments, and set up recurring billing.
- Multi-User Access: Different access levels for accountants, managers, and other staff.
- Integration: Synchronizes with various e-commerce platforms and payment gateways.
- Accounting Reports: Generate profit & loss, balance sheet, and tax reports.
- Tax Preparation: Automatically categorize transactions and maximize tax deductions.
- Mobile Access: Dedicated app for on-the-go management.
Pros of using QuickBooks Online:
- Intuitive: User-friendly interface suitable for non-accountants.
- Feature-rich: Comprehensive set of features tailored for various business needs.
- Integration Power: Seamless integration with various third-party applications and e-commerce platforms.
- Regular Updates: Cloud-based model ensures access to the latest features without manual upgrades.
Cons of using QuickBooks Online:
- Costly Add-ons: Some advanced features might require additional subscription costs.
- Transition Hiccups: Users transitioning from QuickBooks Desktop might find some features different or lacking.
- Occasional Downtimes: As with most online platforms, there can be occasional downtimes.
Recommendation:
QuickBooks Online is well-suited for a wide range of online retailers, especially those looking for a comprehensive, cloud-based solution with robust integration capabilities. It’s particularly beneficial for those who want real-time access to their financial data from multiple locations. While QuickBooks Desktop might appeal to those used to its interface and features, the online version offers more flexibility and integration options critical for e-commerce operations.
2. Zoho Books
Overview:
Zoho is a comprehensive suite of business applications, designed to cater to nearly every business need. Rather than just an accounting software, Zoho provides a holistic ecosystem of interconnected applications that can help businesses manage everything from their finances and HR needs to customer relationships and marketing efforts. For online retailers, the seamless integration between these applications can enable streamlined operations and improved efficiency.
Zoho Modules and Features Used by Online Retailers:
Zoho’s expansive suite of apps is particularly beneficial for online retailers due to its interconnected nature. Key applications an online retailer might utilize include:
- Zoho Books: This is the primary accounting software, allowing retailers to manage their finances, handle invoicing, track expenses, and generate various financial reports.
- Zoho Inventory: Essential for stock management, order fulfillment, and inventory tracking.
- Zoho CRM: Helps manage customer relationships, track interactions, and enhance sales efforts.
- Zoho Commerce: An e-commerce platform to set up online stores and manage product listings, payments, and customer reviews.
- Zoho Analytics: Offers data analytics and insights, essential for forecasting and making informed business decisions.
These specific features in all these app are probably useful for online retailers:
Pros of using Zoho:
- Comprehensive Suite: A wide range of interconnected apps catering to various business needs.
- Scalability: Suitable for both small-scale and large-scale online retailers.
- Customization: Offers flexibility in choosing and integrating specific apps.
- Affordability: Competitive pricing, especially when multiple apps are used.
Cons of using Zoho:
- Learning Curve: Due to its expansive nature, it may take time to familiarize oneself with all features.
- Integration Hiccups: While Zoho apps integrate well among themselves, running multiple external integrations might sometimes be less smooth.
- Performance: Some users have reported occasional slow response times.
Recommendation:
Zoho is best suited for online retailers looking for a comprehensive solution that can cater to more than just their accounting needs. Its interconnected suite of apps provides a one-stop solution for various operational, financial, and customer relationship tasks. Retailers who wish to centralize their operations and enjoy the synergy of integrated applications will find Zoho particularly beneficial. However, those only seeking standalone accounting software might find it overwhelming.
3. Xero
Overview:
Xero is a New Zealand-based company that offers cloud-based accounting software designed for small to medium-sized businesses. With a user-friendly interface and a focus on real-time financial data, Xero has positioned itself as a formidable competitor in the accounting software market. Its robust integration capabilities make it a popular choice among online retailers, especially those looking for seamless synchronization with their e-commerce platforms.
Xero Modules and Features Used by Online Retailers:
- Dashboard View: Provides a snapshot of the business’s financials with graphs and charts for bank balances, invoices, and bills.
- Invoicing: Customizable and branded invoicing with the ability to accept payments online.
- Inventory Management: Tracks products in stock and automatically updates inventory levels after a sale.
- Multi-currency: Handles multiple currencies, useful for online retailers selling internationally.
- Bank Connections: Links directly with bank accounts for real-time transaction data.
- Purchase Orders: Create and send customizable purchase orders and then copy them to bills or inventory.
- Expense Claims: Simplified process for recording, claiming, and reimbursing expenses.
- Third-party App Integration: Integration with over 800 third-party apps, including popular e-commerce platforms.
- Financial Reporting: Provides detailed reports on cash flow, profitability, inventory, and more.
Pros of using Xero:
- Cloud-based: Access financial data from anywhere, anytime.
- User-friendly Interface: Simplified dashboard and navigational features.
- Strong Integration Capabilities: Easily integrates with a multitude of e-commerce platforms and apps.
Cons of using Xero:
- Learning Curve: Might be slightly challenging for those transitioning from other accounting software.
- Advanced Features: Some complex accounting tasks might require workarounds or third-party integrations.
- Pricing: Depending on the level of functionality required, pricing might be on the higher side for smaller retailers.
- Limited Volumes: Designed for businesses with specific thresholds – up to 200 employees, 2,000 bank transactions, 1,000 sales invoices, and 1,000 vendor invoices per month. Exceeding these limits can lead to slow response times in the system.
Recommendation:
Xerois an excellent choice for online retailers who need a comprehensive, yet user-friendly accounting solution. Its strong integration capabilities make it particularly beneficial for those using multiple e-commerce platforms or selling across international boundaries. While it can cater to both small and large online retailers, medium-sized businesses with growth ambitions might find Xero’s scalability and feature set particularly appealing.
4. NetSuite
Overview:
NetSuite, owned by Oracle, is a robust cloud-based enterprise resource planning (ERP) solution. Unlike traditional accounting software, NetSuite offers a comprehensive suite of tools designed to encompass nearly every aspect of business operations. This includes finance, CRM, e-commerce, inventory management, and more. Particularly for online retailers, NetSuite’s seamless integration of these modules provides a unified platform to handle both front-end and back-end operations.
NetSuite Modules and Features Used by Online Retailers:
- Financial Management: Comprehensive financial tracking, from expenses and revenue to fixed assets and revenue recognition.
- E-commerce: A unified platform to manage all e-commerce operations, including web storefronts, shopping carts, and customer portals.
- Order Management: Automate the order-to-cash process, manage inventory in real-time, and reduce fulfillment errors.
- Inventory Management: Real-time tracking, reordering, and warehouse management.
- CRM: A full CRM suite to manage customer relationships, sales forecasting, and commissions.
- Reporting & Analytics: Customizable reports and dashboards offer insights into sales, inventory, customers, and more.
- Tax Management: Automated tax calculations and compliance reports tailored for different regions and tax scenarios.
Pros of using NetSuite:
- All-in-One Solution: Offers a range of modules beyond just accounting, from CRM to e-commerce.
- Scalability: Designed for both small businesses and large enterprises, making it suitable as the business grows.
- Real-Time Data: Offers real-time insights into business operations, ensuring timely decision-making.
- Customizable: Modular structure and extensive customization options fit diverse business needs.
Cons of using NetSuite:
- Cost: Being a comprehensive ERP solution, it will be more expensive than standalone accounting software.
- Complexity: With its vast array of features, there can be a steep learning curve for new users.
- Implementation Time: Setting up and customizing NetSuite can be time-consuming, especially for larger, more complex operations.
Recommendation:
NetSuite is an ideal solution for medium to large online retailers or those with plans for rapid expansion. The platform’s comprehensive features and integrations offer the potential to centralize most, if not all, business operations within a single system. While smaller retailers might find it overwhelming and perhaps more than they need, those with significant sales volumes, international operations, or multiple sales channels will benefit the most from what NetSuite offers.
5. FreshBooks
Overview:
FreshBooks, established in 2003, is a solution primarily aimed at small businesses and freelancers. Its simplicity and user-friendly interface are commendable. Online retailers, especially those in the early stages, may find its offerings suitable.
FreshBooks Modules and Features Used by Online Retailers:
- Expenses: Track business expenses systematically, allowing easy categorization and receipt attachment.
- Payments: Facilitate swift payment processing directly through invoices, though it’s worth noting the transaction fees.
- Reports: Access essential financial reports to maintain a clear picture of business health.
- Inventory Management: While FreshBooks offers basic inventory tracking, it’s more suited for businesses with limited stock variety.
Pros of using FreshBooks:
- User-friendly Interface: FreshBooks is known for its intuitive design, aiding those unfamiliar with accounting software.
- Strong Invoicing Capabilities: For very small retailers, the platform offers robust invoicing tools.
- Third-party Integration: Enhance functionality by integrating with a select range of third-party applications.
Cons of using FreshBooks:
- Scalability Concerns: As your business grows, FreshBooks’ features might not meet all your expanding needs.
- Basic Inventory Tools: Its inventory management is quite rudimentary, which may not cater to all retailer needs.
Recommendation:
FreshBooks could be a fitting choice for fledgling online retailers or those with limited product ranges. Its ease-of-use and invoicing capabilities are its standout features. However, as an e-commerce operation plans to expand or diversify its product line, considering a more comprehensive solution might be wise.
Summary of Accounting Software for Online Retailers
The e-commerce boom has intensified the need for robust accounting software for online retailers. But not all platforms cater to the diverse requirements of these retailers. Let’s summarize the capabilities and ideal fit for each:
- QuickBooks Online: Known for its flexibility and integrations, this solution is an all-rounder. Perfect for both small-scale artisans and larger e-commerce platforms, it provides a comprehensive suite of tools to keep financial data organized. For those already familiar with QuickBooks Desktop but seeking more real-time access and integrations, the online version is the right step forward.
- Zoho Books: Part of the broader Zoho suite, Zoho Books is an option for those who might already be using other Zoho products. It caters well to small to medium businesses, and its interconnected apps offer an integrated experience.
- Xero: With its cloud-native approach, Xero offers accessibility and a user-friendly interface. It’s suitable for small to medium online retailers who are looking for a solution that is easy to implement and has a vast ecosystem of integrations.
- NetSuite: A heavyweight in the ERP world, NetSuite is designed for medium to large-scale online retailers. Its advanced features and customization capabilities make it a top choice for retailers with complex operations or those on a rapid growth trajectory.
- FreshBooks: Particularly tailored for the smaller end of the market, FreshBooks is perfect for fledgling online retailers or those with a limited product range. Its strength lies in its simplicity and invoicing capabilities. As businesses grow, they might find the need to migrate to a more feature-rich platform.
Overall Recommendations
In conclusion, the best accounting software for an online retailer hinges on the business’s size, growth plans, and specific needs. Hobbyists and smaller retailers might be satisfied with FreshBooks or Xero, while larger, more complex operations will find their requirements are only met with QuickBooks Online, Zoho, or NetSuite. Every retailer should assess their current needs, forecasted growth, and required integrations before making a choice. The key is to ensure that the chosen platform can scale alongside the business, offering support through every stage of growth.