The shift to cloud accounting is in full force.
Leading accounting software companies are moving their customers away from the traditional and more robust desktop systems in favor of more simplified and financially lucrative cloud-based general ledger systems. The shift appears to be driven by the expectation that individual industries will develop supporting accounting software and apps designed to meet their industry’s specific financial reporting needs. But IT resources in the e-commerce sector have been so consumed with meeting the industry’s other explosive technology needs that little appetite or capacity exists to address the accounting needs of e-commerce companies.
Although cloud-based systems are more expensive, they offer users easier access to their information as well as generally more efficient methods of importing and processing data. However, these systems are being built to some degree on the premise that one general ledger system fits all. As a result, they have less flexibility to meet each specific industry’s unique financial reporting needs. Nevertheless, cloud-based systems offer accounting software companies the opportunity for increased revenue and more manageable operating cost, ensuring that the cloud is the future and the business world needs to adapt.
Growing demand for business intelligence
In addition to the transition from the user’s desktop to the cloud, providers of accounting systems are also facing growing demand for real-time business intelligence. Operators in all industries, including e-commerce, are quickly realizing that in today’s world they need financial analytics at their fingertips to remain competitive. These users are demanding accounting solutions that can also provide them with real-time business intelligence and financially sound, problem-solving analytics tools.
The enormous scope of knowledge and specialization required to meet these demands for endless different industries lies beyond the reach of even the largest accounting software companies. These companies have responded by encouraging third parties to develop apps and companion software (designed to interface with their online general ledger systems) to meet the demand within each specific industry. In fact, most of the name-brand accounting systems have built their own app stores to facilitate the introduction and adoption of these systems by their users.
And everything must be timely and actionable…
The days of using accounting systems to generate monthly income statements with results available fifteen to thirty days after the end of each month are, or should be, a thing of the past — particularly in the volatile world of e-commerce where product sales prices can change by the moment due to dynamic repricing, and gross profit margins can fluctuate wildly based on shipping destination and sales channel selling fees.
The action is fast and furious and requires sellers who expect to stay alive, much less flourish, to have access to real-time information on their margins and gross profit for each individual order on every sales channel. Real-time financial analysis and business intelligence is now an absolute necessity in assisting e-commerce managers with daily, if not hourly, data-driven decision making.
Time to get with the times
The challenge for e-commerce is to move beyond the data access and clumsy accounting processes employed by the pioneers of internet retailing that are sadly all-too-familiar to many readers:
- Data siloed in different platforms and formats
- Daily changes in currency conversion rates
- Payment statements for orders straddling two different months
- Countless spreadsheets requiring importing, exporting, vlookups and endless cutting and pasting
These methods often still result in the user pushing mountains of data for individual orders or batches of orders into generic accounting systems offering financial reports of limited value to the specific needs of e-commerce operators and void of real-time business intelligence or analytics tools.
The solution for our industry
MarginDriver completely automates all of these clumsy e-commerce accounting tasks to the point of providing hourly gross profit reports for every order on every sales channel. The reports include all revenue and direct costs associated with each order including product cost, shipping cost, marketplace referral fees, credit card fees, currency conversion fees and allowances for refunds and returns.
An important distinction of the MarginDriver approach to e-commerce accounting is that MarginDriver does not push this endless stream of order detail into QuickBooks or Xero. Instead, it serves as an accounting system in and of itself for all order-related revenue and cost data. This approach enables it to establish a data bank from which it generates gross profit results for every order on an hourly basis and then accumulates the data to provide daily and monthly financial reports and analysis, including a summarized gross profit statement that can be sent to the general ledger with the click of a button.
The suite of analytics tools delivers real-time business intelligence specific to the needs of e-commerce sellers. They can easily identify orders that are losing money, evaluate the impact of dynamic repricing on gross profit, use SKU profitability intelligence to make inventory decisions and measure the full impact of shipping costs and seller fees on overall profitability.
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Visit margindriver.com, to learn more and explore a full demo account with ongoing data processing. Then sign up for a 60-day free trial and discover what MarginDriver can do to enhance your company’s operating results.