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Why we use accrual accounting

The key difference between cash and accrual accounting lies in the timing of when revenue and expenses are recorded. In accrual based accounting, the revenue and expenses are recorded when the occur. However, in cash based accounting, revenue and expenses are recorded on the day the cash exchanges hands.

Accrual Accounting is the most commonly used method of accounting. Revenue is recorded when it is earned, rather than when it is paid. In the context of an Amazon business, this means that sales are recorded on the day of purchase by the customer, rather than the day that Amazon deposits money into your account. Likewise, expenses are recorded on the date that they occur, for example, the storage fees for July are counted as a July expense, even if you don’t pay for them until September!

Cash Based Accounting is far simpler, however it is not as accurate – it could show that you’re in profit, simply because you have outstanding invoices. As the name implies, sales are recorded on the day money is deposited into your account. Therefore, with cash accounting for an Amazon business, one day, every fortnight it would show two weeks’ worth of sales on a single day. Likewise, any expenses due would be counted on the day that they’re paid.

Think about cash accounting for an inventory business… You would incur huge ‘expenses’ in the months which you buy stock, putting huge ‘dips’ in your profitability.

Consider the following example:

Sue has a product which costs $6 (landed), sells for $30, and she buys 1000 units at a time. In January she purchases her first order, and is selling soon after. In March she sells 50 units, April 100 and May 150, slowly building.

She orders stock every 3 months.

In a cash accounting method her books look like this:

Which graphically can be represented as:

Yes, the cash on her Xero file exactly matches her bank statements, but she has no real visibility as to her profitability. If she buys a heap of stock, suddenly her ‘profits’ nosedive.

Using the same example, when Sue does her books using the accrual method, her books look like this:

Graphically represented as:

Obviously, Sue’s books have been simplified for the sake of illustration. What it allows you to see is that her profitability is directly related to her sales and expenses incurred within that month. The main difference is that stock is counted as an expense only when it is sold.

As it accounts for things on the date that they occur (not the date they are paid), when accounting with the accrual method, the balances in Xero may often not match exactly with the physical amounts that are in your bank accounts. However, it does show a much more accurate picture of your business performance and financial position. It allows you to make financial decisions with far more confidence.

Also, it is VERY important to note, if you’re considering an exit… any business broker will need your accounts in the accrual method.

Choosing the right accounting software can be quite tricky especially if you haven’t used one before.

Most Aussie businesses usually start with Excel then choose between Xero, MYOB, and Quickbooks. If you’re serious about your e-comm business you should just really skip Excel and, invest in a dedicated accounting solution.

We’ll compare these programs in this article and help you pick the best solution.

Let’s start:

Excel is not really a long term solution, however it deserves to be on the list as this is usually where most small businesses start.

As a way to track expenses before you start trading, it is somewhat adequate. Excel does not offer much for bookkeeping – there is obviously no double entry system, so mistakes can be easily made, and are usually difficult to detect.

The platform doesn’t offer historical or real-time data, which can make bookkeeping a tedious job. Expect to do most of your work manually as Excel does not automatically generate reports.


  • Templates can make the job easier

  • You can get a free version (limited features)

  • Available both as an online and offline software


  • More prone to errors due to manual nature

  • Difficult to manage cash flow

  • Not possible to automatically import data from bank accounts

Xero is undoubtedly one of the most popular accounting softwares out there. It's used by over 2 million customers and is the go-to option for many small businesses and professional accounting firms.

Xero hits the bull's eye when it comes to integrations, with add-ons available for nearly every ecommerce platform out there. So, you can be assured that wherever your ecommerce business evolves, your accounting system will be able to integrate this means less hassle and less manual labour.


  • Excellent customer support

  • Apps for iphone and android

  • Allows unlimited users

  • Offers more than 800 integrations making it perfect for e-commerce businesses


  • There's a steep learning curve - some time is needed to familiarise yourself with the program

Users can get their hands on it for free as the software comes with a 30-day trial. Since it’s an online tool, you will not have to worry about hardware, it will work on any computer, and there is no need for backup, as it lives in the cloud.

The cheapest package starts at $25 per month, however most e-commerce sellers will need the $65 per month plan, as it supports multiple currencies.

MYOB was introduced in the early 1980s, and it ruled the Aussie accounting landscape before the introduction of cloud-based solutions. To keep up with competitors, MYOB has released its own cloud-based packages – MYOB AccountRight and MYOB Essentials.

For Australian businesses selling in the USA, a multi-currency option is a must have feature. Unfortunately, the only MYOB solution with a multi-currency option is MYOB AccountRight Premier, which is their most expensive solution at $140 per month.


  • Offers phone support, seven days a week

  • Can connect two company accounts

  • Offers unlimited payroll


  • MYOB AccountRight is only suitable for Windows users

  • Expensive at $140 per month

At the time of writing, MYOB is offering 50% off for 3 months, and a free 30-day trial, however, it is still significantly more expensive than Xero.

Popular in USA, Quickbooks has recently expanded to Australia. Like Xero, they offer a cloud-based software for a monthly subscription.


  • Excellent customer support

  • All plans include free Android and iPhone apps


  • Can be a little tricky to use

  • Does not as many integrations available as Xero

The cheapest Quickbooks plan which supports multi-currency is The Essential Plan, $35 per month. This supports up to 3 users and also allows users to manage suppliers and bills.

The most expensive plan costs $50 per month and comes with the platform's newest feature called- tracking project profitability. It can manage more than 1000 contractors and track inventory.

Best Accounting Software for Small Businesses: Conclusion

Xero is undoubtedly the best accounting software for small businesses. Their support is unparalleled, and because it’s so widely used, the forums are a great source of information. Notably, it’s the integrations that really set it apart from the rest. With Xero you don’t have to worry about the marketplace you’ll be selling into in 3 years, as you can be fairly sure there’s a Xero integration for it. Without a Xero integration you’d have to manually import all of the transactions, line by line into your system. Painful!

Additionally, if you’re selling overseas, you need to be sure that your system can handle multiple currencies. Xero easily handles multiple currencies.

In our opinion, implementing Xero is a must for any small business.

Do you find bookkeeping time consuming and tedious?

You are not alone; many small e-commerce business owners feel the same.

Should you keep ignoring bookkeeping just because it is boring?

You might already be doing well, but one thing that could easily accelerate your growth and help you make the best-informed decisions is simply bookkeeping.

Bookkeeping helps you keep tabs on your business performance, it ensures that you ‘re not repeating the same mistakes, and it provides you with authentic insights for improvements.

In this article, we will talk about bookkeeping and why it is so essential for small businesses.

So, let’s dive in.

What is Bookkeeping?

Do you record and organise your financial data daily (okay, if not daily, then weekly)? Think of the orders received, returns initiated, and items dispatched. This is the nitty gritty of bookkeeping.

The main objective is to ensure that your financial information is up to date, accessible, and comprehensive.

While bookkeeping includes a range of activities, some of these include:

  • Creating accurate financial reports

  • Recording sales and following up invoices

  • Clearing supplier invoices

  • Verifying invoices from suppliers

  • Tracking depreciation

  • Inventory management

Put simply, bookkeeping is a process of tracking the money coming in and then going out of your business.

That said, effective bookkeeping is an essential part for your successful e-commerce business. Let’s see why…

Accuracy of Data & Correctly Accounting Amazon Fees

Every Amazon seller knows that when you are selling with Amazon, the customers belong to Amazon, not you. That makes things easy, as at the end of every fortnight, Amazon deposits money into your nominated account. It eliminates many of the logistical problems that go hand in hand with scaling e-commerce stores. Sweet!

Have you thought about what this money actually is? Revenue from sales? Well yes, but really, it is sales, minus all expenses incurred at Amazon. ‘Amazon expenses’ are many and varied:

  • Sales commission: This varies from 6% to 20%, depending on the category. Most categories attract at least 15% of the sales commission.

  • FBA Fulfilment Fees: product variable, determined by size and weight

  • FBA Storage Fees: size dependent and duration for which the inventory resides at Amazon’s warehouse

  • Advertising Cost: Sponsored products, banner advertisements, coupons etc.

  • Monthly subscription: for the privilege of utilising their selling platform.

The problem is, if you only report this fortnightly figure as your ‘sales’ you are grossly underreporting your actual sales figures, and your business expenditures.

This is where you will find a third-party software package like A2X very beneficial. It imports all your data into Xero and neatly divides it by sales / advertisements / subscriptions etc. It is worth noting that A2X only has the ability to pull historical data for 24 months, so if that 2-year mark is coming up for you, do not delay in contacting us!

Inventory Visibility

Do I have enough stock, and what is its worth?

These questions might sound simple but can be deceptively challenging to answer.

If you’re an Amazon 3rd party merchant and selling on multiple channels, it can be a daunting task to keep track of your stock.

Accounting software with the ability to track each individual SKU makes your analysis so much easier. Knowing your exact stock on hand for each individual product is imperative for the day to day running of your business and essential when it comes to positioning your business for sale.

Time is Money

Undoubtedly, things get complicated as you scale up, and one simple mistake can be costly, both in terms of money and time. You need to go through the entire book again, track all the changes, find out the error, and incur the additional costs.

What’s more, if within this period, you ended up making a decision based on incorrect data, it could have an everlasting detrimental impact on your business.

Better Reporting for Better Decision Making

Data is gold and it should be used to fully achieve your objectives. Having easy access to up to date relevant data helps you derive informed conclusions, strategise, and make better decisions.

Efficient bookkeeping is essential and helps you out by relieving you of this tedious on-going burden, allowing you to concentrate on running your business.

Zonkeepers is here to help you!

It is highly likely that you didn’t start your e-commerce business to become a bookkeeper. Many small business owners that we talk to feel that they lack financial and accounting knowledge. The trouble is, clean ordered books are essential for the long-term success of your business, and absolutely imperative if you’re considering an exit. If you don’t like doing your books or are feeling overwhelmed, outsource it.

Talk to us to find out more about our range of bookkeeping services, and how we can help you to streamline your business operations.

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