Congratulations on opening your retail store! Whether you have a traditional brick-and-mortar operation, or you’re going all in with an online store—or, more likely than not, a combo of the two—retail lends itself especially well to scaling and delegation. This allows you, the business owner, to enjoy the profits from your business without having to be entrenched in the day-to-day operations of the store.
Assuming, of course, there are profits to enjoy.
When operated properly, retail stores can be very profitable. There are several potential pitfalls retailers need to avoid, though. Your first line of defense against these pitfalls is good accounting software for a small retail business. Here’s a review of your best business accounting software options as a small retail business.
Best Accounting Software for Small Retail Businesses: Common Mistakes to Avoid
Wait… pitfalls? Yes!
Retailers have several unique accounting functions they have to manage on a daily, weekly, monthly, and yearly basis. And if they don’t do them right, things can get really messed up really fast. Although these functions often apply to non-retail businesses too, they tend to have a bigger impact on retail businesses—which means mistakes cascade in a big way.
When you’re looking to choose the best accounting software for retail business, you have to make sure that the retail accounting software you choose for online or in-store business manages the following both efficiently and correctly:
1. Inventory
Inventory is the lifeblood of a retail business. Without inventory to sell, you are out of business.
Inventory management goes beyond having enough merchandise in stock, though. Your accounting software needs to also tell you the profitability of each product you sell, how long the inventory sits on the shelves or in the warehouse before it’s sold, the rate at which your entire inventory turns in a given period, and shrinkage due to theft or damage.
Improperly managed inventory will kill your gross profit, which will in turn destroy your bottom line.
2. Sales Tax
Most states charge a sales tax, though certain items like medication, food, and clothing may be exempt in your state. With the increased impact of online business on sales tax revenues, many states are passing laws requiring out-of-state retailers to collect and remit sales taxes.
Your retail accounting software must be able to track sales taxes due. Failure to properly collect and remit sales tax can lead to costly fines and—in some cases—can lead to the state closing your business. Fortunately, there are some solutions available that can automate this function in your business.
3. Payroll
Unless you want to be tied to your retail store, you will need employees to help you operate it. Payroll isn’t unique to retailers, but—after inventory and possibly rent—it’s the biggest expense a retailer incurs.
You need to make sure your accounting software can handle it correctly.
Retail Accounting Software and Point-of-Sale Systems
POS and Accounting Software for Brick-and-Mortar Retail
If you’re asking, “Shouldn’t my point-of-sale system handle most of this?” you’re not alone. In a word, yes. Your point-of-sale system probably will handle most of these functions for you. In fact, a good point-of-sale system is crucial to the operation of your retail store.
But the point is that it should work in tandem with the best accounting software for your small retail business.
Your point of sale system probably won’t handle your actual accounting functions for you very well, though. For this reason, you want to make sure you have a good accounting software in place for your retail store. You also must make sure you can easily get the information you need from your point of sale system to do your accounting.
POS and Online Retail Accounting Software
If you are an online retailer, you won’t have a traditional point-of-sale system, complete with cash registers and a barcode scanner. You’ll have similar components in place, though.
These can include an online shopping cart, real time inventory tracking software, and—of course—your virtual storefront. As is the case with a point-of-sale system for a brick and mortar store, you have to make sure you can get the necessary information to complete your accounting from these various tools.
Picks for the Best Accounting Software for Retailers
The best accounting software for any business is software that’s easy to use and produces the reports the business owner needs to make good business decisions. Depending on your business model and who does the accounting, there are several good retail accounting software options available:
The Best Accounting Software for Brick-and-Mortar Retail Stores: QuickBooks Desktop
Unless you only sell a few products, you shouldn’t try to run your entire business using only your accounting software. That’s inefficient—and can introduce error into your accounting. Instead, use a good point-of-sale system to handle your operations, and then integrate that point-of-sale system with your accounting software. Cool, yeah?
Brick-and-mortar retail stores can’t go wrong using QuickBooks Point of Sale coupled with QuickBooks Desktop accounting software. QuickBooks Point of Sale handles all your storefront and inventory management functions, and it syncs directly with the Desktop version of QuickBooks. This means you don’t have to spend your time manually entering sales data into your accounting software—or hire an employee to do it for you.
There are two major benefits of using the QuickBooks line of products for your brick-and-mortar store:
- Most accountants support QuickBooks products. This means you can easily find a professional to help you review your accounting to make sure it is being done correctly. You can also easily outsource the accounting function in its entirety—remember, one of the benefits of having a retail business is the ability to set it up to run without you.
- Intuit has a network of authorized sellers nationwide. Not only can an authorized seller sell you the point-of-sale and accounting software you need for your business, but most of them also provide setup, training, and troubleshooting services.
The Best Accounting Software for Online Retail Stores: QuickBooks Online or Xero
Almost all of the applications used by online retailers directly link to cloud-based accounting software. Most online retailers will be fine using either QuickBooks Online or Xero Accounting software for their businesses. This means accounting support will be easy to find when you need it.
There are a few things to consider if you are using QBO or Xero for your retail accounting software solution:
- You will need to use a third party application to manage your inventory. Neither QuickBooks Online nor Xero handles complex inventory very well, at least not yet. An inventory management subscription will cost you some money, but it will save you hours of time and costly inventory management errors.
- You will need to use a sales tax automation program. Sales tax automation programs alleviate the hassle of managing the 10,000+ sales tax jurisdictions in the United States, saving online retailers countless hours and dollars. Avalara and TaxJar are two great options to consider for sales tax automation. They connect directly to your online selling platform and—for a small fee each month—will file and remit all necessary sales tax returns and payments due for you.
- You should engage a bookkeeper who understands e-commerce in general and the tools you use in particular. QuickBooks, Xero, and most online retail solutions tout ease of integration, but in reality integration is rarely as simple as clicking a few buttons. Improper integration will completely wreck your accounting. A bookkeeper who specializes in e-commerce will help you integrate your solutions properly from the very start, and they will monitor the integration on an ongoing basis to ensure nothing goes awry.
Considering an All-in-One Point-of-Sale and Retail Accounting Solution
So far, we’ve looked at the options for integrating your point-of-sale system or online platform to well-known accounting solutions. What about an all-in-one point of sale and retail accounting solution?
There are a few all-in-one solutions on the market, and some of them appear to be pretty robust. This can be attractive, but there are a few major disadvantages:
- Using an all-in-one solution means you will not be able to easily find in-depth accounting support. Your accountant can review your financial statements, but—if you choose to use a software your accountant does not support—he or she will most likely not be able to conduct the sort of review that can identify and resolve costly accounting mistakes.
- An all-in-one accounting software for small retail businesses means you will have to do your accounting yourself, or you will have to hire an employee to manage it for you. This may have to be done off-hours, or you may have to invest in multiple workstations.
- Support for all-in-one solutions can be difficult to find. In most cases, you will have to rely on the software vendor for support. Chances are, the support team for the software will be well-versed in the technical aspects of the software, but not accounting.
If you do choose to use an all-in-one solution, do your due diligence before purchasing the software. Look for other retailers who use the accounting software, and contact them for their honest feedback about the product. In particular, ask about their experience with the accounting functions in the software and the support they have been able to find for their accounting questions.
Accounting for Small Retail Businesses Is an Investment
Whether you choose to use off-the-shelf solutions like QuickBooks or Xero, or an all-in-one solution instead, be prepared to invest some money in your retail accounting software and the training and support required to use it properly. Though multiple software subscriptions or purchases and the support for them can quickly add up, this is not an area where you want to bargain shop.
When properly managed, your retail store can be a great source of mostly passive income. In order to realize the profits you desire, you must have the correct accounting software in place for your store. Investing in good accounting and bookkeeping support will also ensure your business is as profitable as possible.
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from Fundera Ledger https://www.fundera.com/blog/best-accounting-for-retail/
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