eCommerce - Essential Financial Tech Stack Elements (Part 2)

eCommerce accounting is especially complicated due to the many tech-heavy needs of selling online. Part one of this 3-part series explored the technology used to manage eCommerce-specific functionality. In part two, we'll delve into what you need to handle back-office processes like managing banking and credit cards, EDI and accounts payable, marketing, and cash flow in an eCommerce business.

Choosing the right bank for an eCommerce business

There are many different types of banks that eCommerce businesses can partner with in order to provide a rich experience for their customers. These include traditional banks, credit unions, regional banks, and Neo Banks. Each of these has its own advantages and disadvantages, so it's important to choose the right one for your business.

One type of bank that is becoming increasingly popular with eCommerce businesses is the Neo Bank. Neo Banks are technology companies that partner with traditional banks in order to provide a more modern and user-friendly experience for their customers. Some of the benefits of working with a Neo Bank include access to innovative features, more personalized service, and greater flexibility.

Another type of bank that eCommerce businesses often partner with is a credit union. Credit unions are nonprofit organizations that offer their members a wide range of financial services. Some of the benefits of working with a credit union include access to lower-cost loans, higher interest rates on savings accounts, and fewer fees. Finally, regional banks are another option for eCommerce businesses. Regional banks are typically smaller than national banks and offer a more personal level of service. Some of the benefits of working with a regional bank include access to local decision-makers, a focus on customer service, and a deep understanding of the local market.

Expense management and credit cards in eCommerce

When it comes to running an eCommerce business, credit cards are often the payment method of choice. This is because there are many benefits to using credit cards, such as being convenient and easy to use.

The most popular credit cards among eCommerce businesses are those that offer the best benefits and rewards for their spending. American Express, for example, has several cards that offer great benefits for shipping and advertising expenses – two of the largest expenses for any eCommerce business. Cashback is also a big motivating factor for eCommerce businesses, which is why you'll see a lot of Capital One and American Express cards being used.

The one thing that eCommerce businesses love is their rewards, so you'll often see larger businesses using a multi-card strategy to maximize the incentives for certain types of spending, then switching to another card to maximize rewards for other types of spending. This allows them to get the most out of their credit card rewards and benefits.

However, there is one major exception to this rule: inventory.

Inventory is often managed offshore, which means that international wire payments are critical. Without the ability to send and receive international payments, it would be very difficult to manage inventory effectively. Therefore, if you are running an eCommerce business, it is important to have a reliable way to send and receive international payments. The good news is that there are many options available for businesses that need to send and receive international payments. There are a number of companies that specialize in providing this service, and they can be a great option for businesses that need a reliable and convenient way to manage their payments.

Managing cash flow

One of the biggest challenges for an eCommerce business is cash flow - due to the inventory cycle. Clients often need some sort of lending facility, like a line of credit or loan, to bridge the cash gap that comes with buying inventory offshore, importing it, and then selling it. Because traditional lenders typically don't consider eCommerce businesses as viable candidates for loans, you'll often see things like Shopify loans, PayPal loans, and a variety of new fintech lenders who are willing to provide the necessary financing. Many of these tools will tap into the sales or payment processor platforms and use algorithms to determine creditworthiness. As such, it's important to keep track of the loans and cash flow in order to stay on top of accounting.

Technology to track marketing spend

When it comes to eCommerce, there is a myriad of marketing technology available. Much of it doesn't require a lot of eCommerce accounting unless you get into the business of marketing spend tracking. This is often done by marketing agencies, but there are opportunities for accountants to provide their own insights.

Marketing tech can monitor and report on the ROI of ad spend on platforms such as Facebook, Google, or Tik Tok. It can also track the effectiveness of e-mail marketing, SMS marketing, influencer marketing, and how marketing creative assets, such as videos or images, perform and convert to sales. 

As an eCommerce accountant or bookkeeper, it's important to have a good understanding of the different marketing technologies available. This will allow you to provide insights and advice to your clients on how to allocate their marketing budget best.

As you can see, there is a lot that goes into an eCommerce business, and the money trail is long and wide. Understanding this technology stack is one of the first things you need to do before jumping into servicing eCommerce businesses. The next critical step is figuring out how to tackle it and put the right solutions in place. Watch for part 3 of this series on eCommerce technology, coming soon!