Ten episodes ago, I talked about some of the math involved in running an ecommerce business. Episode 250 ended up being one of our most impactful episodes to date.

So I thought it would be a good idea to do a deep dive on all the essentials of ecommerce accounting. To do this effectively, I needed to have an expert on board to break down all these things with me.

Luckily, I sat next to Scott Scharf and his wife at a dinner during this year's Ecommerce Fuel Live and he agreed to come on the show.

A Little Bit about Scott

Scott Scharf is the co-founder of Catching Clouds, an accounting services company that caters specifically to online businesses. Through the company, he’s worked with ecommerce entrepreneurs for nearly eight years, helping them stay on track financially.

What We Covered

In this episode, Scott and I go full Ecommerce Accounting 101. Here are some of the basic concepts and terminologies discussed.

• The most important function of accounting is to have financials you can look at on a daily or monthly basis that will tell you how your business is doing.
• Profit & Loss Statement (P&L) - all the components that make up your top-line revenue; also called an income statement. An example would be Amazon sales.
• Cost to Goods Sold (COGS) - shows how much it costs to create, ship, and sell a product/widget. Shipping cost would be included here.
• Subtracting COGS from P&L would give you the Gross Profit.
• Subtracting your operation expenses (e.g. payroll) from Gross Profit would give you your Net Profit.
• Balance Sheet - a report of the company’s assets (e.g. inventory, money in the bank) and liabilities (e.g. business loans).

Listen to the entire podcast to get a grasp of all these accounting basics to make your better sense of your financials.

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If you have any questions or comments, feel free to leave them below. Happy selling!