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Accounting Software
Why This Matters
You're running a business, not a hobby. That means tracking every dollar in and every dollar out. When tax season comes, you'll either have clean books or a nightmare.
Accounting software connects to your bank accounts, categorizes transactions, generates financial reports, and makes tax filing straightforward. It also tells you the numbers that matter: profit margins, cash flow, and burn rate.
Don't wait until you have a mountain of transactions to set this up. Start from day one and future-you will be grateful.
What You'll Do
Set up accounting software, connect your bank accounts and payment processors, and configure your chart of accounts.
How To Do It
Chart of Accounts Setup for a New E-Commerce Store
This takes about 45 minutes. Setting up your books properly from day one means clean financial data, easy tax filing, and actual visibility into whether you are making money.
1. Choose your software and sign up (5 min)
- Just starting out, tight budget: Use Wave — it is completely free and genuinely capable. Invoicing, expense tracking, and financial reports included.
- Ready to invest, want best-in-class: Use QuickBooks ($30/mo) — the industry standard with the most integrations. Your accountant will thank you.
- Selling internationally: Use Xero ($15/mo) — excellent multi-currency support and popular outside the US.
All three connect to your bank accounts and payment processors (Stripe, PayPal, Shopify Payments) to auto-import transactions.
2. Set up your e-commerce chart of accounts (15 min)
Your chart of accounts is the list of categories for every dollar in and out. Here is the e-commerce starter chart:
Income accounts: Product Sales, Shipping Revenue, Subscription Revenue, Marketplace Sales (Amazon, Etsy) Cost of Goods Sold (COGS): Product Costs, Shipping & Packaging Costs, Marketplace Fees, Payment Processing Fees Operating Expenses: Marketing & Advertising, Software & Subscriptions, Office & Supplies, Professional Services (accountant, lawyer), Returns & Refunds Assets: Inventory, Cash (checking/savings), Accounts Receivable Liabilities: Sales Tax Payable, Credit Card Balance, Accounts Payable (owed to suppliers)
Most software comes with default accounts — customize them to match this structure.
3. Connect your bank and payment accounts (10 min)
Link your business bank account, Stripe, PayPal, and any other payment processors. The software will import transactions automatically. Set up rules to auto-categorize recurring transactions (e.g., all Shopify deposits go to "Product Sales," all Facebook charges go to "Marketing & Advertising").
4. Establish your weekly bookkeeping habit (5 min to learn, 10 min/week ongoing)
- Review and categorize any uncategorized transactions from the past week
- Reconcile your bank balance with your software balance
- Check your "Uncategorized" category — it should always be empty
Every Monday, spend 10 minutes:
This weekly habit takes 10 minutes but saves you a painful 8-hour session at tax time.
5. Set up sales tax tracking (10 min)
If you sell physical goods, you likely need to collect sales tax. Configure your software to track sales tax collected and owed. In the US, sales tax nexus rules vary by state — if this feels overwhelming, use a tool like TaxJar or Avalara that plugs into your store and handles calculations automatically.
By the end of this step, you should have:
- Accounting software set up with your e-commerce chart of accounts configured
- Bank accounts and payment processors connected with auto-import enabled
- Auto-categorization rules set up for recurring transaction types
- Sales tax tracking configured for your selling regions
Recommended Tools
QuickBooks
The industry standard for small business accounting. Excellent integrations with every e-commerce platform.
From $30/mo
Try QuickBooksXero
Beautiful, modern accounting software. Popular internationally with great multi-currency support.
From $15/mo
Try XeroWave
Free accounting software that's genuinely good. Invoicing, receipt scanning, and financial reports included.
Try WavePro Tips
- 1Categorize transactions weekly, not monthly. It takes 5 minutes a week vs. a painful hour at month's end.
- 2Keep business and personal finances completely separate. Get a business bank account and card.
- 3Check your local tax requirements — sales tax, VAT, GST, and income tax rules vary wildly by region.