Manual data entry of orders and inventory into QuickBooks® is common among small business owners, but few realize the cost of this practice on their businesses.
Most e-commerce merchants hire or give their existing staff data entry responsibilities to integrate QuickBooks and their online stores. When your clients are just starting out with their online stores and have few sales, manual data entry may work to keep up-to-date with the books. As their businesses grow, however, manual data will not only hinder their business growth, but can also lead to problems with bookkeeping and tax compliance.
The 7 most significant costs of manual data entry for your e-commerce clients
#1: The cost to pay someone to manually enter sales, customers, inventory, and sales tax. Most business owners estimate that it takes about 10 hours a week on average to reconcile all sales, inventory, and customer data between their online stores and QuickBooks. At an hourly rate of $30, that translates to about $15,000 per year. Not only is it expensive, but also very time-consuming. The opportunity cost of the time spent manually entering data takes at least 10 hours a week, adding up to 500 hours a year, or over 12 work weeks!
#2: Human errors, leading to customer dissatisfaction, bad reviews, and low seller rating. Manual data entry leads to human error. If your clients are meticulous, they might be able to keep track of their orders while their businesses are small. Manual data entry is unscalable – the more orders that are entered manually, the more errors that will exist. Customers might get the wrong items, or the shipments arrive late. These issues lead to poor customer reviews, lower seller ratings, and decreased sales revenue. Amazon can deactivate sellers with low ratings.
#3: Overselling and refunds. Because e-commerce is 24/7, and manual data entry is usually done during business hours, your clients risk overselling, if they sell high demand items or have low inventory.
If your clients sell on multiple sales channels, they will need to enter inventory on all of their selling channels and QuickBooks. This will quickly add up to more than 10 hours a week, not to mention the increase in the likelihood of overselling and upsetting customers. In addition, if your client oversells an item, they will need to spend time processing refunds and appeasing customers.
#4: Risk getting audited, due to lack of compliance with sales tax. Clients who sell across the United States need to collect sales tax in multiple states. Sales tax is levied at different rates in different states, since some counties and cities add tax. Merchants risk getting audited if they use the wrong tax codes, when entering sales tax data into QuickBooks.
#5: Cannot match deposits to sales and merchant fees. Payment processors, such as Stripe and Authorize.Net, charge processing fees that need to be reconciled when matching deposits to sales. If the deposits are not matched, the books cannot be reconciled, and the business will need to pay taxes on merchant fees, which are usually 3 percent of the transaction.
#6: Cannot make decisions about hiring or growing their business. If someone on your client’s team is responsible for manual data entry, his or her workload will vary substantially. For most e-commerce merchants, the holidays are the busy season, and the summer is the slow season. The staff member who enters data manually into QuickBooks may only need to spend a few hours a week on this task during the summer, but it can easily grow into more than a full-time job in December. The variance in the workload makes it difficult for a business to launch marketing campaigns, start partnerships, and meet the deadlines necessary to increase their sales.
#7 Inability to scale to multi-channel selling and increase profit margins. Entering data into QuickBooks manually is challenging when selling on just one channel. If your client sells on an additional channel, it will be nearly impossible to keep QuickBooks up-to-date manually. When your clients sell on two or more channels, the COGS will be different because the merchant fees on Amazon are different than the merchant fees on Shopify. Your client’s inventory will need to be updated regularly on different selling channels and QuickBooks, a task that cannot be scaled easily if done manually.
Due to the complexity of accounting with multi-channel selling, many merchants sell primarily on one channel, missing out on exposing their products to a wider audience.
Finally, your clients cannot stay competitive if they are paying someone hundreds of dollars a week for data entry, while their competitors are automating the same tasks.
As your client’s business grows, manual data entry of sales into QuickBooks can become a bottleneck when expanding to new sales channels, making hiring decisions, launching marketing campaigns, and forming partnerships. It’s difficult to make business decisions when you rely on a bookkeeping system that cannot be scaled.
When your clients fail to automate the tasks that create the foundation for their business, such as tracking sales, matching deposits, and complying with tax laws, they will fail to scale sustainably.
Automations to help your clients reduce manual data entry and grow their businesses
What automations can your clients use to minimize manual data entry and grow their sales? Here are some of the most common apps used by our clients:
- Avalara helps businesses comply with their taxes. It integrates with e-commerce platforms and QuickBooks, and can help your clients to avoid getting audited.
- Ordoro is an inventory and shipment management tool that helps merchants keep track of their inventory across multiple channels in once place.
- A CRM tool, such as Ontraport, helps merchants with marketing and keeping track of their customers, without having to enter them manually into QuickBooks.
It can feel overwhelming and expensive to consider all of these automations, but they can be set up at different stages.
The more systems and automations your clients incorporate into their business workflow, the easier it will be to make informed business decisions, engage with new opportunities, grow their businesses, and increase their profit.