 When thinking about e-commerce, we're usually thinking about businesses and sole proprietors that sell physical items, inventory that is, with the help and use of online web-based applications, popular applications including, for example, Shopify and Amazon, although there could be many others that would fall into this general kind of scenario. These web-based applications like a Shopify and Amazon helping to facilitate the logistics of the e-commerce business, providing an online presence to facilitate the sales oftentimes, and providing help with the logistics in order to fulfill the sales. We want to think about this from the accounting perspective now and more specifically from the perspective of someone using QuickBooks Online. How does that fit into the picture? So what are the accounting objectives of the e-commerce business then? Like with many other businesses, the general objective is to get financial information into a useful format. That's usually going to be financial statements, including a balance sheet, income statement and related reports. Why do we have to do that? Well, if you're in the United States, one reason you need to do that is to help fulfill your federal income tax obligations. So if you're sole proprietorship, you at least need an income statement in order to prepare, for example, a schedule C most likely being required for your sole proprietorship type of business for federal income taxes. And if you're another kind of business entity, then you might have both the balance sheet and the income statement that you'll need to populate basically for taxes. However, from an accounting perspective, if you're using software, you usually have a lot more accuracy because you'll be using the double entry accounting system and you'll be able to generate both the balance sheet and the income statement. It's usually a lot more accurate than just trying to create, for example, a schedule C, an income statement without a balance sheet. You can track sales tax information to comply with sales tax laws. So sales tax, when we're thinking about the United States, has different tax requirements for different states and localities. And that, of course, adds a lot of complication when we're thinking about an e-commerce type of store to see if we're subject to sales tax in different locations and how are we going to be able to collect the sales tax and remit the sales tax that we need to be dealing with. So we'll try to dive into that in a little bit of detail in future presentations. Generate useful data for decision making. Now, obviously, if you're small business, you might be focused more on simply building the store and making sales and then trying to comply with the federal tax requirements. But obviously, as you grow, you're going to need more and more accurate information to make good decisions about what kind of inventory you want to sell and what's going to be the price of the inventory. So the more accurate your financial statements, hopefully that will lead to more and better decisions about price points and so on and types of inventory that might be good for an e-commerce business. Track inventory for decision making and for taxes. So obviously, when we're talking about an e-commerce business that actually sells inventory, we've got that added level of complexity we have to deal with, tracking inventory, which is more of a problem or more difficult than a service-based type of business oftentimes because we often have to do an accrual type of thing, recording the inventory as an asset and then tracking, of course, the inventory. So we want to think about how are we going to do that from a QuickBooks perspective when we have this e-commerce platform that's facilitating the sales, for example. Integrate applications for ease of use. So clearly, when we have this other application like a Shopify or Amazon that is fulfilling the logistics of fulfilling the orders, for example, we would like to be able to do some integration between possibly a Shopify or an Amazon, for example, and possibly with our banking system to pull in basically the bank feeds. And then we also could have other applications that add a little other layer of confusion, such as the payment processing, like a PayPal and a Stripe, those kinds of services. Okay, so let's look at this from a business owner's perspective. So most people, if you are like a sole proprietor and you're starting up a Shopify store, clearly your objectives aren't usually on the accounting. It's revenue generation. You want the Shopify store in order for it to start to generate sales, obviously. Picking products, clearly people that have a Shopify store that are quite good at it are usually the ones that are quite good at picking the right products, making their website look very nice, setting up their store. So they're going to be focused a lot on if they sell with a website or like a Shopify, then of course, making the store look very nice and all that kind of stuff. Advertising is usually where the focus is going to be, not so much on accounting to make the tax man happy. So oftentimes these are going to be very people that are quite creative on advertising revenue. That's where the interest lies and they're not so focused oftentimes on the accounting and that can kind of take a backseat to some degree. Obviously when you're small business and you're trying to start a Shopify store, that's where your priorities kind of should be because if there's no revenue, then the accounting doesn't really matter all that much. You don't have really any tax obligations or anything, but obviously as the business grows, then these things become more and more relevant and they can start to become overwhelming once the business gets to a certain size and these other kind of things haven't been handled like the accounting, like the taxes and that kind of stuff. So get financial information into useful format financial statements. That's one of our objectives to try to get that financial information into a useful format. That's going to be the balance sheet and the income statement. That's what software typically like a QuickBooks financial software is designed to do. So it usually requires integrations with financial software like QBO. So what we're going to need to do then is now you've got your QuickBooks software. Now obviously if you were just running like a service business or if you were selling inventory like physical in a physical inventory instead of in an online type of situation, you can enter your financial data as they happen into QuickBooks online. But obviously all the sales that are happening are being facilitated on another web-based application. And so now then we have to pull in some information from the other applications into QuickBooks. That's going to require some integrations and the kinds of integrations we can imagine is well can I connect QuickBooks to like the Shopify and the Amazon possibly but then there's the bank that's involved too. So we might have to connect to the bank and then you've got the payment processors like PayPal and Stripes and whatnot. So we can think of integrations but it's not quite so easy. We can think about a whole lot of different types of integrations that might happen depending on the particulars of a business. So that's one of the big things that obviously is quite important to get this right and not get overwhelmed. When thinking about pulling this information into QuickBooks online, it's useful to think about two main buckets and keep them separate in our mind. One type of transaction being the sales side of transactions, the revenue side of transactions and on the other hand in the other bucket, the transactions related to tracking inventory and cost of goods sold. If you have an accounting background and you're thinking about a perpetual inventory system, you might be saying hey wait a second those two things are basically related because when I sell some inventory what should happen at that time is the sales should go up, revenue should go up and the other side cash or accounts receivable should go up, inventory should go down and the related cost of goods sold should go up. All that should happen at the same point in time in a perpetual inventory system. However, oftentimes it's useful to think of more of a periodic type of inventory system when we're trying to pull in this financial data because the sales side of the transaction is usually something that we might be able to pull in from actually Amazon or a Shopify wherever the sales are happening and or from the related bank accounts on the deposit side of things depending on how much sophistication we want to put into our system and then on the inventory side of things usually the software platforms that we are using are not tracking the actual dollar amounts of inventory in the format that we would need like first in first out or a weighted average kind of method. So we have to come up with some kind of method to track the inventory where we might use more of a periodic kind of inventory system or we might try to pull all that data into our accounting system. So those are some of the concepts that we'll get into in a little bit more detail going forward.