How to Set Up Automated Accounting on WooCommerce

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Are you eager to set up WooCommerce automated accounting but don’t know where to start? You’re in the right place. This detailed guide explains how to automate WooCommerce accounting and the software you can use, complete with step-by-step instructions.

A fully automated WooCommerce store is almost like the holy grail of running an online business, in terms of accounting. It takes away the pressure of tedious data entry and bookkeeping without violating tax compliance rules.

Luckily, WooCommerce accounting software allows you to automatically populate your books with e-commerce order data. These platforms will also reconcile your WooCommerce income with bank statements so you can maintain compliant income records.

Using the right software, you can calculate your sales tax liability from WooCommerce sales in different states. Read on to discover how you can set up a WooCommerce automated accounting process in a few easy steps and make more room for your business to grow.

Pros and Cons of Automated WooCommerce Accounting

WooCommerce accounting software can save you time and effort, not to mention prevent costly mistakes. However, there are also a few challenges you’ll need to be aware of as you explore your options:

Best Practices for WooCommerce Accounting Automation

Several digital tools exist to help you automate WooCommerce accounting, but it’s important you follow a set of best practices to keep your books in order. Here are a few handy rules of thumb you’ll want to remember during the WooCommerce accounting process.

1. Separate Your Business Accounting from Your Personal Accounts

The problem with this approach is that it gets in the way of automated WooCommerce accounting. Let’s say you’ve connected your WooCommerce data to automated bookkeeping software like FreshBooks. The software will fetch all your banking transactions, including personal ones.

You’ll then have to manually sort your personal expenses from your business transactions, which is counterintuitive to the automation you’re trying to achieve!

Of course, advanced tools like FreshBooks have guardrails for manual errors. They flag any transaction they can’t classify. However, if an error does creep in, it’ll skew the profit and loss analysis for your WooCommerce business.

You might even overlook deductible business expenses and end up paying more taxes. That’s why it’s best to keep your business and personal accounting separate.

2. Master Data Report Interpretation; Don’t Set and Forget Automated Systems

Sure, WooCommerce automated accounting is meant to save you time, and yes, you can dramatically cut your month-end and year-end bookkeeping efforts using this technology. However, that doesn’t mean you should set and forget the automated system.

It’s worth investing in data literacy to read and interpret these reports. Using WooCommerce automated accounting only to determine your tax liability and comply with state and federal laws is a missed opportunity. Tap into the full reporting capabilities of accounting software tools to grow your business.

3. Follow the 3-2-1 Rule for Data Backup

Automated accounting software lets you completely digitize your WooCommerce bookkeeping tasks, which means you’ll automatically create a digital record of every income, invoice, tax paid/received, and expense. Nevertheless, it’s important to maintain a backup of your data.

You never know when disaster might strike – you could lose software access right before tax season, there could be a cloud outage when you need the service the most, or your PC could stop working.

It’s vital that you prepare for all eventualities so you can approach WooCommerce accounting with confidence.

The best way to do this is to follow the 3-2-1 backup rule. This means you create three copies of your WooCommerce books, maintain two copies in different formats (for example, on a flash drive and Dropbox), and keep one copy off-site in a different location.

This protects you from most forms of accounting interruptions and keeps you covered if your WooCommerce automated accounting system isn’t working.

4. Conduct a Monthly Accounting Audit

It may seem more convenient to run an annual cycle and reconcile all your transactions at year-end. This means you try to balance your books just in time for tax season, but this can cause several problems.

You won’t have clarity on your income and potential tax liability sufficiently early in the tax cycle, making it harder to set aside money to pay for the tax amount.

The automated system could highlight numerous issues, which you’ll have to manually address all at once. You might miss out on deductibles that could bring your taxes down significantly.

That’s why sticking to a monthly process is better, even if it means a little extra effort. Take a couple of days out every month to review your accounting data. The automated software will do most of the work for you; all you need to do is go through your books and look for any misses or anomalies.

5. Learn More About Your Tax Nexus to Automate Taxes

The US has complicated regulations with several state and federal levels of variation based on the products or services you sell.

Therefore, the sales tax you levy via your WooCommerce store needs the appropriate tax configurations.

Your sales tax is calculated using a nexus, which is any state where you have a significant presence and where you need to charge your WooCommerce customers the relevant sales tax amount.

Luckily, the platform lets you set up tax automation directly without requiring a separate extension or tool.

From your WordPress site, head to the left navigation pane, where you’ll find all your plugins and extensions, including WooCommerce. Open the app.

First, enable taxes from the ‘General’ tab. Then, under the ‘Tax’ tab, you can choose to enter prices exclusive of sales tax.

Click on the ‘Standard Tax’ option towards the top of the window to configure your tax amounts, based on which WooCommerce automatically calculates the final price.

You can visit the WooCommerce website to download a sample Excel sheet with tax rates.

That’s the hard part done. Now, all you have to do is connect WooCommerce to an automated accounting system to take care of your sales tax dues.

The accounting system will create an invoice in your accounting software every time you receive a WooCommerce order.

From the invoice, it’ll extract the sales tax details (based on what you’ve already configured) and automatically classify it under your ‘Taxes Payable’ account in the Chart of Accounts.

6. Follow Meticulous Tax Planning Hygiene

While planning for the annual tax cycles may sound common, small businesses often defer tax planning until the end of tax season. This undoes the effort you’ve put into WooCommerce automated accounting, as you have to gather your funds at the last moment!

Instead, start saving for your tax liabilities early on, preferably when you’re going through your monthly reports.

Also, remember that most accounting automation software won’t fully automate income tax calculations. What it will do is give you an updated balance sheet of your income and expenses, so you know which tax bracket you fall into.

Automation offers another benefit – it gives you a ready list of deductibles and receipts to back them up, so you can reduce your income tax bill.

7. Ask an Accountant for Help

You may need professional help when setting up WooCommerce automated accounting. Some accounting software lets you add another accountant from your region (specializing in your local tax regimes) to the automated platform so they can view your books and calculate your taxes for you.

It’s a good practice to seek professional help with tasks like these:

8. Select a Comprehensive Accounting Software

WooCommerce accounting systems come in all shapes and sizes, and it can be tempting to pick the simplest or the most affordable one. After all, you’re just trying to automate the WooCommerce accounting process and nothing else, right?

As your business grows, so will your accounting needs, and a simple bookkeeping app may no longer cut it.

Eventually, you’ll have to buy a software app for expense management, another for tracking your mileage (if you have to use your car for work), and a third for team payroll.

It’s better to invest in comprehensive accounting software from day one instead of adding different – sometimes incompatible – tools to your stack over time.

How to Set Up Automated Accounting for a WooCommerce Store

To set up automated accounting for your WooCommerce store, you need to integrate it with a reputed accounting automation software.

Our guide will explain how to set up WooCommerce automated accounting. We’ll use FreshBooks as an example.

To connect the two platforms, you can use the Freshbooks + WooCommerce integration built by the task automation company Zapier. Available via the FreshBooks app store, it enables two-way data flow from your WooCommerce store to FreshBooks.

To automate WooCommerce accounting using this method, you’ll need a FreshBooks account, a Zapier account, and a WooCommerce account.

Once you have all three accounts in place, follow these steps:

You’ll find introductory templates to help you with WooCommerce automated accounting, which are extremely easy to use. The order-to-invoice template, in particular, will serve most of your automation needs by syncing income and sales data with your accounting system.
Here are the advantages and disadvantages of this method:

By following these simple steps, you can automate WooCommerce accounting by establishing a connection between your e-commerce store and FreshBooks. Whenever you receive an order, it automatically creates a digital invoice for it.

FreshBooks then extracts customer, item, sales tax, and other data from the invoice and inputs it into your books. This automatically updates your Chart of Accounts.

If you’ve refunded a customer through a credit note, it won’t mess up your books. The connection will immediately relay the data, and FreshBooks will update your books automatically.

Meanwhile, FreshBooks also connects with your bank account to fetch account statements.

When a WooCommerce customer pays for their order, and you receive the money in the bank, the software performs automatic reconciliation – that is, it matches the specific WooCommerce order and its invoice with the payment that’s come in, so you know the precise reason for all your income.

As you operate your e-commerce store, accounting apps also offer a great way to track your business expenses. You can use its mobile version to take pictures of your receipts and store them for tax claims later.

The software will automatically calculate your receivables and payables so you can analyze your WooCommerce business’ current health.

Advanced WooCommerce Accounting Customization

If you’ve been using FreshBooks (or an equivalent) to run your e-commerce business and want to level up, here are some options to explore.

1. Create Custom Automations in Zapier

As we explained, Zapier offers a few pre-built templates for WooCommerce automated accounting with FreshBooks. These include updating invoices based on order data and creating ‘other incomes’ in FreshBooks from WooCommerce orders.

Zapier includes a wide range of pre-built WooCommerce and FreshBooks triggers and actions, which means you can access advanced accounting customizations without any coding. Simply select your trigger + action combination to get started.

It’s like telling Zapier, ‘When this happens in WooCommerce, do that in FreshBooks’ – or vice versa, since it’s a two-way automation system.

2. Explore Other Integration Providers, Including Open Source

Here are a few examples:

If you have some programming knowledge, you can also opt for a free accounting automation system via GitHub. GitHub has a couple of open-source WooCommerce FreshBooks integrations that you can use free of charge.

The downside with open-source is that you won’t get expert support other than community forums like Stack Overflow, which is why you need prior programming knowledge. However, it will give you unprecedented control over the accounting system and how you want to customize it.

3. Customize Your WooCommerce Accounting Setup Using Extensions

If you’ve already set up your accounting automation software and are eager to know what else WooCommerce offers, check out the company’s app store.

WooCommerce has several accounting extensions to automatically perform key tasks.

How to Choose Your Accounting Software for WooCommerce Automation in 2024

Automation can dramatically increase the value you unlock from your e-commerce store. According to a survey of accountants, 99% of respondents said that automation is the industry’s future.

However, a separate report found that just 5% of mid-sized businesses have fully automated accounts payable and receivable.

Luckily, automation software makes bridging the gap easier. We’ve compared the best tools for WooCommerce automated accounting to help you decide.

Therefore, when you’re researching your options, ask yourself these questions.

Question 1: Is it a no-code integration?

You can connect WooCommerce with accounting automation software in several ways, and some of them (like application programming interfaces or APIs) involve coding. Unless you’re familiar with programming, it’s best to choose software that offers no-code WooCommerce integration.

Question 2: Does it support one-way or two-way data flow?

In one-way integration, WooCommerce data flows into the accounting software – for example, a new e-commerce order automatically creates an invoice – but not the other way around.

In two-way integration, data can flow in both directions between WooCommerce and your accounting software. Let’s say you add a new client to your accounting app. You can set up the integration to automatically add a new customer entry on WooCommerce.

Both integration types have their uses, and your decision will depend on your business needs.

Question 3: How much will the integration cost?

In reality, you’ll have to pay for e-commerce site hosting ($25/month if you choose WooCommerce’s own Woo Express hosting solution).

You’ll also have to pay for customer payment gateways. The company’s WooPayments service charges 2.9% + $0.30 for each transaction made with US-issued credit or debit cards. There’s an additional 1% fee for cards issued outside the US.

Additionally, you’ll pay for business accounting software. So, choosing an automation integration you can afford is important. Otherwise, it’ll add up and become overwhelming in the long term.

Question 4: How much accounting knowledge does it require?

WooCommerce automated accounting can be complex, and you need software that matches your technical skill levels. For instance, enterprise-grade systems like NetSuite may be too complex for new e-commerce sellers.

Platforms like FreshBooks, QuickBooks, and Zoho Accounting are better suited to small to midsize businesses while supporting scale. Thanks to its partnership with Bench, FreshBooks has the added advantage of providing expert accounting help.

WooCommerce Automated Accounting Takeaways – Is It for You?

Deciding to automate WooCommerce accounting is an important milestone in setting up, monetizing, and growing your e-commerce business.

It can seem overwhelming at first, but tools like FreshBooks do the hard work for you – by enabling no-code integration for automated data transfer and accounting actions.

Besides WooCommerce accounting, the software simplifies most financial tasks, from supplier management to payroll.

Choosing the right software can save you the trouble of manual data entry and the risk of errors. This allows you to take on larger order volumes with confidence.

Ultimately, if you’re processing more than 20 orders a month and can spare $50-$70 a month, accounting automation is a no-brainer.

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