E-commerce accounting: How to structure your product catalog for better financial insights
Laura Tien
November 03, 2023
Product catalog management is at the core of multiple parts of your e-commerce business. Not only will it help to streamline user experience on your site, it will also make your operations and finances run smoother. The earlier you start focusing on your product catalog management, the easier it will be to scale your store and the better your business insights will be.
In this article, we go through what’s involved with product catalog management, why it’s important and how to get started. Next, we’ll explain how appropriately sorting your products can help you build better financial data that you can then use to make business decisions. Finally, we go through how to maintain your product catalog after the initial setup.
What is the product catalog for e-commerce?
A product catalog essentially showcases the products or services offered by a business. For e-commerce, it generally contains all product-specific information from prices, specifications, images, etc. Products should also use tags and be sorted in categories that can be navigated easily on the store’s website.
For the e-commerce business owner, product catalog management involves having their own point of reference or source of truth. This could be a spreadsheet, database or a tool made specifically for e-commerce product catalog management. It has all the data about each product and is sorted in a way that allows for better data and decision making.
Why is product catalog management important?
One of the more obvious reasons to have an organised product catalog for your e-commerce store is to have a stronger presence. Easy-to-understand and easy-to-navigate categories allow customers to save time while on your site, have a better user experience and see your brand as more reliable.
Though people don’t always consider this, product catalog management is essential to having better business data. First and foremost, the way you categorise products dramatically influences the accounting and financial insights you’ll be able to draw. Secondly, if you have multiple sales channels or intend to grow, your product catalog needs to be scalable.
Mapping your product catalog for scalability
Scalability should be a key consideration in your e-commerce product catalog management. You need to make sure that your catalog structure can cater to product additions. Similarly, the type of information you collect needs to remain consistent, be standardisable and give an accurate description of the product.
For each of your products, there are a few different data points you should collect depending on relevancy. General data points include things such as price, SKU, weight, size, images and stock. More specific data points could include shade, texture, resolution, tare weight, country of origin, etc. Keeping record will help you maintain a detailed catalog for the long run.
Tagging and categorising products
Once you’ve gathered all the information you need about each product, the next step is figuring out the best way to tag and categorise them. Similar to how you need to consider scalability when mapping out products, it’s important to put this at the forefront at this point as well. What types of products might you add in the future? Will the tags and categories still make sense?
The ideal tags and categories will help your customers have a better experience when browsing your product catalog. Consider what data points your target market would search for. For instance, a furniture store might include tags for wood type whereas a haircare store might include tags for hair texture. Don’t forget to keep the spelling and stylisation for tags consistent!
How to build and analyse financial insights
Now that you’ve decided what category each product belongs to, you can better build and analyse financial insights. To start, you’ll need a cloud-based accounting software. Then, you can connect your e-commerce store to your accounting software with an accounting integration such as Amaka’s Shopify to Xero integration or Shopify to QuickBooks Online integration.
A high-quality accounting integration will automatically sync your transactions to your accounting software on a daily basis. These are synced into the right account and sorted by category. From there, you can leverage a range of financial reports and reporting tools to help you to make better business decisions.
It can be overwhelming when you start to see all the data points available to you. You can start by looking at the top e-commerce KPIS you need to measure. Then, look into what’s on the cash flow statement, income statement and balance sheet. Being able to look at all the data points on a category level will give deeper insight into your performance.
Maintaining a structured product catalog
Your e-commerce platform will likely allow you to sort products into categories directly within the dashboard. However, it’s worth considering whether you want to use an external system as well. Larger e-commerce businesses will consider options like a custom database or a dedicated product information management (PIM) system that syncs with their e-commerce platform.
Regardless of what system you choose for your product catalog, it’s crucial that you only keep one source of truth. Using a spreadsheet or any other system that doesn’t sync with your e-commerce platform creates more work and potentially more issues for you. If you have multiple sales channels, having a single source of truth becomes even more important.
Finally, you need to be regularly updating your product catalog as details change or as stock arrives. Often, suppliers won’t be giving you complete or consistent data and it’s up to you to go through your product catalog and make sure details are updated. If you ignore product catalog maintenance, it can easily become unorganised and inaccurate.
Key takeaways on structuring your product catalog
Ultimately, most of the legwork you need for a well structured and managed product catalog is done at the beginning. After the foundation is built, it comes down to maintaining it regularly. Your customers will be able to browse your site more swiftly, and you’ll be able to know exactly how certain products and product categories are performing at any given time.