In the digital age – and with so many great pieces of software out there – many modern ecommerce store owners ask themselves, “Do I really need an accountant for my ecommerce business?”
This depends on you. If you have the skill, training, time, and resources required to complete accounting processes effectively, you may be able to handle this yourself. If not, you’ll probably need some reliable professional assistance.
Read on as we explore this in more detail so you can decide for yourself.
What Are the Financial Aspects of an E-commerce Business?
E-commerce businesses come in all shapes and sizes, operating in various industries. However, they are all united by one factor – their finances.
Businesses need to be aware of the financial aspects of their ecommerce endeavors. Without this awareness, it’s difficult to achieve business growth and regulatory compliance.
This is why an accountant can make a real difference for your organization. By staying on top of net deposits and outgoings in business bank accounts, as well as the value of goods sold and the cash flow rate, accountants give you a clear picture of financial performance.
From here, it becomes far easier to plan for the future.
The Benefits of Hiring an Accountant for Your Ecommerce Business
Why is hiring an accountant so valuable for your ecommerce business?
There are several key benefits you can expect as your business grows:
- More Efficient Processes: Handling incomings and outgoings can be time-consuming, and you’ll save time and effort when you outsource this to business accounting and tax experts.
- Reduced Costs: Using a third-party expert will also save money, improving the profit margins for your ecommerce company.
- Tax Compliance and Efficiency: You don’t want to find yourself facing a tax penalty, and you also don’t want to overpay. An accountant can ensure you are reporting and paying the right amount of tax.
- More Time on Your Business Operations: You will free up valuable working hours to focus on other areas of your business, making decisions and developing strategies that keep you moving in the right direction.
Types of Accounting Services for Online Businesses
E-commerce accountants can provide different services to online retailers and companies, rising to the unique challenges of this industry.
Their assistance might include one or more of the following:
- Accounting – The primary function of your accountant is, of course, accounting, but there are several different methods available to you. The cash-basis accounting records the amount whenever you receive or pay out money. Accrual accounting, on the other hand, records when invoices and bills are sent and received. You can choose either method, but you can only operate one of these options at any given time.
- Tax Preparation, Planning, and Compliance – Accountants are also sales and income tax experts, helping you prepare and file tax returns, plan future strategies, and ensure comprehensive income and sales taxes compliance.
- Reporting and Financial Statements – Accounting professionals produce financial reports and statements, giving ecommerce companies an accurate picture of business performance and status.
- Inventory Management – Ecommerce accountants may also manage inventory, maintaining records of available stock and total product values.
How to Choose the Right Ecommerce Accountant
Ecommerce accounting is a serious thing to consider, and you must make the right decision.
Here is a brief list of selection criteria you can use to play on the safe side:
- The right accountant must be fully certified and have experience in the ecommerce field – this is essentially a minimum requirement.
- They must completely understand your financial needs and provide a service within your budget.
- The professional must have a strong understanding of ecommerce accounting software, including cloud-based solutions.
- They have to understand sales tax compliance and other obligations in all your areas of operation, both domestically and internationally.
Last but not least – the accountant must have a good track record of success in your field, with recommendations and testimonials from previous clients – if you get a direct recommendation from someone you know and trust, even better!
Common Accounting Tasks for an E-Shop
For ecommerce business owners, accounting is an ongoing requirement. It’s not something you can just leave until it’s time to submit your tax return – you need to do it regularly. This is one factor that makes ecommerce accountants so valuable, as these frequent tasks can be quite time-consuming.
Some of these repetitive tasks include:
- Putting all your transactions into the relevant categories;
- Creating and monitoring a robust budget for your business;
- Ensuring you remain fully compliant with tax requirements;
- Making sure your bookkeeping and inventory management processes are up-to-date and effective;
- Commissioning reports and conducting analysis to avoid human error and common accounting mistakes;
- Monitoring financial performance by sales channel, etc.
Below, we will cover some basic tasks with major importance for both small business owners and enterprise-level ecommerce companies.
Creating Financial Reports and Forecasts
Financial reports give you and your teams valuable information on how your business is currently performing. As your business grows, these reports may become more complex, and you may need professional assistance as you gain insight from this data.
Financial forecasts, on the other hand, look to the future. These data resources offer predictions on how your business will perform in the future, drawing on transactional data, client information, and expected market conditions to achieve this.
Both of these are key components of accounting software and important tasks for accounting professionals.
Tax Considerations and Compliance
You’ll need to bear in mind several different aspects of taxation as an ecommerce seller.
Here are some tax considerations your accountant can help you with:
- Ecommerce sellers need a permit to collect sales tax.
- Income tax is applied to online sales, just as it applies to all business income.
- Sellers need to remain aware of federal tax implications and specific requirements in individual states.
- You may be able to sell online up to a certain threshold without paying tax, but all income beyond this threshold will be taxed.
- You can reduce your tax liability with deductibles, but this can be difficult to navigate for those without proper training.
Accounting Best Practices for Ecommerce Businesses
Ecommerce accountants can apply several best practices as they target the best results for businesses.
These best practices include:
- Use a Reliable Software Solution – Software solutions can help ecommerce accountants. Professionals should choose software with reliable automation and AI features, making their lives easier and removing the potential for human error.
- Adopt a Regular Schedule – We’ve touched on the regular tasks of an accountant, and these professionals need to be ready to handle these jobs daily, weekly, monthly, or quarterly, depending on the task. Adopting a robust schedule helps keep accountancy teams on track.
- Monitor Accounts as the Business Grows – Business growth changes the accounting dynamic. With more incomings, outgoings, and a growing number of sales channels, the accounting process becomes more complex. Accountants need to plan for this increased complexity to avoid errors.
Using an Accounting Software – Pros and Cons
Accounting professionals certainly provide a great service, and you probably don’t want to have to handle accounts and other related tasks on your own, but do you really need an accountant for your ecommerce business?
Software can make things like tax planning and cash flow management much easier, so why not just invest in a solution rather than working with a more expensive accountant?
To learn more about this, let’s look at some of the pros and cons of this approach.
Accounting Software Advantages
- The solution includes a range of accounting features at a lower cost than hiring a professional.
- Automated and AI-based features built into the software can eliminate human error.
- Software should integrate with other solutions and data stores so accounts payable information and other data feed straight into the solution.
Accounting Software Disadvantages
- You’ll need knowledge and training to operate the software effectively.
- Overreliance on these solutions can lead to errors and discrepancies if the software is not configured correctly.
- You are fully responsible for making sure you remain compliant.
Accounting software is a great asset to your tax planning and bookkeeping strategy, but it is best to let your accounting professionals handle these solutions. Using them on your own, without prior training, can put your online business at risk.
The Importance of Maintaining Accurate Financial Records
Bookkeeping is the foundation of your accounting process. You need to maintain accurate financial records for many reasons – all of which make hiring an accounting professional an attractive option for your business.
- Reliable records are necessary for tax returns and for fulfilling auditing requirements.
- The records give you real insight into your business’s financial performance.
- Thorough records provide data for forecasting and predictions so you can strategize for the future.
- These records help you demonstrate the worth of your organization to partners and shareholders.
Frequently Asked Questions:
What does an ecommerce accountant do?
Ecommerce accountants monitor the financial performance and bank account of online shopping websites, optimizing record keeping and achieving regulatory compliance.
How does accounting work for ecommerce?
Ecommerce organizations have incomings and outgoings like other businesses do – accountancy professionals record these values and analyze changes over time.
What does an ecommerce bookkeeper do?
Bookkeeping is the foundation of ecommerce accounting. Bookkeepers monitor the income and outgoings across each reporting period to achieve reliable records.