What To Look For When Hiring An E-Commerce Tax Accountant

In the world of e-commerce, it can be helpful to have an accountant who specialises in Shopify or your specific sales channel. These accountants better understand the financial and technological ecosystem of your business. Pick an accounting software partner that best suits their business needs. We recommend Sage, Xero, and QuickBooks for ecommerce sellers, as these have the tools and resources you need. Gross profit margin assesses profitability of your products after subtracting all product costs.

• For instance, a customer makes a $40 purchase, but your e-commerce platform deposits $41.90 into your bank account.
• It’s become an essential asset to businesses over the past few years.
• Any retail business should be familiar with accounting for sales discounts, returns, and allowances.
• E-commerce accounting is like business accounting, but since e-commerce transactions take place entirely online, there are several things you should keep in mind.
• These are the Income Statement, Cash Flow Statement and Balance Sheet.

With years of varying business experience, we can provide you with a team that is the right fit for your company and your financial needs. But never fear, though, an awesome ecommerce accountant will be able to help you navigate the rapids of sales tax compliance. When you start your business, you may be able to manage by hiring a bookkeeper occasionally to keep you organized. As you grow, however, it’s essential to have someone professionally managing both of these aspects of your business.

The 3 Keys to Successful E-Commerce Accounting

They also have access to innovative tools such as ecommerce accountant software and can always provide professional consultation based on your specific needs. As such, it is no surprise that the ecommerce fraud detection and prevention market is expected to experience impressive growth over the next few years. According to reports from Statista, online retailers suffered a staggering $41 billion in ecommerce fraud losses in 2022. This is essential, as you’ll want to make sure they have experience working with businesses like yours. It’s important to determine what type of services you require from an accountant in order to make sure they’re the right fit for your business.

Operating margin refers to your company’s earnings after deducting expenses of your primary business activities. Say I open Book Me, a purveyor of books long and short, heavy and light. Customers pay a flat $10 shipping fee for every order, regardless of weight or number of books.

Key takeaways on accountants specialising in e-commerce

With over 11+ years of service in the Accounting and Finance industry. The number one problem with your ecommerce store in the beginning is that you don’t have any money and are not sure where to start. Specialist also understand important ecommerce terms like ecommerce gross profit ratios, business depreciation, and capitalizing expenses. We’re sorry to say that this one can be overwhelming and frightening, like the sales tax monster in the picture.

Working with an ecommerce specialist accountant isn’t always possible straight away, but you still have options – it’s all about starting out strong. Balance sheets are like the world map, with P&L and cash flow statements as street view. These summarize revenue, expenses, and costs incurred in a particular period of time – usually a financial quarter or year. A business with lower variable costs than fixed costs will likely be more profitable once those fixed costs are covered. A business with higher variable costs compared to fixed costs typically has more consistent profitability .

Startup Budget Template

But if you were to model your ecommerce accounting on this, you would end up with a hot mess AND an inaccurate picture of your business. Basically, you leverage automated accounting software to continually track your business’s levels of inventory. The software automatically refreshes the figures as and when necessary. Essentially, it means that you have to periodically count every unit of inventory and manually record each item’s cost or sale value. Then, once you’ve updated your records, you have to also update your cash flow sheet to stay on top of the total amount that your company has spent and gained regarding its inventory. Don’t worry – eCommerce accounting solutions and firms can help your online business track the most complex data .

Business owners have some choice over the way they record their business financials – their method of bookkeeping. In this blog, the first part of the A2X Ecommerce Accounting hub, fundamentals series, we’ll be covering the basics of accounting for ecommerce. Peruse our guide to small business tax deductions for a sizable list of expenses you should deduct on your tax return. Net profit margin, more often called net income, is your business’s bottom-line earnings.

Cost of goods sold

Inventory is not recognized until it gets sold, calling on the need for an inventory accountant who understands when to move expenses to cost of goods sold. If you make a sale on a third-party website, when do you receive those funds, and when should you record that revenue? The answers to these questions depend on your chosen accounting method and revenue recognition policies. Your accountant can help you determine if your accounting methodologies are serving you.