Here is why you need an ecommerce accountant

In a modern and competitive business environment, it can be challenging owning and managing a successful ecommerce business. As the business owner, you are in charge of all the business operations. You might decide to do it all yourself, however, this may prove difficult. Therefore hiring an ecommerce accountant will free up your time so that you can focus on other business aspects. Before hiring one, you need to have a separate business bank account and a business tax ID number. You can delegate these tasks to your accountant as you concentrate on decision-making processes and other business operations.

 

Maintaining healthy cashflows

As a business owner, you might decide to either incorporate a cash-based accounting system or an accrual method. The former is more popular with small businesses, where only transactions involving “actual” cash are recorded, not those on credit. On the other hand, the accrual method involves recording all the transactions incurred regardless of when cash is received or paid. An accountant will give you useful insights to guide you on which method to choose. Cashflows include all the incoming and leaving monetary transactions incurred in the business. The details associated with each transaction are noted for easy reference. An accountant will track inventory sales, refunds to customers, store chargebacks and goods bought on credit.

 

Transaction categorization

An ecommerce accountant is responsible for recording different business transactions and expenses under their respective categories. This includes payments to suppliers, stock purchase, salaries, expenses packaging, shipping, handling costs, bank charges, website subscriptions and advertising costs. Money getting in and out through all these transactions should be well documented and therefore recorded in the cash flow statements. Moreover, these transactions are categorized in the Profit and Loss statement so to arrive at the net profit or loss for the period. By categorizing, it is easy to set aside funds for recurring expenses, equating to good budgeting.

 

Maintaining inventory

A further important task undertaken by your ecommerce accountant is to tracks inventories. Tracking where stock is going as well as amount and reason for returns will allow quality refining. It entails checking the total goods available as frequently as possible, either at the start of the week or day and comparing the difference to the sales. This is referred to as stock maintenance. The ecommerce accountant will calculate the sales it takes for the business to break even. Break-even is the point at which the business sells enough goods to make back its production costs and other expenses incurred before selling the goods, this is without gaining any profit or losses. You can access this information and make relevant decisions which will benefit to your ecommerce business.

 

Record keeping

In addition to preparing cashflows, an ecommerce accountant will create other financial statements including a Profit and Loss and Balance Sheet statement. These should accurately align with the transactions shown in the bank accounts. An ecommerce accountant will also use some of the latest technologies such as Dext. With a Dext app you will be able to capture physical receipts or invoices directly from your phone. Those receipts and invoices can then be integrated with your accounting system, such as Xero. Xero, is a cloud-based application for accountants to collect, analyze and sort financial data for the ecommerce business. It is secure and ensures the company’s financial data is protected. Another popular software is ZipBooks, a software used by businesses accepting credit card payments. However, for cash flow management Sage is more popular. Accurate invoicing is crucial for the business and FreshBooks is popular for its advanced invoicing options.

 

Tax procedures

Businesses must report their profits for tax purposes and well-documented reports are crucial for a smooth tax procedure. Firstly, it is important for a business to have a tax ID number. Moreover, an accountant would makes sure all tax obligations of the ecommerce business are fulfilled on a timely fashion.

 

Budgeting

Financial statements are reviewed for budgeting, which the accountant prepares and manages. The accountant and the owner usually agree on this together, or your accountant could submit a proposal which you can then review and modify. An accountant manages also the cashflows and ensures precise records, and follows up on set weekly budget goals. You, as the owner, would see things through another set of eyes, some of which you might have missed.

 

Financial risk analysis

An accountant would be beneficial to you in analysing risk and forecasting trends of sales of your ecommerce business. He/she will provide you with professional mitigation options that you can then incorporate in your financial model. He/she reviews how your business generates its revenue and identifies if there are better ways to increase sales without incurring unnecessary additional costs. An accountant would also conduct internal business auditing and advises the company’s owner accordingly.

 

Business computerization

Accounting is crucial to any business, whether on a small or global scale. And for those reasons, software developers have dedicated their efforts to create accounting solutions that meet all business owners’ needs. Accountants use different applications to do various tasks and automating the whole system; going paperless is the ultimate goal. An accountant may choose to use easily accessible software tools to do almost all the accounting functions.

Xero is the most common accounting application software for ecommerce businesses. It is used by accountants to generate invoices, cashflows, record bills, maintain payrolls of employees among other accounting functions. This application also creates simple reports that can be used in calculating expected tax filings.

All these applications (Xero, QuickBooks, Dext, Sage, FreshBooks, ZipBooks) are commonly used by small-scale businesses. However, businesses with a wide range of customers and suppliers may prefer a customized accounting system to meet their needs.

 

Overall benefits of engaging an ecommerce Accountant

 

If you decide to take on all these duties and all other business-related tasks, you stand to lose more than you save on doing without an accountant.

The benefits of an accountant cannot be stressed enough. As an ecommerce business owner or prospective owner, you are advised to consider one. Without an accountant going supporting you with strategic advices you might find it challenging making your business successful.

 

Author Bio:

Ciro Scianna is the Founder of Accontext, an innovative and virtual accounting firm for ecommerce and online businesses.

Ciro is a professional Chartered Accountant who has gained over 15 years experience in small, medium and multinational corporations. He also worked as an auditor for one of the top accounting firms in the World and started his career at the prestigious Crown Estate. The Crown Estate is the organization managing Her Majesty’s The Queen and Royals properties in the UK.

Having completed 5 years of continuous development, Ciro became a Fellow of the Association of Chartered Certified Accountant (FCCA) in 2018. Ciro continued developing his skills by specialising in accounting for ecommerce.

 

If you have any question of how to maximise your cashflow or require any support, please feel free to reach out at ciro@accontext.com for a FREE friendly chat.