So, you’ve decided to start your own ecommerce business selling on Amazon, Shopify, and other platforms. Your day-to-day tasks might include ordering inventory, managing items on hand, and driving traffic to your platforms.
You realize that accounting will come into play eventually, maybe around tax time, so you push it to the bottom of your to-do list. Once the year closes out and you start compiling tax information, you realize that you are missing 30% of sales in your checking account.
How is this possible? Ecommerce businesses don’t follow the traditional business model of receiving income and paying expenses. This is why you need ecommerce accounting services specific to your business type.
In this article we’ll cover everything you need to know about ecommerce accounting, including how to choose the right accountant for your business.
What is Ecommerce Accounting?
Ecommerce accounting is the process of managing transactions and making adjusting entries in your accounting system to generate accurate financial statements and tax returns. Most of the transactions in your ecommerce business happen outside of your checking account. For example, many platform fees are deducted off the top of gross revenue, creating net deposits sent to your bank account.
Without truing up your revenue and recording offsetting expenses, you aren’t getting a clear picture of your operations. This can hinder your decision-making process. Common expenses that don’t directly come out of your business bank account include product sales, refunds, returns, sales tax, advertising, selling fees, service fees, shipping costs, and warehouse expenses. Each of these items needs to be accounted for, which is what an Amazon seller accountant or a Shopify CPA focuses on.
What are the Roles and Responsibilities of an Ecommerce CPA?
Shopify accountants and Amazon FBA CPAs can take on many different roles and responsibilities in your ecommerce business. First, we must differentiate between accountants and bookkeepers. Bookkeeping for Shopify businesses focuses on transaction management and bank reconciliations, while accountants help your business at a higher level, tracking profitability and making entries to comply with accounting regulations.
Both bookkeepers and accountants play a pivotal role in your organization, and work hand-in-hand. Nevertheless, there are three main responsibilities that ecommerce accounting professionals take on. These include:
- Locating Transactional Data – Amazon accountants will dive into your income and expenses, looking at the timing and accuracy of transactions. Deposits in your bank account don’t equal gross revenue. Your ecommerce professional will adjust accounts to match your platform reports.
- Understanding Inventory and COGS – When you purchase products, you don’t automatically get to take the deduction. Instead, unsold items will be found in your inventory account. Your ecommerce CPA will help you manage the accounting side of inventory, including the amount that should be in COGS, ending inventory values, outstanding purchase orders, and how to handle returned items.
- Managing Sales Tax – You might have found yourself asking, “Does Shopify remit sales tax?” or “Should I charge tax on Shopify?” Sales tax collection can be complex, with states imposing nexus regulations and some platforms acting as marketplace facilitators, handling the sales tax process on your behalf. An ecommerce accountant helps you track sales to each state, uncovering when you might need to register, collect, and file state sales tax.
These three areas are key responsibilities that a CPA for Amazon sellers or a Shopify accountant will take on. The specific roles and responsibilities of an ecommerce accountant will depend on your business’s needs.
How to Choose the Right Ecommerce Accountant
By now, you should realize the importance of ecommerce accounting. Poor accounting controls can lead to minimal insights, poor financial growth, and noncompliance with federal and state agencies. Finding the right ecommerce accountant takes careful consideration. Let’s go through some of the factors you want to evaluate.
First, be sure that your accountant has relevant ecommerce experience. A run-of-the-mill accountant won’t understand how to alter revenue or how the sales tax collection process works in other states. Accurate Shopify accounting relies on having an in-depth understanding of these factors.
Moreover, evaluate the candidate’s credentials and education. Do they hold a formal degree? How about having a CPA certification? Most ecommerce accountants will have a bachelor’s or master’s degree in accounting or tax.
Furthermore, the right ecommerce accountant will maximize cost and value. They should have the availability to complete your accounting work without draining your checking account. This is why many ecommerce business owners enlist the help of a remote ecommerce accountant. Reach out to a team member today to schedule your free consultation.
