The boom in e-commerce is great for business, but does mean more responsibility and demands for business owners. If financial matters are starting to build up, it might be time to get an accountant for your e-commerce store.
Many new and small businesses don’t think it’s necessary to hire an accountant, as it’s too expensive. But hiring an accountant is more than just the cost. Many do not understand the role of an accountant and how business can benefit from a qualified professional. We’ll explain when it’s time to hire an accountant for your e-commerce store and why it’s necessary. For seasoned business owners, this may apply to you too.
What Is E-commerce Accounting?
E-commerce accounting is different from traditional accounting, where business transactions are recorded as income and expenditure. Suppose you’ve received money from your customers in your shop’s cash register. At the end of the day, you count the total sum of money earned for the day. That’s your income.
But it doesn’t work that way for e-commerce accounting, which is about collecting, analysing and organising sales data. That financial data is crucial for making business informed decisions. Unlike traditional accounting, the amount you receive from your customers isn’t sales. They’re net deposits, which include sales, returns, sales tax and shipping paid by a customer. It’s important to understand what is considered ‘sales’ and what isn’t when it comes to e-commerce accounting.
When Is the Right Time To Hire an Accountant for My E-commerce Store?
Now that you know the difference between e-commerce accounting and traditional accounting, you might be thinking about when you need to hire an accountant.
There isn’t a prescribed point at which to hire an accountant, but if you come up against these challenges, it might be time…
Business growth and tax returns
It’s common to handle your own finances when you first start your e-commerce store, especially when you might not be able to afford a proper accountant. But as your business grows and you’re required to submit tax returns, it might be a good idea to work with an accountant to make sure your company is completely tax compliant.
Lots of demands on your time
Growing an e-commerce business is time consuming. Managing everything from customer relations, to business development and even sales requires a lot of time and effort. Finances are likely to take low priority, so getting an expert means you don’t have to worry about it.
Lack of knowledge
Accounting is more than just income and expenditure: you’ll also need to add products, tax and other financial structures into the calculation. The rules and regulations from Her Majesty’s Revenue and Customs (HMRC) are subject to change. A qualified accountant can help to make sure that your financial statements, reports and tax returns are filed properly and on time, so you don’t have to pay hefty fines for late submissions. To be up to date and have relevant knowledge and information, you can always help your employees get training, such as the series 7 securities exam, new accounting tools, and financial management.
Keeping on top of it all
Hiring an accountant can help you to keep track of deadlines, including filing tax returns, statutory accounts, corporation tax, VAT returns and PAYE - as well giving your company credibility.
All limited companies are required to submit three types of financial reports: income statements, balance sheets and cash flow statements. There are specific deadlines to submit those documents and, to be honest, it can be a pretty tiresome process.
In e-commerce business, tax plays a big role as it involves receiving payments from different countries, and every country has different tax rules. An accountant can sort all of this out for you, as well as providing business advice, such as how to set up the best entity structure for your company vision.
Do I Need To Hire an Accountant for a Limited Company?
Over 70% of limited companies are successful as a result of working with an accountant.
Similarly, e-commerce businesses handle inventory management in order to update the stock level on their website. It’s important that an accountant will be able to advise you on that aspect.
Some companies might have an in-house accounting team, or outsource the responsibility to an accounting service provider. There’s plenty of paperwork to handle, and sorting out all these records and books will keep you away from what you do best.
Let’s sum up - here are the top three things to take away:
- Hiring the right account for your e-commerce store will save you time especially when your business is growing.
- Having an accountant could give your company an edge over other businesses.
- It’s good that you have fundamental knowledge of running an e-commerce business. But sometimes, enlisting an accountant can help you see any financial mistakes you may have overlooked.
If you’re planning to hire an accountant or want to know more, speak to us. Our team of experienced accountants provide accounting and bookkeeping services for e-commerce businesses so you can concentrate on achieving your business’s goals.