Why to Hire an Ecommerce Accounting Service?
No matter, how boring accounting is, you have to do it if you want your business to run smoothly. Just like an offline business, ecommerce too has to do accounting. If you’re in ecommerce and are wondering about where to start accounting and how to hire a competent accounting service, here are a few tips.
What is eCommerce Accounting?
Ecommerce accounting is simply the collection, analysis, organization and reporting of financial data of an ecommerce business. Ecommerce accounting services can do these jobs for you. Just like the financial data for other sectors, ecommerce accounting can be divided into 3 categories.
- Submitting tax returns
However, there are 4 more elements in ecommerce accounting that differ from traditional accounting. These are:
- Finding transactional data
- Deep knowledge of inventory and COGS
- Sales tax for online sales
- Reduction in costs of foreign transactions
Requirements for Ecommerce Accounting
Any ecommerce accounting firm will inform you about what you need for the accounting of your ecommerce business. These are:
Business Bank Account
One of the most important aspects of any type of accounting is keeping your personal and business finances separate. Therefore, you should open a dedicated business bank account just for your ecommerce store using one of the popular payment apps such as PayPal.
You should strictly avoid using this account for your personal expenses. If you use your personal finances for business finances, classify them as “out of pocket” expenses.
Business Tax ID Number
You have to request an Employer Identification Number (EIN) from the IRS. This is a 9-digit number that can be used in all your tax documents. You can apply for this number online and get it via email. A sole proprietor of a business can use their Social Security Number (SSN).
Online Services and Accounting Software
Online accounting services and accounting software can save your time on report generation, expense management, sales recording and other such tedious accounting tasks.
What is Break-Even Point?
Breakeven point is when your expenses are equal to your revenue. At this point, your profit becomes zero. However, it’s also a good sign that you’ve managed to cover your costs with the sales achieved.
If your breakeven point is too high, your ecommerce accounting service will advise you to either increase your prices or reduce your variable costs. You can do this by using cheaper materials, raising shipping prices etc.
An ecommerce accounting service is a highly useful service because they’ll advise you on various accounting topics and reduce your confusion, so that the tedious accounting task can become easier for you. Avoiding to hire such a service just for saving some money can cause you a huge loss of time and a lot of headache. So, have you started looking for one?