Profit Spear Consulting LLC

We drive profitability and growth for small businesses!

Menu
Book A Free Consultation
Menu

We drive profitability and growth for small businesses!

Accounting For E-commerce Entrepreneurs: 16 Questions You Should Ask

Accounting For E-commerce Entrepreneurs: 16 Questions You Should Ask

Do you run an e-commerce business and you are in doubt whether your finances are well managed? Have you ever wondered how one accounts for e-commerce and the potential it holds for efficient business growth? Below are the 16 most crucial questions when considering accounting for e-commerce. The answers to these questions will help you learn more about the profession of an accountant to understand how the specialist can help you improve the financial condition of the business.

Accounting For Ecommerce Entrepreneurs: 16 Questions You Should Ask

1. How many e-commerce experts do you have in your accounting practice? How do you train them, and how do you keep them in your company?

When it comes to accounting for e-commerce, you need a firm that knows your industry. Ask how many experts specialize in e-commerce within their practice. 

It’s also essential to understand how they train and retain their team, ensuring you’re getting the best service possible from experienced professionals. 

A firm with dedicated specialists can better assist with the unique challenges of e-commerce like sales tax, international shipping, and online payment processing.

See Also: What Does an Accountant Do for Small Businesses?

2. How experienced are you with accounting for e-commerce companies?

You wouldn’t trust a generalist to handle the complexities of accounting for e-commerce businesses, would you? Get to know more about their previous encounters with other e-commerce clients. 

An experienced accountant will understand more about the on-goings in the field and particular issues that arise, for instance, handling a massive number of transactions or tracking orders via multiple online channels.

 

3. Can you name six sales channels you have worked with?

Your accountant must be aware of the many sales channels that are open to you. An ideal candidate should be conversant with marketplaces like Amazon, Shopify, eBay, Etsy, WooCommerce, and Walmart. 

Knowing about these environments, their operating models, specific payment terms, and taxes are important for controlling the cash flow and accounting for the e-commerce enterprises in different channels.

CTA

4. How can you help me grow my e-commerce company?

Every business desires to grow and your accountant should help you on how to achieve that. They should be asked how they want to support your expansion strategies. 

Starting from how and when to raise capital and to how to manage the cash flow in your business, a good accountant can advise on what actions to take to expand. 

It suffices to mention that they should understand what accounting for e-commerce can do to improve profit margins along with reducing unnecessary spending.

5. How do you figure out the cost of goods sold for your clients?

The cost of goods sold evenly is a prominent line that each e-commerce business must calculate to sustain the right margins of profits. Enquire how your accountant computes this for its clients. 

An accurate computation of COGS eliminates pricing inaccuracies because it will help you to understand the amount of profit that you want to generate. Get in touch with us for small business bookkeeping services in USA!

6. What payment processors have you worked with?

It is also important to note that payment processors act as the veins of every e-commerce transaction.

Any accounting professional who is knowledgeable about the features offered by PayPal, Stripe, or Square will comprehend how to manage payments, fees, and refunds adequately. 

This will enable you to have a proper flow of your financial activities and record your sales income appropriately.

See Also: Everything You Need To Know About Payroll Tax

7. Do your e-commerce clients use the cash or accrual method of accounting?

The choice of the appropriate method of accounting has an influence over the appearance of the finances. 

Cash method, a transaction is recorded when cash is exchanged, while accrual method, it is recorded when due irrespective of when cash was paid. 

It is advisable to consult an accountant who has specific knowledge regarding accounting for e-commerce businesses about which of the two methods is best suited for your business.

 

8. What accounting system do you use? Why?

Accounting software for e-commerce does not only depend on the type or size of the business but there is one that suits your business. 

Quickbooks, Sage, Zero, Xero – choosing the best and appropriate software depends on the size of your company, the number of daily sales, and the particular requirements of the program. 

Knowing why they recommend a certain platform will enable you to see whether that platform will be suitable for your financial reporting needs.

person doing accounting

9. Do any of your clients use inventory management systems? Why do they use them, and which one would you recommend?

Inventory is another factor that other accounting disciplines cannot overlook when doing e-commerce accounting. 

You can ask your accountant about the particular business management software he or she has prior knowledge or working experience in, especially with inventory systems. 

Hence, being aware of how to track your inventory properly so that you can do away with instances of experiencing stock or overstocking. 

They should recommend systems that will interconnect with your accounts software so that you view your financial position and your stock levels in one place.

10. What accounting system integrations do you recommend for recording sales income?

The links between your e-commerce site and your accounting software have to be seamless to produce the figures. 

When it comes to membership payments Shopify sales or even Amazon orders, integration does reduce a lot of effort in handling the data. 

Asked about which integration you should use or prefer to go with and why that integration is suitable for accounting for e-commerce.

See Also: How to Choose/Hire an Accountant for Your Business

11. How do your Amazon FBA clients deal with sales tax?

Sales tax is an area of compliance that causes difficulties within e-commerce, especially, if you use Amazon FBA (Fulfilled By Amazon). 

Your accountant should be able to have experience on how to handle the sales tax in your various states or even in several countries if you are operating on the international market. 

They should also be aware of the various issues concerning sales tax collection and filing for online businesses to make sure that they do not violate the law.

 

12. Who is paying for the accounting tools?

Every accounting tool has a price tag and you should be aware of who bears the bill, your business, or the accounting firm. 

It is crucial to know precisely which software or services can be considered a part of your fees while outsourcing accounting for e-commerce so that there are no unexpected extra costs and you can see that you are getting your money’s worth.

13. How many industries do you serve?

You need an accountant who specifically focuses on e-commerce but it may also be useful to know how many other fields this accountant works with. 

Having a wide range of work experience also entails that they have a wealth of information from different industries, and this may come in handy in that they might be able to bring a new dimension to the understanding of accounting for e-commerce.

CTA

14. How is your accounting firm using technology to provide detailed, accurate financials?

Technology is still disrupting the accounting industry, and your accountants should be enhancing efficiency by adopting the changes. 

From automated programs to live updated graphs, technology can be utilized while preparing and presenting the financial reports thus helping the company to monitor its cash flow.

15. What are your responsibilities?

It should therefore be important to know just what more of your accountant to expect if you are to have a good working relationship. 

Are they preparing only the final accounts and balances of the company or are they also entering into the routine daily, monthly, and quarterly records? More specifically, will they assist in tax filing or even offer payroll services? 

This way, it is clear what aspects of accounting for e-commerce they are going to cover and thus, guarantee no gaps in the accountability of their financial responsibilities.

16. How do you handle the seasonal fluctuations in e-commerce sales?

Seasonal influences or events are some of the influences that may affect its sales since people spend a lot of money buying goods online during special occasions. 

A good accountant understands how to address such fluctuations and manage the company’s cash flow over the year. 

It should be equipped with plans of how to approach the inventory as well as the budget so that during slow months of operation, your business is not affected, not forgetting plans to approach the tax system.

Therefore, the process of choosing the accountant for your e-commerce business depends on the answers to the mentioned questions. Because accounting for e-commerce is different from traditional accounting, an ideal candidate should possess extensive knowledge about e-commerce sale channels, inventory, and sales tax among other areas of specialization.

Why choose ProfitSpear for your ecommerce accounting?

At Profit Spear, we give you meaningful reports and prepare concise and understandable financial statements that enable you to make the right economic decisions. We help you optimize taxes where possible and be ready to present your books to banks, lenders, or investors. Contact us today for small business bookkeeping services in USA!

FAQs

Maintaining accounting for e-commerce involves tracking sales across multiple platforms, managing inventory, recording payments from various processors, and staying compliant with sales tax regulations. Using integrated accounting software helps streamline the process and provides accurate financial reports.

Accountants in accounting for e-commerce should manage financial records, handle tax compliance, track profits, and provide insights for growth. They ensure that e-commerce businesses are financially stable by handling cash flow, inventory costs, and sales channel management.

Financial accounting in accounting for e-commerce involves tracking and reporting the business’s financial activities, including sales, expenses, and inventory. It ensures transparency, helps in tax preparation, and provides critical financial data for strategic decision-making.

Are You Looking For Best Accounting & Bookkeeping service? Click Here

Recent Post