In many online businesses today, one of the most challenging parts of running one’s operations is the responsibility of ensuring that an e-commerce accountant is getting everything right. Whether you’re an online shop that specialises in bespoke furniture or a subscription-based service that continually takes in a massive influx of customers, there’ no doubt that ensuring the competency of your accountant is vital.
More often than not, most business owners tend to get this responsibility mixed up because they assume that accountants know the nuances of the e-commerce world, but this is far from the truth. Every time this mistake is made, a business owner ends up suffering because incompetent professionals can result in costly errors and losses, potentially tanking the business in the process.
Fortunately, making sure that you get a competent accountant who will meet your business’s needs and successfully navigate the nuances isn’t as complicated as you may expect. If you want to hire a professional who is e-commerce-savvy to ensure that you aren’t missing out on crucial details, here are three factors to consider:
Factor #1: Your business’s Cost of Goods Sold (COGS) When it comes to the hierarchy of importance, nothing is more vital in your list of components than the COGS entry in your regular reports or statements.
Generally, this factor should be focused on when glossing over your hired accountant’s work because it’s the most significant expense in your financials and tax returns. While there may be many ways to assess the overall effectiveness and aptitude of your accountant in handling this entry in your business’s financials, asking these questions will work best:
“Is my accountant recording the business’s COGS at the end of the month as they should?”
“Are the right components—such as materials and labour—being recorded in the business’s COGS?”
“Are the changes in the COGS paired with matching increases and decreases in my sales?”
Factor #2: Your e-commerce business’s sales deposits Aside from COGS, another component that you’ll need to gloss over when gauging the competence of your accountant is the sales deposits entry in your records.
In most cases, the best way to gauge whether or not an accountant is as well-versed with the intricacies of e-commerce operations is to check whether or not they’ve adjusted their deposits. When going over this particular component, it’s best to check if their entries are showing the “Deposits = Gross sales - Fees” equation as this is the prescribed formula that needs to be followed by online businesses.
Factor #3: Your business’s sales tax payments As opposed to conventional businesses and mom-and-pop operations, the sales tax that your e-commerce business incurs follows an altered structure that yields different values when implemented.
The component of sales tax, in particular, acts as a foolproof indicator of your accountant’s capabilities as checking whether or not they’re familiar with it will tell you about their experience. Should your accountant explicitly state that they’re well-versed in dealing with Australian e-commerce sales tax requirements, then there are a few questions you can ask to verify:
“Are we collecting and remitting for each state according to their requirements?”
“Are we using a separate bank account for our sales taxes?”
“Is our sales tax process automated?”
“Are we recording sales tax as under accounts payable, and is it being adjusted when collected and remitted?”
Conclusion
Given the growing needs of e-commerce business landscape, it is necessary to make sure that your accountant follows suit and is as competent as they need to be. By considering the three factors mentioned above, you can keep your online business out of dire straits and direct it towards profitability and long-term growth!
We’re an e-commerce accountant that assists big companies, online start-up businesses, and influencers all over Australia. Get in touch with us today to learn more about how we can help you stay up to date and on-track with your finances!