Is your Ecommerce business finally making great sales however you are struggling to take a wage or profit distribution? Maybe your Amazon fulfilment business is making a profit, but your business is cash poor. Or finally your business is being successful, and you’ve got heaps of cash in the bank but you’ve been hit with a tax bill that is making your eyes pop out of your head all because your business isn’t structured correctly.
Well if any of these are you, it’s time to call an Ecommerce Accountant.
Ecommerce accountants specialise in helping businesses which are online. They have an excellent understanding of the market that you are competing in, coupled with multinational tax strategies so that your business can utilise every penny it earns which in turn can be reinvested into growth. In addition, your Ecommerce accountant is there at your side to analyse your business, implement systems and provide recommendations so that your business succeeds. A recent study from Xero has found that 50% of small businesses fail within the first 5 years. However more interesting, businesses that regularly employ an accountant in their business while employing an accounting software have an 85% survival rate (Xerocon 2019).
Not that in of itself is astounding, but below are some more reasons why they can help your online business.
Reason 1: They Understand The Mechanics That Drive An Ecommerce Business
Ecommerce businesses are heavily reliant on supply chain and digital marketing working effectively and efficient so having an accountant that understands this is a must.
On average a dropshipping business needs roughly a 200% ROI (Return on Investment) to break even from each acquired purchase, so not knowing your BEROAS (Break even Return on Advertising) could be devastating to your business. In a nutshell this measure shows you what return on your ad spend is needed for your business to make a profit after selling expenses.
In terms of supply chain it’s a good idea to have your accountant involved in the overall strategy. A good example of the is the calculation of the ideal amount of stock to hold too avoid holding too much (cash flow issue) or too less (stockout issue and thus lost sales). This is a major problem for business owners as knowing the right amount of stock to hold is so important.
You want an accountant that understands the changing trends of the Ecommerce market in your court, acting as an adviser for your business. Digital marketing and supply chain are just two areas that need to be watched like a hawk in an online business. There are many other ways your adviser can assist you. Ecommerce can be a make or break environment for budding and even veteran entrepreneurs but having and adviser which understands the levers and mechanics that drive your business will only increase the value of your major asset – your business.
Reason 2: They Employ The Best Tax Strategies For International Players in the Ecommerce Space
Hate paying a third of what you make to the government? Doesn’t paying 0% sound better, and it’s totally legal. How, you ask? Through international tax planning and structuring your business the right way.
Depending on your business model and your supply chain, there are major opportunities for tax savings. For instance, if you were a dropshipping business sourcing all of its product from China and selling mainly to T4 (Top 4 Countries: USA, Australia, United Kingdom and Canada) Countries you may want to structure in Hong Kong as an offshore company. The benefits of doing this is that any profit made in Hong Kong is taxed at 0% so long as your business satisfies the offshore status requirements. It also simplifies business as most countries don’t view Hong Kong as a tax haven.
However, you must also note that these strategies bring risks of their own and specific criteria must be upheld in order for your business to successfully implement. The main risk is that it isn’t done correctly and you are accidentally in breach of the tax law. So always best to consult a specialist adviser in this area.
Reason 3: Technology Is Their Best Friend, And Yours Too.
In the last 10 years, technology has revolutionised how the accounting industry deals with their clients. This ranges from the ledger moving to the cloud to greater demand from clients to want daily information that is up to date. Due to this, accountants have had no choice but to either adapt or become irrelevant.
An Ecommerce accountant must be 100% cloud based to be unique among its peers to serve the online entrepreneurial community. Below is a list of tools that your accountant should use to help your business grow:
- Xero – The Tool of Choice for Accounting software www.xero.com
- A2X – A great app that make reconciling thousands of sales transactions for both shopify and Amazon stores www.a2xaccounting.com
- Receiptbank – An expense automation app. All you have to do is take a picture of your receipt and leave receipt bank to do the rest. www.receiptbank.com
- Spotlight Reporting – Great for automating your management reporting of key financial and Non-Financial on your business www.spotlightreporting.com
- Dear Inventory Systems – An all in one inventory solution that helps you track your stock from Manufacturing all the way to sale. www.dearsystems.com
The list of apps goes on and on but having someone who knows what works and what doesn’t before you have wasted time trying and testing them is a major benefit.
In a nutshell, having an accountant is a must for any business which wants to succeed but having an accountant who also knows your Ecommerce business inside and out is only going to increase that benefit exponentially. In terms of specific benefits of using an Ecommerce accountant over a regular accountant you are going to benefit in three ways. Firstly, they understand the international tax environment and where to structure to minimise your taxes so that you can reinvest back in your business. They understand the mechanics behind your business and the strong part supply chain and digital marketing play in an Ecommerce business. Finally, the Ecommerce accountant knows what the best tools are to supercharge the finances within your business. With all this said it is best to put your business on the advantageous playing field with the help of an Ecommerce accountant.
Article By / Thomas Sparks CA