Nowadays we talk a lot about eCommerce business owners. Almost everyone faces similar challenges, especially with financial reporting. The primary issue generally revolves around the establishment of a scalable solution that will function as they grow.
Too often, what worked during the start of the business may not work after the business development. This may be painful when it affects the revenue of the business. On top of this, collecting the wrong data about the business will create greater negative impacts.
If you are someone who is running an eCommerce business, then you would have encountered any of the following issues:
- Manually reconciling Shopify or Amazon settlement reports against the deposits which are often confusing and take more time.
- Having no idea about how to handle the sales tax filings.
- Missing or incorrect data of inventory assets in the balance sheet.
- Inaccurate data related to the Cost of Goods Sold.
- Inability to view the profitability related to sales of products across different channels.
- Having a low level of confidence when it comes to business performance since cash flow and income statement don’t express the same story and a few more.
The common reason for all these issues is the lack of a properly configured, integrated app stack where everything tells the story of each other.
Need for eCommerce accounting system:
The eCommerce accounting system is the best platform that will act as the base for the app stack. This system will report the business’s financial performance. There are many reasons why many things are thrown into the accounting application but it may bog down the system and create more chances for creating the issues. Hence, the right app stack will maintain the heavy data lifting.
Getting the right online bookkeeping services will offer you many benefits. The well-documentation will allow you to quickly refer to the regular cash flow, profits, losses, debts, investment, sales and many more. The instant overview of the financial health will help the business owners make informed decisions for the business based on the current financial health.
Inventory management for the online business:
Inventory management is an important operation in the eCommerce business. These are essential when you start selling the products in different sales channels. You can connect all the channels into one system. Hence, you can find the number of products in stock, sales, revenue, profits and many other metrics in this central application.
The detailed view of the sales activity from different sales channels can be recorded and summarized into the accounting system. You can generate reports that will help you know the sales and make informed business decisions. This will make you become more successful since you take more advantage of the data and approach the market in the right way which will lead you to the success road.
Making sure to pay the tax successfully and efficiently is important for all online sellers. Sales tax as we all know is just a small percentage of the sale tax on the sale by the online retailer. The process of calculating the sales tax rates, collecting the tax, submitting the tax returns and finally paying it will be very time consuming. When you sell multiple products, then it will become more confusing.
The basic rule for the online sellers while collecting the sales tax is:
- The business has sales tax nexus in the same state as the customer
- The product is taxable in that particular state.
- Sales tax nexus –Sales tax nexus is the fancy way to indicate a significant connection to a state. If you are an online retailer, then nexus in the state is a must-have. Then that particular state will consider your business on the hook for charging the sales tax to the customers in the state. In your state, you may have the sales tax nexus but certain states will also create sales tax nexus for certain business activities.
- Sales tax for each state – The nexus requirements will change based on the state. Some areas will have higher taxes while some states may not have taxes. Hence, for this reason, staying up to date on changes in the sales tax laws is essential. Whether you run a small, medium or large company, carrying out the quarterly sales tax analysis will help you save more money while paying the tax.
Except for the raw materials, wholesale items and sales that are made by non-profit organizations, others need to collect the tax from the consumers. The sales tax nexus is what determines the relationship between the business and a particular rate or taxation jurisdiction. The change in sales tax nexus changes from state to state and is determined by several factors.
Keeping on top, the ever-changing eCommerce sales tax must be properly collected, tracked and paid which is not easy. Setting up the right system and process will help you ensure that you are meeting your tax responsibilities. As a personal opinion, it is always better to contact the experts in tax planning and accounting so that they will help in managing and calculating tax behind you.
Free 30-Min Strategy Session
By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.
Larger online sellers will find this way as the best choice since it will help them have an advantage over others. Just, track every penny, carry out quarterly sales tax analysis, know how to remit sales tax, ensure that you have proper permits, understand your mistakes and delays and finally pay the tax at the right time. These steps will help you manage eCommerce sales tax and save more money in this process.
Final take away:
Building the right accounting and inventory management system using online bookkeeping services is essential to keep you ahead in this competitive world. As soon as you start using the best tools when you continue to grow, you will really love the way everything is handled easily. Thus, take time to choose the best tool for your accounting and keep an eye on the tax paid to make way for your business to run successfully.