Accounting and Bookkeeping is the foundation for strong, viable business.If you have a system for recording all transactions and expenses, you can get clear insights into how your business is operating at any time.Whether you’re selling products through Shopify, BigCommerce, Etsy, or Amazon, you are going to need a good system in place to manage your finances.
Accounting for your e-commerce business can become complicated with international taxes, cost of goods, and payment portals, and it’s helpful to have a professional’s insight to make sure you’re CRA compliant while making the most of your revenue.
COMMON E-COMMERCE ISSUES AND CHALLENGES
Canada imposes a sales tax on products shipped to Canadian consumers.The taxes are levied on a provincial and federal basis.Hence an e-commerce company will need to register to collect sales taxesfrom Canadian buyers if you are deemed to carry on business in Canada and you are selling taxable supplies and you are not a small business supplier.
Traditional accounting can be cumbersome for an e-commerce business.More sales, more transactions, more data. Most good accounting systems don’t handle high-volume detailed transactions well and the system will slow down.Instead of taking your information from online to offline, switching to cloud-based accounting allows you to integrate your accounting software directly with your payment processor, invoicing software, credit card, and website.This way the records are updated on real-time basis.
By selling your products online, there are additional costs that need to be accounted for. Some costs, like shipping, can be passed along to the purchaser, but things like credit card processing fees, website costs, and the cost of your packaging need to be built into the price that you set on your online store.
You must know where you are and fight to improve financial performance but without really good accounting it is nearly impossible to properly manage your products.
Inventory management can be complex in an e-commerce business.A well placed accounting software can help answer the following questions:
- How much inventory do you have and how much it is worth?
- Do you need to track inventory levels by SKU?
- What about inventory turnover or simply total inventory valuation?
- Are you using third party logistics for fulfillment?
- Do you need to track inventory stored in multiple locations?
This inventory control of your e-commerce business helps manage your stocks effectively.
Tracking returns is one of the most challenging aspects of an e commerce business.Most sellers let their customers return items that don’t fit, arrive damaged, or don’t work for any other reason.However,returns create havoc in the accounting process.Customers are issued a refund, and the returned product(s) may have to be re-added to the inventory.The key to handling returns is a careful attention to detail. Sellers have to decide whether to write off inventory, so they don’t expense it twice and mess up their books. That’s where the role of an accountant comes into play.Return management can be smoothly handled when the accounting of the e commerce business is already in place.
Hire an E-commerce Accountant for Your Business Now
It doesn’t matter what system you choose, as long as you have one. It can be as simple as a calendar of times that are set aside within the month to categorize transactions and expenses, whether it be in a Google Sheet or in a more robust cloud accounting system like Xero or QBO(Quickbooks Online).
We at Rav Bhatia CPA Professional have a vast array of experience in assisting e-commerce businesses with their accounting needs. Since we are just a click away,just fill out the Contact Us form and book a complimentary virtual meeting to discuss your business and how we can help.