5 eCommerce Accounting Tips to make tax season easier
Your tax forms are in the mail, you're on your sixth cup of coffee, and you have a shoebox full of receipts that are beginning to overflow. If this sounds familiar, you've likely experienced tax season with your online store. Fortunately, there are a few basic practices that can make your eCommerce accounting and tax filing a whole lot easier and less stressful.
Integrate your accounting software with your online store
If you are still trying to handle your accounting notepads and excel - now is the time to stop. Shopify offers many different apps that integrate your store with popular accounting platforms like QuickBooks and Xero, plus many more. These apps allow you to generate and catalog invoices easily, keep a running ledger of bank deposits and payouts, and view your current inventory and past purchases at a glance.
Using the proper accounting software not only keeps your books up-to-date but helps you save time by cutting down on manual calculations. Once you're ready to outsource your accounting, it will save your eCommerce accountant time as they will have easy access to all your business information and reports all in one place.
Keep Accurate Records
An eCommerce business that's been through a few tax seasons understands the importance of accurately recording business expenses and revenues. Why? To start, you can write off many various expenses during tax time, reducing your taxable business income, including your home office, shipping costs, web hosting, and professional services such as outsourced accountants.
Ensure you're tracking critical details like transaction date, item information, and where your receipt is stored for every purchase. It may seem like a hassle to hang on to last year's receipts for packing tape and shipping labels, but the reality is you can be audited for up to six years. Apps like Evernote, Shoeboxed, and Expensify allow you to store your receipts in paperless fashion, making room for more important things like inventory.
Reconcile Your Accounts Monthly
Most accounting software connects with your bank account to automatically download and sync transactions. This saves you from manually entering banking transactions, and it's super helpful when it comes time to reconcile your accounts.
So, what does it mean to reconcile your accounts? Essentially, it means to take two sets of records (your accounting and bank's) and make sure they agree. It can help reveal transaction errors, duplicate charges, and fraudulent changes while providing you with the peace of mind that every debit and credit has been processed accurately.
Once you've integrated your accounting software with your bank accounts, you'll categorize transactions as they come in throughout the month and then reconcile at month's end by running a reconciliation report. When done monthly, you can get your books squared away in no time.
Ensure your tax settings are up-to-date
When you open your Shopify store, your tax settings are automatically configured based on the countries you operate and ship to, which is excellent for the short term. Still, as your business expands, it's vital to check your tax settings and ensure you're not unintentionally breaking any tax laws.
Besides setting up a new tax rate for each country you ship to, you should be aware of tax exemptions that come into play for that area. Do a little digging, and you'll find that all kinds of products are tax-exempt. The internet is an excellent source of information, and you can see which tax rates apply to various products. If in doubt, you can reach out to the local taxing authority directly. Once you have that information, all you need to do is apply a tax override to your platform, and you're good to go.
Understand your deadlines
Tax deadlines are like birthdays; they sneak up when you least expect it. The difference is that remembering your dog's birthday is less important than remembering to file on time - as missing a tax deadline can result in expensive penalties.
While tax deadlines differ from year-to-year and depend on where you live and what type of return you need to file. Research deadlines for the year and mark the ones relevant to you on the calendar.
Accounting may not be the most fun part of running an online store, but investing the time to understand and get it right is well worth it. Paying attention to your numbers can pave the way to improved time management, productivity, and even sales.
Accounting may not be the most exciting part of running an online store, but investing the time to get it right is well worth it. Paying attention to your number can pave the way to improved sales and productivity. And if you run into a blockade, you can always reach out to a trusted eCommerce accountant to help get you back on track.
