How to Choose the Right eCommerce Accountant
Why do I need an eCommerce accountant? Unfortunately, many of our customers ask this question before they realize what a mess their books are, which is often the result of a previous accountant's lack of eCommerce accounting knowledge. The lack of knowledge affects how business is done and can impact sustainability and growth. So, you must find an outsourced accountant, even in the early stage of growth, that understands the unique aspects of eCommerce accounting.
There are a few factors we recommend when searching for an eCommerce accountant:
Have they previously worked with your sales channels?
Do they understand online payment processors?
Are they familiar with online accounting software?
Do they know COGS and inventory?
Are they tech-savvy?
When interviewing potential outsourced accountants for your eCommerce store, these are the types of questions you should be getting answered.
Understanding Your Sales Channels
One of the main differences you'll find with eCommerce accounting is that financial activity flows through your sales channels, not your bank accounts. The financial activity shown in bank statements gives you most of the data you need for most other businesses. With eCommerce, a deposit in your bank account from Shopify or Amazon doesn't paint a complete picture. Suppose you were to record a payment from Amazon as revenue. In that case, you are understating your income and missing out on additional details, which can come back to hurt your business later.
A good eCommerce accountant knows that they need to dig through your sales channels for accurate financial data. This person or team will need to be familiar with tools such as A2X, which connect from Amazon Seller Central to Xero.
Online Payment Processors
Online processors can be nuances with eCommerce accounting depending on how you collect payments. Online processors charge fees that need to be tracked and require quarterly reconciliations with sales channel reports and bank statements to ensure you are receiving everything you are supposed to be receiving.
Accounting Software
eCommerce companies should be using online accounting programs such as Xero or QuickBooks Online. These programs have a great ecosystem of apps, including sales tax, payroll, and inventory, that can be integrated with your accounting software.
Since online accounting software is essential for eCommerce businesses, make sure your eCommerce accountant is familiar with these platforms.
COGS and Inventory
The most important number for an eCommerce accountant to get right is your Gross Profit Margin (GPM):
Gross Profit (Revenue – COGS)/Revenue
Since 90% of your business decisions are made from gross profits, your eCommerce accountant will need to have a deep bench of knowledge regarding GPM.
Since your Gross Profit Margin is so important, you need to record revenue and COGS accurately. Achieving accurate COGS requires understanding how to calculate COGS per SKU and when to record COGS on your books. Your eCommerce accountant should understand both of these items thoroughly and implement them accordingly.
TECH-SAVVY ACCOUNTANTS
eCommerce companies use a lot of technology. Therefore, your eCommerce accountant will be working with a lot of technology, so they need to be tech-savvy. When interviewing your next eCommerce accountant, ensure they have a general understanding of all the technology within the eCommerce world.
Finding an eCommerce accountant that understands these things will save you a lot of headaches as you scale your business. If your company has reached the $1 Million in annual revenue, now may be the time to upgrade to a team of outsourced eCommerce accountants. At Basis 365, our team can help you understand product velocity and profitability with in-depth inventory and COGS accounting.
If you have questions on how Basis 365 can help your company grow, reach out today, and speak with one of your expert accountants.
