The million-dollar question is, why do I need an accounting specialist for my business when I can make simple calculations by myself? Unfortunately, this question has created a broad spectrum of conventional opinions for business owners in the e-commerce world.
First, let’s understand what an e-commerce business is. In simple terms, it’s defined as an online business transaction between people. This could be B2B – business to business, B2C- business to customer, or C2C – customer to customer. However, it is crucial to understand that whichever business operational format or the tenure of your business, there is a need to keep close tabs on your transactions; expenses, invoices, profits, tax, and other liabilities.
In this guide, we will discuss the growing need for an accounting specialist, the duties of an accounting specialist, and how to find a suitable one that befits your business type.
What Is E-commerce Accounting?
In simple terms, e-commerce accounting is the process of collecting, analysing, organising, and reporting every transaction that occurs in an e-commerce business. It’s essential to build a strong foundation for a successful business. Therefore, all financial information obtained via this procedure should be accurate and up-to-date.
Standard traditional accounting and e-commerce accounting differ significantly. While both deal with bookkeeping, e-commerce accounting comprises reporting, analysing the business tax returns, and bookkeeping as an addition.
E-commerce accounting works with the modernisation of e-commerce businesses around the world. In particular, it accounts for sale transactions, transactional data, credit card statements, bank card statements, returns on tax, inventory management, etc.
Is It Necessary To Hire an Accounting Specialist for My E-commerce Business?
In a straightforward response, hiring a suitable accounting specialist for your e-commerce business is not mandatory but is highly recommended.
The requirement on when to hire varies and substantially depends on several factors, such as the size of the business, knowledge of e-commerce accounting, and flexibility.
For example, you may have some knowledge of how e-commerce accounting works, but while practically applying that knowledge, you might find it hard to make a complete analysis of every transaction in the business, or your analysis can be easily prone to error. In such cases, it is better to hire an account specialist.
Likewise, the size of your business is also essential, which can be estimated based on how much revenue is generated, how much is your expenditure and income, and the like. But, again, if this is relatively high, you are expected to hire an accountant.
When Should I Hire an Accountant?
Hiring an accountant should only be done when it is suitable and convenient. Here are some great tips to help figure out when is the right time.
Size of the Business
As earlier discussed, the more transactions performed on your business, the higher the need to find a competent accountant to oversee every transactional statement or action. Some business owners may be able to handle the work of an accountant on their own at the start of the business. But once the company expands, it is recommended to hire an accountant as the number of transitions increases. This is to avoid errors in calculations, incomplete bookkeeping, failure to report, and so on, which can, in other cases, cause more harm to the business owner.
Track Inventory Cash Flow
An accountant also has to track the inventory cash flow and report it to the business owners. This is important as most e-commerce businesses sell from multiple sales channels. Having a view of your inventory status would help you replenish it at the right time. Also, knowing the most profitable channels for your business would help you plan and strategise better for the future. You would know where you need to pump in more investment and where not to.
Financial Statements
To grow in the e-commerce world as an entrepreneur, your business’s financial statements should be prepared monthly, fortnightly or even weekly, depending on the type of business. An e-commerce business usually receives payments through a number of options. In such cases, you need someone to keep track of all the revenues and expenditures and that someone is an accounting specialist. In addition, they need to ensure a complete statement giving an accurate picture is made available regularly for your e-commerce business.
Understanding The Rudimentary Nature Of e-commerce Accounting
Some e-commerce entrepreneurs hire accounts that are not aware of the e-commerce world. So they venture into the accounting job with little or no knowledge of e-commerce accounting. This can cause a lot to the business owners.
There are various aspects of e-commerce accounting that are different from other types of business, such as recording customers’ returns and chargebacks. The original transaction should be recorded as expenses for customers’ returns, and the returns should be recorded under returns and allowances. Chargeback should also be registered under returns and allowances. Someone who is not an accountant can easily mix this up.
What To Look for in a Suitable Accounting Specialist?
To have a successful business, you need to hire the right people for the right job. So while hiring an account for your e-commerce business, be sure to look into the following essential attributes:
- The accounting specialist must have acute knowledge, expertise, and experience in executing any accounting tasks needed for the successful running of your e-commerce business.
- Also, the accounting specialist should be dependable, have a sense of time, be hardworking, and be diligent in their work.
Final Words
At this point, you should have your answer as to whether or not you need to hire an account specialist for your e-commerce business. One more thing to note is that being an accountant of your own company requires you to handle the taxes and track all sale orders, expenses, returns, etc. This can be tricky when time is ticking.
You can avoid this financial stress by hiring the right accountant for your e-commerce business. If errors are made in the financial statements, it could cost your business a lot. In addition, you might end up paying heavy penalties to government bodies if the mistakes are too severe. Also, hiring an account would give you access to high-end accounting software like Xero to manage your finances with a click of a button. So stay focused on growing your business while the right person takes care of the accounts.
