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As an aspiring entrepreneur, launching a business is often one of the biggest decisions. As exciting as it can be to embark on this journey, it also requires careful consideration and planning. If you are looking for success, financial planning and forecasting should be part of your startup strategy. Taking control of your finances from the beginning is essential for the health and growth of any business venture. It’s what separates successful companies from those that fail in their early years.

This blog post discusses why efficient money management through financial planning and forecasting is the key to helping your startup business succeed. Keep reading!

Financial Forecasting: A Look Into Future Finances

As the name suggests, financial forecasting predicts how your finances will look in a given time period. Forecasting is usually made annually and based on historical data for objectivity and accuracy. 

Note that forecasts aren’t 100% correct, and they are always subject to change, especially if there are new variables that pop up during the fiscal year. Nevertheless, it pays to invest in forecasting, especially if you are a startup. Here are some benefits of financial projections.

Objectively See Your Business’s Financial Future

No matter how limited the historical information is for new businesses, it helps if you still base your financial forecast on any of the past data you’ve gathered. This practice ensures that you have bias-free, objective, and accurate forecasting of future income, expenses, savings, profits, and trends.

Just note that there is a higher chance for beginning businesses to have forecast changes, as owners are testing the waters. Nevertheless, the forecast is still a good guide in the decision-making process.

Anticipate Your Income

It’s exciting to know how much you’ll be earning in the next year! Knowing these details brings a lot of benefits like the following:

1. You can prepare the supplies you need for peak months. This knowledge ensures you won’t run out of stock and that you can keep the sales coming.
2. The sales forecast will serve as your beginning sales benchmark—data you will be challenged to maintain or beat.
3. You will also know how much income tax you’ll need to pay, so you’ll have a chance to lower it.

Foresee Your Expenses

With your knowledge about your income comes the visibility of your future expenses. If you spend the same amount as you spent from the period you derived your data from, you are likely to have the same income. 

If you already have a large income, this is good news. All you need to do is to maintain the best practices and keep expenses to a minimum to maintain your high income. However, if you want to raise your revenue, you’ll get the chance to take a closer look at the areas where you can minimize the costs. 

Know How Much You’ll Save

Have you successfully saved in the previous year, or was it a challenge? As a startup business, it’s a bit of a struggle to begin saving, but you can still make it a goal and achieve it for the coming year. To successfully do this, financial forecasting will be of great help. 

When you know your income and expenses in advance, you’ll know your net income. Net income is calculated by deducting the total expenses from your total income. Then, you can plan on how much of this net income will go to your savings.

Predict Roadblocks

Months and quarters with low income, high expenses, and the inability to hit revenue goals can happen. Some of the expenses which can turn into roadblocks when left unmanaged are the following:

• Bank fees and interests
• Rent for office space and equipment
• Utilities
• Marketing
• Payroll
• Employee incentives and benefits
• Taxes
• Outsourced assistance
• Charity contributions
• Advertising and marketing
• Debts and interest fees

Financial challenges will be reflected in numerical form if you do financial forecasting. You can pinpoint specifically what the culprit is and can plan how to manage it better moving forward.

Prepare for Investor Presentation

Financial forecasts are beneficial for your knowledge and a helpful tool for you to gain more investors. As a startup business, having individuals willing to invest in your business keeps you from having large loans. Interest fees can hurt your business more than you know. Your investors will also likely be well-versed in the ecommerce industry and the products you sell. You can benefit from this expertise.

If you see your business working hand-in-hand with investors, a financial forecast can help gain their trust. This report lets them know if your company is worth investing in.

Planning: A Financial Forecast Complement

Financial planning is essential to all businesses, especially for startups like yours. The plan serves as a guide, so all your financial decisions are not made blindly. A forecast and a financial plan are always intertwined. The latter will be the means for you to bring the forecast to life or improve the outcome of that report. Through a well-thought-out financial plan, you can reap all these benefits.

Gives You a Clear Game Plan

Financial planning allows you to set clear future goals and ways to achieve them. Through it, you can create step-by-step annual plans on how to maintain a profitable company, maintain or increase income, save, set financial plans for profit, and see when you can expand your growing business. 

You can practice strategic decision making because you have visibility on all your assets and an idea of the possible costs. Hence, your actions will be directed towards spending less and earning more.

Drives You To Reach Profit Goals

Your income trend in the forecast will remain in numbers unless you work for it. If you continue the techniques of your current operation, you are likely to achieve the same earnings as the previous years you got your data from. However, if you are ready to step up, you at least have a base point through the forecast. You can be as creative as possible with the plans you suggest to increase your business income and revenue, or attain the highest profit possible.

Controls Expenses

Looking at your expenses closely is the key to ensuring that you make the highest income. The lower your expenses, the higher your income will be. As a startup business, here are some helpful tips you can follow:

• Pick the most cost-efficient supplies so new supplier partnerships last long. 
• Choose technology, applications, and software that can optimize your work processes through machine learning and allow you to save on payroll in the long run. 
• Review your expenses from the previous year, and check which expenditures you can still lower and control to save more.

Helps You Proactively Overcome Roadblocks

Challenges are a constant in running a business, especially when you are just starting up. For instance, you will see which months sales become stagnant. In this case, you can heighten your marketing and advertising beforehand to avoid it from happening. You will see how much taxes you are to incur in certain periods, so you can control travel expenses, utilize retirement and health insurance benefits, check qualified deductions, and deduct charity contributions. Many more roadblocks can be proactively addressed or kept at bay with a forecast and proper strategic planning. 

Show Confidence and Forward Thinking to Investors

Having investors for a startup business is a great help in ensuring you have enough capital to launch and keep your business running. Showing your financial forecast is putting your best foot forward, but telling them about your financial plan shows your confidence. Your plan shows that the financial data will not just stay in the books but will come to life. As a result, investors will be more encouraged to invest their money in helping your business grow.

Get Assistance From Unloop

Preparing a financial forecast will help any new business succeed in the long run. It's essential to get valuable insights on how much income you'll bring in and what your expenses will be, and can even predict any roadblocks that could come up. A financial forecast is also key when pitching your business to investors—it shows that you're confident and have a clear plan for the future. 

If you need help in getting started, our team at Unloop can assist you with forecasting and planning so that you can set your business up for success. Let us help you work on the limitations of financial planning and forecasting and make the most of these tools. Contact us now, we’d love to assist you!

Business accounting involves evaluating the past performance of your business and determining how well your business is thriving. However, peeking into your business's future performance is equally essential. It allows you to plan accordingly to ensure that your business runs smoothly and can withstand potential issues along the way.

Financial forecasting is a way of predicting a business's future financial position using historical data gathered from reports like cash flow statements, revenues, expenses, and sales data. We'll talk about the various forecasting techniques in this article to assist you in evaluating the performance of your company.

Financial Forecasting Methods for Every Business

Many factors can affect your business, some of which you have no control over. However, financial forecasting allows you to see potential scenarios, so you are ready when they happen. There are two types of forecasting methods: qualitative and quantitative methods.

We go over some of the most popular techniques in each area so you can better comprehend them.

Qualitative Forecasting Methods

Qualitative forecasting bases its predictions on experts' and customers' responses rather than using historical data. This method is valuable for new businesses with no data to begin with.

Here are some examples of qualitative methods.

Expert's Opinion

An expert's opinion is simply asking an individual or group of experts about the subject matter, which they will give predictions on according to their knowledge. In order to make the most accurate prediction possible, an expert should offer opinions without bias. From there, business executives will decide if they want to go with the suggested actions.

Business owners may bring more than one expert to collaborate on their predictions. But, of course, it is up to the administrators to decide which expert opinion to follow. They can solely rely on experts for future planning, or they can do other methods and consider other factors that may affect the business.

Market Research

Market research is commonly used to determine the market needs of a certain product or service. The entire addressable market and the company's current clients are used in this strategy to collect data. Market research uses customer surveys, analyses of metrics for current campaigns, testing, and research on your competitors' marketing strategies.

Market research needs large data as much as possible to eliminate human bias. This method requires a lot of time, effort, and resources to deploy. However, if done correctly, you'll get the most accurate financial forecast possible.

Delphi Method

The Delphi method is similar to experts' opinions, except it is more systematic and structured. In this method, you will still need experts for their insight, but instead of giving them the freedom to make predictions according to their knowledge, they will need to answer several questionnaires until the business comes up with a forecasting model.

Why Do You Need Qualitative Forecasting?

Qualitative forecasting helps executives make informed business decisions like determining how much of their inventory to keep, hiring more people for their company, or applying adjustments to their sales operations. Qualitative forecasting methods are also used to develop projects and marketing campaigns highlighting the business's products and services.

All businesses can perform qualitative forecasting, but here are some industries that will greatly benefit from qualitative forecasting.

• Healthcare: Healthcare can use this method to determine trends in public health so they can prepare their services for the future.
• Education: Schools and colleges use this method to predict the number of enrollees in the coming school year.
• Sales: It helps companies make decisions, such as determining the number of products to produce and which of their inventory should be the priority to get more sales.
• Construction: Forecasting helps construction and manufacturing determine the approximate number of resources they need for their upcoming projects.
• Agriculture: Forecasting can help study sales of crops over the season so farmers can plant the produce most in-demand by customers.
• Pharmaceutical: This helps pharmaceutical companies see which medications are more popular with users, so they can increase the production of those medications.

Quantitative Forecasting Methods

Quantitative financial forecasting is a data-driven forecasting method that businesses use to make accurate predictions for big decisions. This form of forecasting uses historical data to analyze patterns to determine what the business performance will be like in the future.

Quantitative forecasting results are affected by past data, relevant variables, and time parameters. You can do this financial forecasting for budget, sales, or projected expenses for a future time period. Here are some examples of quantitative forecasting methods.

Straight-Line Forecasting Method

The simplest quantitative forecast you can use is the straight-line method. This method only needs an approximate projected growth rate of your business which is usually based on your past performance.

The straight-line method predicts your business's future by calculating your previous and projected performance. For example, in the last three months, your sales have been $300,000 in total, and for the coming three months, you are projected to increase by 5%, so you can calculate your future revenue by:

300,000 x 1.05 = $315,000

So, for the next three months, you predicted sales growth would go up to $315,000.

Naive Method

The naive method is the best financial forecasting method if you want calculations to be as simple as possible. The naive method suggests that your business performance will be the same as in the past. For example, if your business made $500,000 in sales last year, according to the naive method, your business will generate the same amount of sales this year.

This prediction does not consider any seasonal trends or other factors that could affect your business. So this type of prediction can easily change when something major happens within a specific period.

Seasonal Index

The seasonal index method analyzes patterns in data points by separating months of the year into seasons. In most cases, seasons are divided into four quarters:

Q1: January, February, and March

Q2: April, May, and June

Q3: July, August, and September

Q4: October, November, and December

Experts calculate past seasonal index scores to determine how your business will perform in the future. For example, in the last two years, your seasonal scores were:

2021: Q1 (58) Q2 (60) Q3 (55) Q4 (70)

2022: Q1 (62) Q2 (54) Q3 (65) Q4 (60)

Your projected seasonal index score from the two data points will be:

2023: Q1 (60) Q2 (57) Q3 (60) Q4 (65)

After getting the projected seasonal index scores, you can go on with creating a forecast for your business performance.

Revenue Run Rate Method

This method is used to forecast the revenue of a business in a specific period. Revenue run rates are calculated based on previous data and assuming your sales rate will continue at a certain pattern given a specific period.

For example, your business made $50,000 in the first quarter of the year. Using the revenue run rate method, you will assume that you will generate the same amount for every quarter. Hence, your total revenue for a year will be $200,000.

Importance of Quantitative Methods

Gathering data and creating inferences using quantitative methods help you draw more accurate predictions. More than accuracy, using the quantitative method provides:

• Predictability: When businesses have access to their past data, it is easier to spot trends and patterns within the business. This makes predicting the performance easier and more accurate than other methods.
• Objectivity: Using numbers and data means your results will be free from bias. Opinions gathered from experts are still beneficial, but they can be twisted to achieve your desired results. With data, it's more realistic and accurate.
• Transparency: As they say, numbers don't lie. Data reflects the exact state your business is in. This data transparency will help business owners make better business decisions.

Be Future Ready With Unloop

There is no doubt that business forecasting methods help administrators and stakeholders make better business decisions. Whether you choose a qualitative or quantitative method, taking a peek into your future ensures that you will be ready to take on your business's future.

If you're serious about doing business predictions, Unloop offers forecasting for businesses. Our service gives you a tailor-made forecasting model to drive your business to success. So what are you waiting for? Book a call with us today!

It's no secret that accurate forecasting in accounting is critical to a company's long-term success. But predicting future revenue growth can be difficult—particularly for small and medium businesses with little to no data. In this post, we'll take a look at four popular revenue forecast models and show you how you can use real data to predict your future revenue growth. Let's get started!

What is Revenue Forecasting?

Generally, in accounting, financial forecasting refers to the process of predicting future financial outcomes based on past data and trends. Accountants use financial forecasting to plan for upcoming expenses, budget for future projects, and make investment decisions.

Revenue forecasting is the procedure of evaluating a business's future sales. This is typically done using historical data, such as past sales figures, economic trends, and demographic information.

Forecasting can be used to make short-term predictions about the company's growth rate (such as quarterly or annual sales) or long-term predictions (such as 5-year or 10-year sales projections).

Why is Revenue Forecasting Important?

Revenue forecasting is important because it can help businesses make informed decisions about the future. For example, revenue forecasts can set expense and budget targets, help businesses price products, and give insights for hiring decisions. 

Additionally, forecasting can help businesses track their progress towards long-term goals and identify potential problems early on.

The Different Types of Revenue Forecasting Models

There are four main types of revenue forecast models: historical trend analysis, regression analysis, market share analysis, and economic indicators. Let's take a closer look at each model.

1. Historical Trend Analysis

Historical trend analysis is the simplest and most common type of revenue forecasting. This method uses past sales data to recognize trends and predict future sales. 

Businesses first need to gather data on past sales figures. This data can then be used to create graphs and charts that show how sales have changed over time.

Once the data has been collected and visualized, businesses can look for patterns and trends that might indicate future growth. For example, if sales have been steadily growing over the past few months, they will likely continue to increase in the future. 

On the other hand, historical trend analysis can help businesses identify potential problems and adjust if sales fluctuate or decline.

2. Regression Analysis

Regression analysis is a more sophisticated revenue forecasting model that uses mathematical models to pinpoint relationships between distinct variables. This model is often used in conjunction with historical trend analysis.

To conduct a regression analysis, businesses first need to collect data on past sales figures and other relevant variables (such as price, advertising, and economic conditions). This data can then be used to create a mathematical model that predicts how changes in the independent variables affect sales.

Regression analysis is a powerful tool that can help businesses understand the drivers of their sales and make more accurate predictions. However, it is important to note that this method requires a significant amount of data and can be complex to implement.

3. Market Share Analysis

Market share analysis is a common revenue forecasting model in the business world. This method estimates a company's future sales by analyzing its market share. To do this, businesses first need to gather data on their past sales figures and the overall size of their target market. This data can then be used to calculate the company's market share and predict how it will change in the future.

Market share analysis is a relatively simple method of revenue forecasting that can be used with limited data. However, it is important to note that this method only estimates future sales and does not consider other factors (such as price changes or economic conditions).

4. Economic Indicators Analysis

Economic indicators analysis is another common model of revenue forecasting. This model uses economic data to predict how economic changes will affect sales. To do this, businesses will need to gather data on relevant economic indicators (such as GDP, inflation, and unemployment). This data can then be used to create a model that predicts how economic changes will affect sales.

Economic indicators are powerful variables that can help businesses understand the drivers of their sales and make more accurate predictions. However, it is important to note that this method only provides an estimate of future sales and does not take into account other factors (such as price changes or market conditions).

How to Choose the Right Model

The best revenue forecasting model for your business will depend on several factors, including the type of business you have, the amount of data available, and the resources (time, money, etc.) you are willing to invest.

If you're just starting out, it's probably best to stick with a simple method like market share analysis or historical trend analysis. These methods can be used with limited data and don't require complex mathematical models.

As your business grows and you collect more data, you can start to experiment with more sophisticated methods like regression analysis or economic indicators. Implementing these methods will require more time and effort but can provide more accurate predictions.

Common Mistakes Businesses Make When Forecasting Revenue

One of the most common mistakes businesses make when forecasting revenue is failing to account for all relevant variables. This can lead to inaccurate predictions and, in some cases, complete failures.

Other common mistakes include:

Using outdated or irrelevant data

It's important to use recent and relevant data when forecasting revenue estimates. Outdated data (from two years ago) can be misleading and lead to inaccurate predictions.

Failing to account for seasonality

Seasonality refers to regular patterns of demand that emerge at predictable times of the year. For example, retailers may see a spike in demand during the holiday season, or an outdoor equipment company may see an increase in sales during the spring. By accounting for seasonality, businesses can better anticipate peaks and troughs in demand and plan accordingly.

Seasonality is a major factor affecting sales projection, so it's important to account for it when you forecast revenue. 

Relying too heavily on one variable (such as price) to predict sales

The price of goods and services is just one of many variables affecting sales. Other variables include economic conditions, market conditions, customer behavior, and more. By relying too heavily on one variable, businesses can make inaccurate predictions about the future.

Your One-Stop Solution to Revenue Forecasting

No matter which model you use, always make sure your forecasts are realistic and backed up by real data. This way, you can be confident in your predictions and plan for future growth accordingly. 

Are you looking for help forecasting your company's revenue and cost of goods sold (COGS)? If you're an inventory business based in the US or Canada, Unloop can help! 

We use revenue forecasting software to track and calculate historical data that will help you assess your budget, revenue, and unprofitable points in your business.

Book a call and talk to us, we’d love to discuss the future of your business with you!

Amazon is the biggest platform to sell products across the globe, but with every financial venture, taxes are just around the corner to lessen the hard-earned income of Amazon sellers. 

As an Amazon seller, you're obligated to make a sales tax collection for every purchase. But the good news is that dropshipping is among the few eligible ventures for Amazon Tax Exemption Program (ATEP). In this blog post, we'll show you how to get tax-exempt on Amazon in minutes. Keep reading to learn more!

Quick Steps on Registering for a Sales Tax Permit 

If you're planning to resell products online, you'll need a sales tax permit, which will allow you to collect sales tax from items sold. But, in this case, it allows you to apply for Amazon Business's Tax Exemption Program. 

In most states, registering for a sales tax permit is relatively simple and can be completed online. Let's help you get started. 

#1. Compile All Business-Identifying Info

Having all of your ducks in a row from the beginning is important as a business owner. This will ensure that you can always correctly identify yourself and your business when dealing with government agencies or financial institutions.

Double-check if you have the following proper documentation for your online business.

• EIN. The Employer Identification Number is a unique nine-digit number assigned by the IRS for the sole purpose of tax collection. Other names it goes by are FEIN (Federal Employer Identification Number or FIN (Federal Identification Number). 
• Business Bank Accounts. A dedicated bank account for your online business can help identify your online business as legitimate. 
• Trademark Registration. Trademark registration offers several important benefits, including deterring others from using your mark and giving you the exclusive right to use the mark in commerce. Additionally, trademark registration can serve as evidence of ownership and help protect your investment in your brand. 

#2. Apply to the State Department of Revenue Website

This government institution is responsible for collecting taxes and administering tax laws. Every state has a Department of Revenue, and each oversees taxation within its borders. 

To register your online business, visit your state's Department of Revenue website and click on the Sales and Use Tax Section. You can easily read through and complete all the necessary info to get your sales tax permit. 

How to Get Tax Exempt on Amazon in Minutes 

You're one step closer to getting your tax exemption status approved now that you have your sales tax permit. Next is heading over to your Amazon account and applying the following steps.

#1. Select the States You Want to Avoid Sales Tax Exemption In

Under US law, online sellers make sales tax collection in states with a physical presence or nexus. Amazon has used this loophole to its advantage, systematically avoiding collecting sales tax in most states.

There are states dropshippers can get Amazon tax exemption from, so be sure to click on them when applying for it.

• Pennsylvania
• Texas 
• Utah Virginia 
• West Virginia 
• Wyoming
• Iowa
• Idaho
• Indiana 
• Kansas 
• Kentucky
• Michigan
• Minnesota 
• Rhode Island 
• South Dakota 
• Tennessee 
• Missouri
• North Carolina 
• North Dakota 
• Nebraska
• Wisconsin 
• Georgia 
• New York
• Ohio
• New Jersey 
• Nevada 
• Alabama
• Arkansas
• Arizona 
• Colorado 
• Connecticut 
• Vermont 
• Washington 
• Oklahoma

You will notice that some places are not included in Amazon business tax-exempt. It's because these states do not levy sales taxes.

• Delaware
• Alaska (only some municipal governments) 
• Montana
• New Hampshire
• Oregon

Meanwhile, avoid clicking on the states that require you to upload state-specific permit numbers and additional information. Instead, only select them if you have the required tax exempt documentation for the following states.

• Alaska 
• Florida
• Hawaii
• Illinois
• Louisiana 
• District of Columbia 
• California
• Maine 
• Maryland
• Massachusetts 
• Mississippi
• New Mexico 
• Puerto Rico 
• South Carolina 

#2. Fill Up Your Organization's Info 

After picking the states you are applying for Amazon tax exemption in, input your small business's information from its name to the type of property you sell. This includes your sales tax permit and other tax exempt documentation.

Double-check everything, and you'll be directed to a page where you will sign your Amazon tax exemption certificate. Finally, click Activate Certificates. Your Amazon tax exempt status will take effect in 15 minutes, whereas Amazon Business will upload the Amazon Tax Exemption Certificates within 24 hours. 

Stay Tax Compliant With Unloop

If you're looking to start a dropshipping business or are already in the throes of running one, it's important to stay compliant with sales and income tax laws. As an Amazon seller, one way to do this is by applying for sales tax exempt status. To qualify, your business must resell items to learn how to use tax-exempt on Amazon. 

Unloop can help you through the process and make sure everything is filed correctly so you can continue earning profits without worrying about penalties from the government. Are you ready to get tax-free income? Book a call today!

Outsourcing tasks for different areas of your business can be beneficial, especially when you're not well-versed in doing such things. Countless professionals and trained individuals are ready to offer their services to small businesses. But before hiring one, assess your business first. Which professional would be most helpful for your business?

When it comes to finances, you can get a bookkeeper or an accountant to help you. Does it make a difference when you hire the other professional over the other? Can they perform the tasks your business requires? 

If you're thinking about hiring someone, you've come to the right place. We'll list the different responsibilities of bookkeepers and accountants so that you can hire the proper help for your growing business. 

What Is The Difference Between Accounting and Bookkeeping? 

Hiring a trained professional to help you manage your business means allocating resources to pay them. But, of course, you want your hard-earned money to be worthy of the service you are getting. So let's look at the different responsibilities of accountants and bookkeepers to help you differentiate their tasks.

Key Responsibilities of Bookkeepers 

Certified bookkeepers do need a formal accounting degree to perform their job. However, bookkeepers are trained and do not need state-mandated exams and certifications to do their job. On average, a bookkeeper’s rate starts at $30 per hour. 

Here are the responsibilities bookkeepers carry out. 

Managing daily cash flow 

Whether cash flow comes in plenty or slows down, keeping track of everything that comes in and out of your business is a way of telling if your business is doing good. Part of a bookkeeper's job is recording transactions in sales and expenses that happen in your business. 

Modern technology means automated bookkeeping software, making it easier for bookkeepers to record your data. Moreover, bookkeeping software instantly produces summaries of your transactions whether you want data monthly, quarterly or annually. 

Handling accounts payable and receivables

It's common for small businesses to have suppliers instead of producing their own goods. Of course, you need to pay the suppliers for the goods they manufacture for you. You can work with several suppliers if your company sells a variety of goods. It's the bookkeeper's duty to make payments to your suppliers. They can also make payments on behalf of your business for other necessary expenses. 

In addition, as they make payments for your business, they are in charge of the collection. They send invoices to your clients to ensure all payments are done on time. They also record if payments and receivables come in late to ensure that your sheets remain balanced. 

Preparing all the business’s financial statements

Businesses produce several financial statements. The data on these statements can tell if your business is stable or on the verge of failing. Bookkeepers prepare these financial statements for accounts to analyze. 

Balance sheets, cash flow statements, income statements, and statements of equity are a few crucial financial documents that bookkeepers offer.

Processing payroll

A bookkeeper's service may vary, and it can include processing payroll. For small businesses, bookkeepers can perform some duties of the HR department. For example, they can assist in processing paychecks and ensure employees get their pay accurately and on time.

Key Responsibilities of Accountants 

A certified public accountant goes through a rigorous accounting degree and must pass state-mandated licensure examinations before they can offer their services. A certified accountant's average rate is between $50-$100. It can go higher depending on their work experience. 

Here are a few of the major duties held by qualified accountants in small businesses.

Ensuring the data on financial records are valid 

It's the accountant's role to make sure all data in the business's financial records are valid and accurate. Accountants are in charge of tracking any inconsistencies in the statements and pinpointing any problems. They will also be in charge of consulting with a bookkeeper when they see these inconsistencies. 

Once everything is verified, accountants will be the one to answer if auditors check on your business. They also present these statements to stakeholders and potential investors to help with your business’s growth.

Ensuring that your business complies with tax laws 

If bookkeepers record the cash flow in a business, the accountant makes sure you pay up correctly—especially taxes. Taxation is an important part of business, and you must comply with tax laws to run your business legally and smoothly. 

Accountants are in charge of filing all tax returns for your business. Tax filing is done quarterly or annually, depending on the rule of your country's tax collection agency. Accountants ensure that you file and declare taxes on time so you won't have to pay fines and other unnecessary expenses. 

Forecasting and risk assessment 

An accountant can examine your business’s financial records to make an informed guess or forecast your business’s future. Aside from your records, there are other methods accountants can do to predict the direction of your business. For example, the market research method uses how many people are potential buyers when a product is launched. This information can help you significantly enhance your sales.

Other forecasting methods may include factors like GDP, economic factors, trending, and data models, which can be used for long term forecasts. Furthermore, accountants can help you plan your business's next step. Risk assessment allows you to see if your actions will benefit your business growth. 

Many small business owners tend to go big and be reckless with their decisions, causing failure. Accountants will be able to strategize with you along the way so your business resources won’t go to waste. Their financial advice will help you allocate your resources to the right department.

Budgeting and cost accounting 

Small businesses strive to make their processes more efficient to lessen their expenses. Budgeting within the business process is also in the job description of an accountant. They can pinpoint the areas of your business with unnecessary expenses which they think you can lessen. 

Accountants can help you save money and allocate them to the other areas of your business you can improve on. 

Conclusion 

The difference between bookkeeping and accounting may be hard to spot as they both focus on the financial aspect of the business. But, to simplify, you can look at bookkeepers as individuals that keep all financial transactions in an organized record. In comparison, accountants are the ones to analyze and interpret the data. 

So which one is better for a small business? As you start, bookkeeping will be easier for you to handle. In fact, you can attend training to be a certified bookkeeper. You can meet with accountants once in a while to help you manage your financial data. As your business grows and more cash flows into your company, then it may be a good time to hire both. 

For trusted bookkeepers and professional accountants, book a call with Unloop and talk to our professionals. We offer many different accounting services that fit a small business’s budget.

There's no question that keeping your online business healthy is essential for its success. But which report can help you know if your business is doing okay? 

An income statement example can give you a detailed overview of your company's financial health and help you identify areas that need improvement. How can you prepare a comprehensive income statement for your business? 

In this blog, we'll discuss the parts of this crucial financial statement. We will also give examples of income statements that are helpful for your online business. Let's dive right in! 

Income Plus Expense Is the Income Statement

One of the essential financial statements for any business, including online businesses, is an income statement. It shows your revenue, expenses, and net income for a month, three months, and so on. You can use the income statement to assess your small business’s health and make forecasts about its performance.

Perhaps, you're confused by the following names. You shouldn't be, as these statements are all income statements.

• Profit and loss
• Operations statement
• Statement of earnings
• Consolidated statement of income 

By comparing cash flow period after period, you can get a good sense of how your business is performing. For example, if you see that your revenue is increasing, but your expenses are also rising, you'll know it's time to make some changes to your budget. 

Income statements can also help you measure your strength in sales, see how much leftover money you have, and determine what expenses to cut back on. You can use this document to secure investments or loans. So, if you're not regularly making income statements, now is the perfect time to start. 

How to Prepare This Financial Statement 

Now that you understand the importance of having this statement as one of your financial reports, it's time to learn how to make one for your online business. 

As an ecommerce business owner, you might have already invested in accounting software with templates for these financial statements. But here's what you should remember for the income statement format: headings.

The headings typically include:

• The business name
• The period the statement covers
• The currency in which the financial results are reported

For instance, your business might report its income statement for the fiscal year ended December 31, 2022 in US dollars. Plus, the heading may also include other disclosures, such as whether the statement is prepared on a GAAP or non-GAAP basis. 

Types of Income Statements

After compiling all of your transactions into their correct charts of accounts, you can choose whether to prepare an income statement using a single-step or a multi-step income statement. 

Single-Step 

So, what is an example of an income statement using the first approach? The single-step income statement computes all your revenue and expenses in a single calculation of net income. Thus, it reports revenues and expenses that are easy to understand. 

Net Income = (Revenue + Gains) – (Expenses + Losses)

Below is an example of an income statement with this approach. 

MPOM Pet Supplies

Income Statement

For Month Ended June 30, 2021

(in US dollars)

Multi-Step

While a multi-step income statement subtracts operating expenses from gross profit to net income. Non-operating accounts, such as interest expense or gains on the sale of investments, are then subtracted or added to arrive at the final figure for net income. Thus, a multi-step income statement provides a more detailed picture of a company's profitability. 

Gross Profit = Net Sales - Cost of Good Sold > Operating Income = Gross Profit - Operating Expense > Net Income = Operating Income + Non-Operating Items

Below is an example of an income statement using the multi-step approach. 

MPOM Pet Supplies

Income Statement

For Month Ended June 30, 2021

(in US dollars)

Comparative Income Statement

Do you want to evaluate your profits over several periods? Then, a comparative income statement will give you a larger view of your business's finances.

It combines information from several income statements into a single statement. This makes it easy to compare your business's performance from different periods side-by-side. You can also compare your income statements with your competitors as an official document open to the public.

By comparing your small business's income statement from one year to the next, for instance, analysts can get a clear picture of its financial health.

MPOM Pet Supplies

Income Statement

For Years Ended December 31

Parts of the Income Statement

By now, you may realize the three main sections of an income statement—the revenue, the expenses, and the net income. This income statement format is simple enough. However, businesses have different ways to earn income, such as sales from goods sold or services, and spend their cash, such as administrative expenses.

Common items found in any income statement are: 

Revenue

This is the first line item you'll put on your income statement. It represents the total cash your online business has earned in a year, for example. Remember, your revenue is different from profit. Profit is determined by subtracting your total expenses from your total revenue. So, in the sample income statement, MPOM had $57,000 in sales and $50,922 in expenses. Thus, its profit would be $10,478.

Cost of Goods Sold

This item is your business's direct costs from manufacturing your products or honing your services. This item includes the cost of materials, overhead costs, training, and labor used to produce the goods. 

But COGS does not include indirect costs, such as shipping or marketing. The COGS formula is 

COGS = beginning inventory + purchases - ending inventory

All businesses should aim to reduce their COGS to increase profitability. You can accomplish this by negotiating better deals with suppliers or manufacturing products more efficiently. Generally, the lower a company's COGS, its profits will be higher.

Gross Profit

Total sales minus the cost of goods sold is your gross income or profit. Then, you evaluate your gross profit margin. This metric is the ratio of your gross profit to your total sales. You can use the gross profit to recognize your online business's financial health and pricing strategy. 

For instance, if you have a high gross profit margin, you are selling your products at a higher price than your competitors. Meanwhile, you are overspending on production costs if you have a low margin of gross profit.

Operating Expenses

What expenses maintain your business door open? Also known as the general and administrative expense, an operating expense involves expenditures that don't directly relate to making your products or services. It commonly includes:

• Rent
• Payroll
• Travel
• Utilities
• Insurance
• Maintenance and repairs
• Property taxes
• Office supplies
• Advertising

Taxes and Interest

EBIT, or earnings before interest and taxes, measures your business's profitability. It essentially represents the company's operating income or the amount of money it makes from its core business activities before deducting interest and taxes. 

Taxes are government-required expenses, and interest is the cost of your borrowings, such as cash loans.

Interest Income

Other income is a category on the income statement that includes interest income and gains on the sale of assets. For example, you can receive revenue from bank interest while adding the income from selling your equipment or tangible assets to your final profit.

Net Income/Loss

The final figure in an income statement is the net income or net profit. It shows how much money you will actually get after deducting all of your expenses. To calculate net profit, you subtract your total expenses from total revenue or your taxes and interest expense from your EBIT. 

If the result is positive, the company has made a profit. If the result is negative, your business incurs a net loss. Net income can fluctuate from month to month or year, depending on various factors such as sales revenue, direct cost, and interest rates. 

Prepare Your Financial Reports With Unloop

As an online entrepreneur, it's important to keep a close eye on your finances. After all, you can't continue your operations without a good bottom line. 

One of the best ways to stay on top of your finances is to prepare an income statement and analyze it. If you need help interpreting your numbers, don't hesitate to ask Unloop for our professional advice, ensuring that your business will always be profitable. 

If you have a financial tool on hand, pair it with our easy income statement template. Download it now!

Maintaining a healthy balance sheet is crucial for any business, but it’s especially important for Amazon FBA sellers. This is because Amazon FBA sellers are constantly investing in inventory, and they need to know that they have the financial resources in place to support this ongoing investment. The balance sheet provides an overview of a company’s financial health, and it can be used to assess whether a company has the ability to continue funding its operations.

For Amazon FBA sellers, the balance sheet can be a valuable tool for understanding whether they are on solid financial footing. By closely monitoring their balance sheet, Amazon FBA sellers can ensure that they have the necessary resources in place to maintain their inventories and support their businesses.

The Amazon Balance Sheet as Your Entrepreneurial Secret Weapon

Most sellers think of the balance sheet as just another way to check their Amazon account balance. However, it can also be used to keep track of inventory levels, sales data, and other important information for FBA sellers.

Here are four ways a balance sheet can help keep your business in tip-top condition as an FBA seller:

1. Determining Your Business’s Risks and Returns

Your balance sheet gives a clear view of your business’s finances as an FBA seller. It lists your current and long-term assets and liabilities, which indicate your company’s potential to create cash and continue business operations in the future.

It can also show you if your debt levels are sustainable by helping you compare your current assets and liabilities. By doing this, you can see if your business can fulfill its short-term obligations. Additionally, having a balance sheet can aid you in determining other financial issues to avoid serious financial problems.

2. Keeping Track of Your Inventory

As an Amazon FBA seller, it’s important to keep track of your inventory with a balance sheet. This helps you keep track of what you have in stock, what needs to be restocked, and what is selling well. As a result, you can make smarter decisions for your business and ensure that you always have the products your customers need.

Additionally, organizing your Amazon balance can help you spot trends in your sales and inventory levels, which can be helpful in forecasting future sales. So a balance sheet is ultimately a valuable tool that can help you run your Amazon FBA business more effectively.

3. Providing Useful Financial Ratios for Your Business

Financial ratios are useful in assessing how well your Amazon business is doing in terms of productivity, profitability, solvency, and liquidity. Thus, they are also helpful when determining the long-term viability of a company. And you can see a detailed and organized view of all the important information regarding these by having a balance sheet.

Furthermore, having an organized financial statement also helps you determine your company’s cash flow.

4. Securing Business Loans and Other Types of Working Capital

When you have a balance sheet for bookkeeping, it’s easy to show your business’s financial condition to potential lenders or investors. It’s because they will need information about how stable your company’s financial condition has been over time. They will also require information about your credit history and track record of your paid debts.

Potential lenders and investors may also look at your balance sheet to see where their money will go and when they might expect it back. Thus, it’s important to have a consistently updated balance sheet.

Frequently Asked Questions by Amazon FBA Sellers

1. Am I required to have a balance sheet as an Amazon FBA seller?

No, it’s not required for FBA sellers to have a balance sheet. However, having a balance sheet for your Amazon business is a huge advantage. It will help you organize your finances so that you can effortlessly determine your cash balance, cash flow, net income, total assets, and total liabilities.

Having it will also make it easier for you to make financial statements, including your income statement and cash flow statement. You also won’t have a hard time dealing with any financial ratio. Furthermore, it will be more convenient for any potential investor if you have a balance sheet, which means you can close deals more easily.

2. Can I ship my FBA inventory directly to Amazon?

Yes, you can directly ship your FBA inventory to Amazon through your Amazon dashboard. Under the inventory tab, you can find an option to manage your FBA inventory. Then, you can choose the preferred stock you want to ship by choosing the send/replenish inventory option under the edit tab.

Afterward, you can continue organizing your shipping plan and packaging plan. Once you’re done with these processes, Amazon decides where your products will be shipped based on their demand from different areas across the country. This way, you can benefit from Amazon’s wide distribution network and extensive audience reach.

3. Does Amazon FBA help boost my sales?

Getting the Fulfilled By Amazon service can definitely help boost your sales for several reasons. First, Amazon FBA broadens your potential customer base by widening your audience reach. Second, it helps you get more sales since Amazon is a reliable brand that handles most of your selling and shipping needs.

Furthermore, Amazon FBA can also increase your products’ search rankings. This is greatly beneficial for you because potential customers tend to check out or purchase products that are placed higher on the search results.

Final Thoughts

The Amazon balance sheet is a great resource for entrepreneurs. By understanding how it works and what it can tell you about your business, you can make smart decisions that will help your company flourish. Thus, be sure to keep track of your inventory and financial ratios using the balance sheet so that you have a good idea of where your business stands financially.

If you want to know more information on how to use a balance sheet or need other related services for your business, explore our website. We offer a variety of services that can help entrepreneurs just like you succeed in the ever-changing world of business.

Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.

You've just opened up a small ecommerce business, and things are moving quickly. You're making sales and keeping track of inventory, but you can't seem to find the time to keep up with your bookkeeping. So you decide to look for an ecommerce CPA.

With tedious tasks like advanced reporting, automated tax calculations, and streamlined order management, having a professional makes it easy to stay on top of your bookkeeping and grow your business.

Whether you are just starting or have been in business for years, the right ecommerce CPA can help you achieve your goals. But with thousands of CPAs out there, how do you know which person is the best for your business? Once you've hired them, what duties and goals should they tackle to help your ecommerce business succeed? This article will show the importance of hiring a credible expert to help manage your business and how to get the best one. 

An Ecommerce Accountant vs. A CPA Ecommerce Expert

Most people loosely use the terms accountants and CPAs interchangeably when they aren't the same. For example, a CPA, also known as Certified Public Accountant, is an accountant. But not all accountants are CPAs. Interestingly enough, according to NASBA, only 30–45% of accountants in the US are CPAs. 

Here are the three main differences between ecommerce CPAs and ecommerce accountants: 

Licensing 

To practice certain accounting tasks, CPAs must pass the licensure exam. But even before that, accounting students who want to become a CPA must complete 150 college credit hours plus hours of advanced accounting, core business courses, taxation, and auditing. 

After passing the boards, CPAs must continue to take comprehensive tests and stay up-to-date with accounting-related laws and principles as they continually change. 

Auditing 

CPAs have to verify financial documents such as statements of financial health. It is their duty to see that all accounts are correct and accurate so that statements released to the public and the IRS show the accurate position of the business. 

CPAs, like lawyers and doctors, take an oath to act as fiduciaries, meaning they are duty-bound to act in the best interests of their clients. While you may hire an accountant with the best intentions for your business, you'll have to trust solely on their word. 

Taxes 

Tax compliance, such as filing for tax returns, is one of many responsibilities both CPAs and non-CPA accountants can take care of.

Nevertheless, it is worth noting that passing the CPA in one state doesn't make you a CPA in other states or countries. You still need to pass the licensing exam in that area to do certain accounting practices such as auditing. However, hiring a CPA will give your ecommerce business an edge since an accountant who has passed licensing exams should always be up-to-date with taxation laws and codes. 

Important Responsibilities of an Ecommerce CPA

Ecommerce CPAs are simply CPAs specializing in working with ecommerce businesses. Aside from basic accounting and financial duties, they need to: 

• Managing invoicing, account receivables, account payables, etc. 
• Oversee inventory and cost of goods sold 
• Perform internal auditing 
• Prepare timely financial statements for the month- or year-end reporting. 
• Interpret and prepare reviews, projections, and forecasts for online strategies 

Ecommerce CPAs are legally bound not to offer audit and consulting services to businesses in the same line as this would create a conflict of interest. 

When to Hire an Ecommerce CPA 

Hiring a professional is a tough decision for your online business. Here's how to figure out if you need an expert for your company:

Your Taxes are Too Complex to Handle

Sales tax, tax return, tax laws—how do you calculate and file them all? Do you even need to file them even if you transact sales online? How about overseas or multi-state sales? If you have these questions and don't know the answers to them, it is time to hire professional accounting services.

When You're Starting Your Business

Starting your business is very messy and confusing. Thus, having an expert to lay the foundation, such as setting up your accounts online or integrating the right accounting tools for your business, can help you succeed. 

When You Need Auditing

As we mentioned, only CPAs can audit both internal and governmental auditing. Thus, if the IRS asks to audit your business, your CPA is qualified to represent your ecommerce business. 

Key Factors to Hiring the Best CPA for Your Ecommerce Business

Adding a professional to your ecommerce business will help you deal with your finances efficiently. Ecommerce CPAs are more qualified and capable than accountants, but you don't just need the title and the license that comes with the person. Here are other qualifications to look at before hiring a CPA.

Experience in Ecommerce

We highly suggest you hire a CPA that has experience working with an online business and not just the usual corporate CPA firm. In addition, they must be computer savvy and have applied knowledge of ecommerce platforms and accounting software that can integrate inventory management and sales tax in a flash. 

Availability

Everything is now virtual, including accounting services. But despite remote services and hectic schedules, you should still be able to reach your ecommerce CPA whenever you need them. Your business deserves quality attention and action. 

Cost

Because of the extra effort of passing their license and gaining incredible knowledge, hiring an ecommerce CPA costs more than hiring a non-CPA. Of course, there are even more added costs if they have work experience in the business, other accounting jobs, and other factors that contribute to how well they do their jobs.

We suggest that you look for a CPA who can give you a billing structure that fits your budget. Because at the end of the day, you need a CPA who can improve your business and its overall financial health. 

Hire Unloop Today

So, you've decided to hire a CPA for your ecommerce business. Congratulations! Recruiting a reputable ecommerce CPA is one of many important financial decisions that will greatly affect your business flow and success.
At Unloop, we know the ins and outs of hiring a great CPA for your ecommerce business. We've outlined the key factors to look for and some important responsibilities of an ecommerce CPA. Don't worry if you feel overwhelmed by all this information or just don't have time to vet candidates yourself. Our team at Unloop is passionate about helping businesses such as yours succeed, so you can focus on what you do best: running your online business. Give Unloop a call today!

Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.

You're probably familiar with sales tax. It's that pesky thing you have to pay on most purchases, depending on your location. Many online sellers have asked themselves, "Do I need to collect sales tax for selling online?"

The answer is overwhelming, but it's not complicated as long as you have a tax guide like this one. Inside, we'll break down the basics of sales tax for online sellers and help clear up any confusion. 

It's important for small business owners to be aware of their legal obligations. Fortunately, with a little knowledge about how tax law works, you can avoid many headaches by being compliant. We'll explain each part step by step so that by the time you finish this post, you'll be a bona fide sales tax expert. Let's get started!

What Does Internet Sales Tax Mean?

Also known as ecommerce sales tax, internet sales tax is the small percentage you collect when you make an income from selling your product online. You must accurately assess sales taxes and pay them to the proper state tax authorities.

In the US, most states require online businesses to collect sales tax. On top of this, you need to check the cities and countries you sell in and see if they have special taxing districts, AKA special assessment districts. 

Let's say your online business is currently located in Los Angeles, California. 

As of 2022, the city of Los Angeles, California, requires businesses to pay a 9.6% tax rate from their sales and revenue. The final computation of your tax rate is determined by the exact location of your business. 

What Is a Sales Tax Nexus? 

The exact location of your business determines the taxes you have to file. You're responsible for charging the correct sales tax and remitting the right amount of tax rate back to your respective state. But what does this fancy term "sales tax nexus" even mean?

It's a legal term of the state that means "to be on the hook." If you have a place of business, it means you have a physical presence that the state can tax you on. It could be a:

• Warehouse
• Storefront
• Office

The Ripple Effect of the US Supreme Court Ruling

Generally speaking, online businesses don't pay sales taxes if they don't have a nexus. But for many years, states have been arguing about not being able to collect sales taxes from online business owners simply because these marketplace sellers don't have enough sales within their located state to generate taxes.

But the burden shifted back to the seller since the US Supreme Court ruling over South Dakota v. Wayfair in June 2018. Sales tax nexus laws have changed on when and how to collect taxes. As a result, complying with tax prerequisites for online retailers, especially small to medium businesses, has gotten much messier. 

The ruling changed how online businesses collect and charge sales taxes. Many states have the power to charge sales taxes on online businesses even without a nexus. But as of now, the status of this new tax law hasn't been passed as a federal law, which is good news for small businesses in some states. 

Are You Required to Collect Taxes in Other State Locations? 

Yes, you still need to collect sales taxes in different states if you have:

• A physical presence: Whether it be an office, a store, or a warehouse far away from your home, you still need to comply with the sales tax laws of that state. 
• Personnel: Do you have accountants, contractors, salespeople, or service providers managing or working for your business in certain states? Then, you need to file sales taxes based on the location of your production as well. 
• Affiliates: Influencers who advertise your products or services also give you sales tax nexus in many states. 
• Inventory: Storing your products can cause sales tax nexus in most states, even if you don't have a facility or personnel. 
• Dropshippers: If you have a third party shipping your products to your consumers, there may also be sales tax nexus involved. 
• Selling at trade fairs and events: Some states may require you to collect sales taxes even if you sell there temporarily. 
• Economic nexus: If your business is booming and you're earning above the sales threshold in that state—as remote sellers, you need to collect sales taxes in a state if you reach a certain amount and number of sales in that state. 

What Products Have Tax?

Most tangible property is taxable. But some states make tax exemptions for certain products. 

Let's go back to California once more. If you are a marketplace seller that offers furniture, toys, and clothing, your products are subject to sales tax. In addition, some labor services and costs associated are even taxable if they are connected to producing new personal property. 

But there are sales tax exemptions in California, such as:

• Selling food and many groceries 
• Selling medicine prescribed by a doctor and certain medical devices
• Sales of items paid for with food stamps 
• Sales to the US government 

Important Reminders on How to Collect Taxes for Your Online Business

Once you have learned that your business is taxable, you must take steps to ensure tax compliance. This means filing the appropriate tax forms and making sure that your tax liability is up to date. By taking the time to file for tax compliance, you can help protect your business and avoid costly penalties.

Tax Permit Registration

Don't skip this crucial step when collecting sales tax. Unfortunately, most states consider it illegal and penalize businesses that collect sales tax without a tax permit. So instead, we suggest you contact the Department of Revenue of your state to learn more about registering your business for sales tax collection. 

Sales Tax Filing and Report

Like each state's calculation of sales tax nexus, the state assigns how frequently you will file your sales tax—either monthly, quarterly, or annually. When your sales tax due date comes, it is your job to state how much you've collected. 

Reporting your sales tax is easy if they want to see only the total of your sales tax collection. However, most states want to know how much you've collected in each county, city, state, and other special taxing districts in your nexus. 

Final Thoughts

The verdict is in, and, as expected, the Supreme Court's decision in South Dakota v. Wayfair has had a massive impact on online sales tax laws across the US. As a result, states are now scrambling to put new rules and regulations governing how and when sellers must collect sales tax based on their customers' physical location. 

Suppose you're an online seller doing business in more than one state. In that case, it's important to understand the implications of this ruling and take action to ensure you are compliant with all applicable sales tax laws. 
Contact financial experts from Unloop today for help in navigating these murky waters and staying ahead of the curve for internet sales tax compliance.

Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.

Income tax preparation is a process that many business owners dread. However, it doesn't have to be so challenging if you hire the right service providers. 

Income tax preparation services can provide practical ways for you to save money on taxes you owe in the coming year. But you have to be careful: some income tax preparation programs might leave you vulnerable to scammers or fraudsters who want access to your personal information. 

This post will discuss some of the common scams and frauds that can happen when preparing to file your taxes. This way, you can better prepare yourself against them.

If you are looking for ways to protect your assets against scams and fraud, this article is for you.

Who Are the Usual Targets?

The most vulnerable people to scams and fraud are the elderly and non-English speakers.

Older people who are not tech-savvy are easy targets for scammers. Unfortunately, they are not well-informed about the latest modus of scammers. Most of the time, scammers use the identity of someone related to elderly people to lure them into the trap.

Non-English speakers are also easy targets because of their poor understanding of the English language. Some scammers are multilingual and can assume the identity of anyone they like. Thus, they can mislead people with poor English skills and take their money without breaking a sweat.

Common Scams and Fraud During Income Tax Preparation

Malicious attackers out there will try their best to steal from business owners like you. Becoming a victim of their scams is never easy, and it is depressing. That’s why the Canada Revenue Agency (CRA) and the IRS of the United States work hand in hand to protect taxpayers from scams and other fraudulent activities. 

These scams and fraud often begin with a phone call or an email you receive right into your inbox. But what are the other types of scams and fraud you might encounter? 

Take a look at our list and learn about the different modus operandi out there.

Phishing Messages

Fake emails, web forms, social media posts, and text messages are the most common types of phishing scams. Scammers send these messages to the victim to steal their valuable information. Thus, you have to be careful when receiving legitimate-looking messages that require you to click web links. 

Scammers also use phishing to target corporate tax filers, human resource workers, and payroll professionals. These emails typically offer huge amounts of tax refunds or threats. Avoid opening the links or attachments included in these suspicious messages. 

Questionable Charities

You have to be careful with people who promise tax deductions through fake charities. It is good to visit CRA or IRS portals to check the legitimacy of the charity a scammer is introducing to you.

Also, never disclose personal or financial details such as passwords, credit card information, or social security/insurance numbers to people asking for donations. Another thing you need to keep in mind is to not give a cash donation if you want to declare it as a tax deduction.

Fake Phone Calls

Receiving fake phone calls from scammers is one of the most popular ways to steal from people. 

Scammers will pretend to be representatives of CRA or IRS, and often their calls are unexpected and quite aggressive. Technology upgraded this modus by allowing scammers to use robocalls and automated messages. 

This scam is terrifying because the caller might already have personal information like your name, address, and the last four digits of your social security/insurance number. Additionally, scammers may use bullying to threaten and persuade their victims to pay taxes via gift card, prepaid debit card, or wire transfer.

Remember that CRA and IRS seldom call to request any specific payment, and they do not resort to bullying or any threatening remarks. If the scammer threatens you that your social security number will be suspended, remember that’s not possible.

Social Media Fraud

With this tactic, scammers create a fake identity related to their victims to convince them to provide their personal data such as their full name, birthdate, address, and social security or insurance number. 

Scammers can also utilize social media to get their victims' email addresses and send them malware links that can get through mortgage accounts, bank accounts, and other identifiable personal information.

Identity Theft

Set strong passwords and install antivirus software when accessing or storing sensitive financial data online. You should also store your tax records and important cards in a safe place.

Remember that scammers can steal your data with various security breaches. They will then use stolen taxpayer identification details to file and claim fake tax returns. 

Fraudulent Tax Return Preparation Services

If you’re considering hiring income tax preparation services, you have to be very careful and conduct thorough research on the firm you will hire. Scammers can pretend to be tax preparers to steal your identity and use it in other tax scams. 

To ensure that you are with a legit firm or professional, validate their credentials by visiting the CRA or IRS website. You can also hire qualified tax preparers on their websites if you want to conserve time.

Inflated Refund Claims

Knowing the ins and outs of tax preparation is essential. You can attend income tax preparation programs or ask your tax preparer to give you a walkthrough of your income tax. 

Scammers often claim to prepare your taxes and ensure you a large tax refund. They also file a fake return under your name and have the tax refund deposited into their account. Always remember that legit tax preparers will provide a copy of the filed tax return.

False Tax Deductions

One of the most common scams is persuading the taxpayer to file a fake return using fake tax forms to lower the sum of taxes due. False tax deductions may increase or decrease the amount of income claimed to get the maximum tax credits possible. 

Scammers may also convince their victims to overstate deductions by falsifying their child tax credit, donations, business expenses, and medical expenses. You wouldn't want the CRA or IRS to penalize or sue you, so you have to be honest with your tax deductions.

Hire a Legit Bookkeeper from Unloop

Your earnings are the product of your hard work. To protect yourself, here are our tips.

• Do not entertain suspicious messages, links, and unsolicited calls; these are red flags that might lead you to a very difficult situation. 
• Do not tamper with your tax information just to get a huge tax refund.
• Hire a legitimate accountant who will help you prepare your income tax in Canada or the USA the legal way.

Here at Unloop, our expert bookkeepers work with trusted tax partners. You deserve a hassle-free experience, so let us do the work for you! After we prepare your financial statements, you can rest easy knowing our partners will handle them with care.

Should you have further questions about our services, call us at 877-421-7270. We’d love to hear from you!