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!
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).
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.
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.
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.
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.
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).
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).
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.
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:
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.
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.
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.
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!
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.
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.
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.
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.
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.
You will notice that some places are not included in Amazon business tax-exempt. It's because these states do not levy sales taxes.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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!
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.
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.
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:
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.
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.
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
For Month Ended June 30, 2021
(in US dollars)
|Revenues + Gain|
|Total revenues and gains||$61,400|
|Expenses + Losses|
|Cost of goods sold||$22,200|
|Bank & ATM fees||$22|
|Marketing and advertising expenses||$1,100|
|Income tax expense||$14,500|
|Minus: Total expenses and losses||$50922|
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
For Month Ended June 30, 2021
(in US dollars)
|Cost of Goods Sold (COGS)||$22,200|
|Bank & ATM fee||$22|
|Marketing and advertising expense||$1,100|
|Minus: Operating Expenses||$10,222|
|Add: Capital gains||$4,400|
|Minus: Interest expense||$4,000|
|Earnings Before Income Tax||$20,578|
|Minus: Income Tax Expense||$14,500|
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
For Years Ended December 31
|(In thousands of dollars)|
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:
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.
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.
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.
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:
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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:
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.
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.
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.
Ecommerce CPAs are simply CPAs specializing in working with ecommerce businesses. Aside from basic accounting and financial duties, they need to:
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.
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:
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.
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.
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.
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.
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.
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.
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.
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!
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.
|Los Angeles Tax Breakdown as of 2022|
|Los Angeles City||0.25%|
|Los Angeles County Local Tax Sl.||1%|
|Los Angeles County District Tax Sp.||2.25%|
|Minimum Total of Sales Tax Rate||9.5%|
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.
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:
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.
Yes, you still need to collect sales taxes in different states if you have:
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Your earnings are the product of your hard work. To protect yourself, here are our tips.
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!
Do you run a small business? If yes, you need to make many banking decisions, from determining the type of account to open to choosing among the best and most ethical small business banking companies.
This blog post will give you six tips for managing your small business banking properly.
Have you ever been curious about what a checking account and a savings account are and how they differ?
With so many different financial products, it's important to understand their differences before choosing which one is right for you.
You can use a checking account to pay bills or buy food, so this type of account will work well with what most people need from their bank. On the other hand, you can use a savings account to save for large purchases, emergencies, retirement, or other purposes.
As a small business owner, you must have both and use each of these accounts according to their purpose to avoid mixing your transactions. Accounting your business transactions will then flow smoothly.
You may think checking your balance before making any transactions isn't necessary. However, if something were to go wrong with a wire transfer or online payment, not knowing what funds are available could have serious consequences.
On the other hand, knowing how much money you have on hand means that you can prevent bounced checks and overdraft fees from happening. It is also helpful should an emergency arise. For example, suppose you urgently need more money for a major repair or a medical bill. In that case, you have enough liquidity without taking out a loan!
Keeping track of how much money is coming in and going out can be a pain, but it doesn't have to be! Instead, make things easier on yourself with simple spreadsheets or accounting apps that will tell you exactly where all your hard-earned cash has been going.
You can use a cash flow diary to keep track of your monthly budget and prevent overspending. Then, at the end of the month, you can use the data on your spreadsheet or accounting app to track down unnecessary expenses that you can cut off the next month.
Business owners always have to liquidate at every end of the month or so. As much as you want all the money to be in one small business bank account, you have to divide this money for their respective purposes.
Depending on how many transaction types you make, you can open multiple bank accounts. Here are some recommendations from us.
Do you have a hard time remembering to pay your bills on time? Are you tired of wasting money because you always forget to cancel a subscription or service before the next payment is due?
If so, set up automatic payments.
As a business owner, you probably have a lot of bills to pay every month like rent, electricity, phone, and Internet. Or, if you own an ecommerce business, there are extra expenses like storage and shipping. Setting up automatic payments for these fees will make managing your finances easier and save you from late fees.
If you have employees or crews working for you, it is crucial to pay them on time. You can have a separate bank account for this so that it's easier for you to pay them every paycheck schedule.
Not only that, but you can also use this account to pay suppliers, business partners, investors, and others. The most important thing is that the only cash going out from this account is the money for your people.
Customer service is very important. And one way to keep your customers happy is to offer them hassle-free transactions through online banking.
Make sure that the name on this account is your brand name. This way, there will be no confusion.
Also, you have to create a separate online payment portal for your customers to avoid problems with your other cash flow. Remember: you will have to post information about your customer account online, making it susceptible to fraud and theft. So make sure to choose a secured bank that allows you to set up a double-authentication proof before doing transactions.
Always keep a personal bank account for you. Here, you can track all of your profits and earnings. It will also help you determine if you're ready to make a bigger investment or take business loans.
If you're like most people, you might sometimes find it hard to keep track of what's going on with your money. That means that once in a while, you will need to ask for your bank statement from the past month or two.
It's important to see where all of your money is going and how things are adding up at the end of each month. The goal is to make sure everything is running smoothly financially.
Apart from using a spreadsheet or accounting app, a bank statement is a legal document that you can request at any point in time. So don't be shy! You won't look foolish asking for this document.
In today's economy, it is more important than ever to pay taxes on time. In the past, delinquent taxpayers could expect a slap on the wrist or a small penalty fee. Nowadays, however, tax regulations are stricter, and penalties for late payment are much higher.
Did you know that if you don't pay your taxes on time, the IRS will tack on a 5% penalty to whatever tax bill they send? As a business owner, you need to meet all of your tax obligations to keep your company from turning into a money pit due to federal fines and fees.
We hope this blog post has helped you understand how your banking decisions can affect your business and customer experience. It's important to plan accordingly and know what expenses are coming up, how much money is going out each month, where all that money is going, and how to budget for future purchases or emergencies.
Need help? Unloop’s bookkeeping service includes financial reporting and small business banking reconciliation. No matter the size of your business, our bookkeeping service will give you peace of mind.
Call us today to get started!
Amazon is a great destination for buying almost anything in just a click, but how does taxation work on Amazon? Is there a sales tax on Amazon purchases?
The giant e-commerce channel collects sales taxes only in certain states and cities. But as Amazon's physical presence grows, it will have no choice but to collect more state and local taxes.
This article will outline the basic things you need to know about Amazon's sales tax collection, from sales tax online services to tax calculation and more. Let's start!
Sales tax is a kind of consumption tax. Consumption tax is a tax levied on goods and services, and it’s calculated by adding together all of the resources used in creating a product or service.
Unless you live in states or provinces that don’t charge sales tax, a purchase will be subject to two kinds of sales tax: the state or federal tax rate and the local tax rate of the area to which it was sent.
In Canada, for example, the federal sales tax is called the Goods and Services Tax (GST). In British Columbia, Manitoba, Saskatchewan, and Quebec, you need to collect the 5% GST plus their respective provincial sales tax (PST) rate.
Canada also has the Harmonized Sales Tax (HST). It is a sales tax levied in the remaining parts of Canada. As the name implies, it “harmonizes” or combines GST and PST, although the HST rate still varies per province.
Most products are taxable, and if you sell a taxable item, you must charge your customers sales tax. If you do business in several jurisdictions or sell items online, you have to charge different sales tax rates depending on the state. First, however, you have to establish a sales tax nexus.
A sales tax nexus means your business has a “presence” in a particular jurisdiction. This presence subjects your business to the prevailing income and sales tax rules within that state.
For instance, if you sell products that need to be stored or shipped to a particular state, you establish a nexus in that area and thus have to collect sales tax.
Another way to establish a sales tax nexus is through intercompany transactions. For example, if you sell goods used by another company and delivered on behalf of its customers, you may be required to file taxes in that company’s jurisdiction.
On the other hand, if you sell digital goods like music downloads, software subscriptions, or other intangible property, you don't need to report these transactions because they do not require storage space and physical delivery.
The sales tax on physical products purchased on Amazon can range from 17 to 27%, depending on the buyer's country of location.
As a seller, you may or may not be responsible for collecting sales taxes. That will depend on whether or not Amazon has jurisdiction to collect them in a particular state or province. As a result, you might have to do it yourself in certain areas.
In California, for example, Amazon has the jurisdiction to collect and remit sales taxes. In other places, however, they do not have that obligation.
If Amazon can collect and remit taxes for you, you no longer have to worry. Amazon has set up systems through which you can collect sales taxes from each order. On the other hand, if you’re on your own, you may need to hire a tax support service to automate this for you.
Amazon sales tax reports are useful in helping sellers make sales tax decisions. If you are wondering where you can get such reports, you can do it through Amazon Seller Central Account Settings.
To download any Amazon Sales Tax Report, log in to Amazon Seller Central and navigate to Reports. Then, click Tax Documentary Library, where you can see the sales tax report.
Next, you should generate a tax report by selecting a report type. You can generate two types of sales tax reports on Amazon: the Sales Tax Calculation Report and the Marketplace Tax Collection Report.
The Sales Tax Calculation Report is useful if it’s your duty to collect and remit sales tax, as well as any associated sales tax liabilities.
On the other hand, the Marketplace Tax Collection Report documents sales tax collected and remitted by Amazon on behalf of sellers.
When you have selected a report type, a pop-up window will appear where you can customize the time range for the data you want to see in your report.
The Amazon sales tax report for purchases is a great way to help you handle your tax obligations. If you are responsible for collecting sales taxes on your own, then you should generate this report.
Still confused about sales taxes? Outsourcing tax support may help to simplify running your ecommerce business.
Whatever ecommerce platform you use, adopting industry-specific tax and accounting methods is critical to achieving your business objectives. With the right accounting service, you can grasp these numbers and make more informed business decisions.
We at Unloop can be your partner as you grow your ecommerce business. Our team of experts can provide you with a wide range of services, from accounting to automating your sales tax collection and other important financial tasks.
Call us at 877-421-7270, and we'll help you get started.