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Your financial statements are one way to know how well your business is doing. However, some things are just inevitable, such as errors. Whether you make financial statements manually or generate them through accounting software, there's always a window for mistakes. That's why preparing financial statements should be handled with extra care.

A small mistake in financial statements can have enormous consequences. However, understanding how things go wrong can help business owners fix and prevent these errors. Let's look into the common mistakes with business reports, so you know what to do when your numbers don't match.

Questions You Need To Ask

Before we start discussing the pitfalls of financial statements, it is also crucial that you know when a problem occurs. Here are some questions you need to ask to help you determine inconsistencies and errors in your business statements.

  • Does your accounting planning system generate timely and accurate financial reports?
  • Do all financial reports come in on a daily, weekly, and monthly basis? 
  • Are all business reports distributed to the appropriate personnel on time?
  • Do the people that receive the financial statements know how to read them and use the information in the report?
  • Do people in your business take the time to read and analyze these reports and utilize the insights to make better business decisions?

If you answered no to one or more of these questions, there might be something wrong in the process or the reports themselves, and you should start addressing them. 

business reports

Common Mistakes in Financial Reporting

Sometimes, no matter how carefully small business owners prepare their reports, mistakes still seep in. Here are mistakes you should look for in different financial statements.

Data Entry Errors

Data entry is the most common and frequent error that could happen in financial statements. Among the most typical mistakes made when entering data are:

  • Declaring input in the wrong account or table. (e.g., putting sales in the expense table).
  • Forgetting or adding a number or a decimal place.
  • Deleting or duplicating an entry.

It's always best to have two copies of your important financial statements to compare them side by side. Furthermore, you can assign personnel to double-check the entries to guarantee that there are no inconsistencies.

Lacking Comparative Data

Some businesses choose to produce single-columned reports, which are short in comparative data. Including the company's current assets and previous vital data points will give a better insight into the business's financial position.

Financial reports such as income statements and expense reports should contain comparative data. It will help you see if your business generated more sales than in other months so you can adjust your strategies. It goes the same for your expenses. It always helps to compare your current and previous expenses to see if you're going overboard to look for ways to save your resources.

Error of Commission

An error of commission happens when you mishandle data and enter it in the wrong place. In this error, you still enter the correct amount. The inconsistency happens when you put it in the wrong category. For example, you make a sale of $100 from your products, and you accidentally put this in your expense column.

You will see a decrease in your inventory but not an increase in your sales which can confuse you when the report comes out. It will also make your expense report higher than usual. Small amounts may seem insignificant, but they may turn your finances into chaos when it's consistently happening.

Failure To Inspect Business Financial Statements Closely

Making financial statements will be pointless if no one takes the time to read and study them. Aside from understanding what the numbers mean for your financial performance, inspecting them to look for suspected errors is also crucial.

To help spot errors in profit and loss statements, balance sheets, and other important business reports, every person that receives the reports should:

  • Possess the knowledge necessary how to make a business financial statement and comprehend the primary financial accounts of a company.
  • Dedicate time to read the statements on a schedule.
  • Identify discrepancies that deviate from your usual outcomes.
  • Immediately find a solution for the discrepancies and address them with people of authority.

If the administration can’t find solutions to the errors in the report, it's best to hire someone who can help you sort out and correct the errors in your financial statements.

Neglecting To Change Procedures To Prevent Errors

Errors in your financial statements will be ever-present if you don't look for the root cause of the errors. Revising some of your accounting procedures can help decrease and eliminate these errors.

For example, most data entry errors, such as omission or mishandling, stems from doing them manually. If you have a small business, manually recording income and expenses or making cash flow statements are a piece of cake. But regular and accurate recording will prove much more challenging as your business grows.

In its place, you can invest in accounting software to eliminate errors in your data entry. Revisit all your accounting procedures and make adjustments to ensure recurring errors in your reports can be eliminated.

Forgetting To Analyze Financial Ratios

Financial ratios are essential to assess your business activity. It will help you pinpoint potential problems before it does considerable damage to your business. For example, suppose your account receivables grow from 25 days to 30 and 35 days over a specific period. In that case, it can signify that some of your customers still have pending cash payments or you must catch up on collection responsibilities.

Calculating financial ratios should be done with the three main financial statements— income statements, balance sheets, and cash flow statements. By doing this, you can spot discrepancies and address potential problems.

How Mistakes Affect Small Businesses

Some mistakes are small and easy to remedy, but some are harder to spot and significantly damage businesses. Here are some consequences that come with erroneous reporting.

  • Incorrect Income Statements: Wrong data in income statements can distort your company's financial position. Under-computing your profit margins can give you the impression your business is performing poorly, while over-computing can mislead you that you are generating your desired profit margin.
  • Incorrect Expense Tracking: Failing to include all your business expenses will mean you miss things under deductible expenses, which will lead to overpaying your taxes.
  • Indication of Fraud: When inconsistencies happen after all your efforts, one thing is sure: it is caused by fraud. Fraud often happens in small businesses since it's not easily detected. However, if it persists for a long time, it can cause the downfall of a business.
record of financial statements

Get Accurate Financial Statements for Small Businesses

Proper bookkeeping is critical to creating accurate financial statements. Fortunately, there is an expert ecommerce accounting service that can help small businesses like yours. Unloop offers all-around accounting services for ecommerce businesses.

For your financial statement needs, Unloop's bookkeeping services have got you covered. Our bookkeeping services include the following:

  • Preparing three primary financial statements: income statements, balance sheets,, and cash flow statements, on a monthly basis.
  • Accrual accounting method for key financial statements.
  • A subscription to accounting software such as QuickBooks and Xero.
  • Filing your taxes and ensuring you pay taxes correctly and on time.

Financial statements say a lot about the overall financial health of your business. Ensuring they are accurate and complete with all essential data points is a top priority. We hope this list of common mistakes helps you be more careful of your errors. 

In addition, if you need professional accounting help, Unloop offers other services such as accounts payables, forecasting, payroll, and taxation. Book a call with us today!

Small Business Financial Statements: Common Mistakes Businesses Should Watch Out For
Watch Now

Your financial statements are one way to know how well your business is doing. However, some things are just inevitable, such as errors. Whether you make financial statements manually or generate them through accounting software, there's always a window for mistakes. That's why preparing financial statements should be handled with extra care.

A small mistake in financial statements can have enormous consequences. However, understanding how things go wrong can help business owners fix and prevent these errors. Let's look into the common mistakes with business reports, so you know what to do when your numbers don't match.

Questions You Need To Ask

Before we start discussing the pitfalls of financial statements, it is also crucial that you know when a problem occurs. Here are some questions you need to ask to help you determine inconsistencies and errors in your business statements.

  • Does your accounting planning system generate timely and accurate financial reports?
  • Do all financial reports come in on a daily, weekly, and monthly basis? 
  • Are all business reports distributed to the appropriate personnel on time?
  • Do the people that receive the financial statements know how to read them and use the information in the report?
  • Do people in your business take the time to read and analyze these reports and utilize the insights to make better business decisions?

If you answered no to one or more of these questions, there might be something wrong in the process or the reports themselves, and you should start addressing them. 

business reports

Common Mistakes in Financial Reporting

Sometimes, no matter how carefully small business owners prepare their reports, mistakes still seep in. Here are mistakes you should look for in different financial statements.

Data Entry Errors

Data entry is the most common and frequent error that could happen in financial statements. Among the most typical mistakes made when entering data are:

  • Declaring input in the wrong account or table. (e.g., putting sales in the expense table).
  • Forgetting or adding a number or a decimal place.
  • Deleting or duplicating an entry.

It's always best to have two copies of your important financial statements to compare them side by side. Furthermore, you can assign personnel to double-check the entries to guarantee that there are no inconsistencies.

Lacking Comparative Data

Some businesses choose to produce single-columned reports, which are short in comparative data. Including the company's current assets and previous vital data points will give a better insight into the business's financial position.

Financial reports such as income statements and expense reports should contain comparative data. It will help you see if your business generated more sales than in other months so you can adjust your strategies. It goes the same for your expenses. It always helps to compare your current and previous expenses to see if you're going overboard to look for ways to save your resources.

Error of Commission

An error of commission happens when you mishandle data and enter it in the wrong place. In this error, you still enter the correct amount. The inconsistency happens when you put it in the wrong category. For example, you make a sale of $100 from your products, and you accidentally put this in your expense column.

You will see a decrease in your inventory but not an increase in your sales which can confuse you when the report comes out. It will also make your expense report higher than usual. Small amounts may seem insignificant, but they may turn your finances into chaos when it's consistently happening.

Failure To Inspect Business Financial Statements Closely

Making financial statements will be pointless if no one takes the time to read and study them. Aside from understanding what the numbers mean for your financial performance, inspecting them to look for suspected errors is also crucial.

To help spot errors in profit and loss statements, balance sheets, and other important business reports, every person that receives the reports should:

  • Possess the knowledge necessary how to make a business financial statement and comprehend the primary financial accounts of a company.
  • Dedicate time to read the statements on a schedule.
  • Identify discrepancies that deviate from your usual outcomes.
  • Immediately find a solution for the discrepancies and address them with people of authority.

If the administration can’t find solutions to the errors in the report, it's best to hire someone who can help you sort out and correct the errors in your financial statements.

Neglecting To Change Procedures To Prevent Errors

Errors in your financial statements will be ever-present if you don't look for the root cause of the errors. Revising some of your accounting procedures can help decrease and eliminate these errors.

For example, most data entry errors, such as omission or mishandling, stems from doing them manually. If you have a small business, manually recording income and expenses or making cash flow statements are a piece of cake. But regular and accurate recording will prove much more challenging as your business grows.

In its place, you can invest in accounting software to eliminate errors in your data entry. Revisit all your accounting procedures and make adjustments to ensure recurring errors in your reports can be eliminated.

Forgetting To Analyze Financial Ratios

Financial ratios are essential to assess your business activity. It will help you pinpoint potential problems before it does considerable damage to your business. For example, suppose your account receivables grow from 25 days to 30 and 35 days over a specific period. In that case, it can signify that some of your customers still have pending cash payments or you must catch up on collection responsibilities.

Calculating financial ratios should be done with the three main financial statements— income statements, balance sheets, and cash flow statements. By doing this, you can spot discrepancies and address potential problems.

How Mistakes Affect Small Businesses

Some mistakes are small and easy to remedy, but some are harder to spot and significantly damage businesses. Here are some consequences that come with erroneous reporting.

  • Incorrect Income Statements: Wrong data in income statements can distort your company's financial position. Under-computing your profit margins can give you the impression your business is performing poorly, while over-computing can mislead you that you are generating your desired profit margin.
  • Incorrect Expense Tracking: Failing to include all your business expenses will mean you miss things under deductible expenses, which will lead to overpaying your taxes.
  • Indication of Fraud: When inconsistencies happen after all your efforts, one thing is sure: it is caused by fraud. Fraud often happens in small businesses since it's not easily detected. However, if it persists for a long time, it can cause the downfall of a business.
record of financial statements

Get Accurate Financial Statements for Small Businesses

Proper bookkeeping is critical to creating accurate financial statements. Fortunately, there is an expert ecommerce accounting service that can help small businesses like yours. Unloop offers all-around accounting services for ecommerce businesses.

For your financial statement needs, Unloop's bookkeeping services have got you covered. Our bookkeeping services include the following:

  • Preparing three primary financial statements: income statements, balance sheets,, and cash flow statements, on a monthly basis.
  • Accrual accounting method for key financial statements.
  • A subscription to accounting software such as QuickBooks and Xero.
  • Filing your taxes and ensuring you pay taxes correctly and on time.

Financial statements say a lot about the overall financial health of your business. Ensuring they are accurate and complete with all essential data points is a top priority. We hope this list of common mistakes helps you be more careful of your errors. 

In addition, if you need professional accounting help, Unloop offers other services such as accounts payables, forecasting, payroll, and taxation. Book a call with us today!

Read more

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.

Amazon, the largest global platform for product sales, offers unparalleled opportunities for ecommerce businesses. But taxes are also an ever-present reality that can lessen their hard-earned income. Can you really drop the drop shipping sales tax on Amazon? Let’s find out.

As an Amazon seller, you have the painstaking responsibility to collect sales tax for every purchase. But there is a silver lining in the form of dropshipping. This business model is one of the few ventures eligible for the coveted Amazon Tax Exemption Program (ATEP).

But how do you achieve tax-exempt status on Amazon via dropshipping?

In the upcoming sections, we will delve into the specifics, equipping you with the knowledge to implement this tax-saving hack.

We will cover everything from the eligibility criteria to the intricacies of sales tax compliance in dropshipping. Get ready to discover practical tips, actionable steps, and expert guidance that will enable you to position yourself for financial success on Amazon.

Understanding Sales Tax in Dropshipping

Embarking on your drop shipping journey means understanding the key parties involved: 

  • you, 
  • your valuable customers, 
  • and the third-party company

Why is that?

The rules and regulations governing Amazon sales tax vary based on the locations of the buyer, seller, and third-party supplier engaged in each transaction. Discerning the precise methods for collecting and remitting sales tax is paramount to avoid legal consequences.

Here are a few important things to consider if you use the dropshipping model for your business:

Sales Tax Nexus

A sales tax nexus refers to the connection between a seller and a state, which requires you to collect and remit sales tax from customers in that state. Factors determining a sales tax nexus include having a physical presence, employees, or storing inventory in a state.

Nexus plays a crucial role in the context of dropshipping. If you have a nexus in a state where the sale occurs, collecting sales tax is paramount, even if you’re working with a third-party dropshipper. On the other hand, you’re exempted from collecting sales tax if you don’t have nexus. 

Retailer-Dropshipper Relationship

In business, a foundational principle holds true: the end customer is responsible for paying the consumption tax, as they directly benefit from the final product. This tax specifically targets consumption, encompassing personal and expenditure purchases.

business flow chart of amazon dropshipping

But when it comes to dropshipping, the sales tax process can get slightly confusing. You might wonder, “Am I obliged to pay tax on the orders I place with my suppliers? Is it the suppliers’ responsibility to collect tax?”

Here’s the good news: You’re not required to pay sales tax on purchases intended for resale. The key lies in a single requirement, which we will delve into in the next section.

Sales Tax Permit: The Answer to Tax-Exemption

If you want to resell products online, you will need a sales tax permit. In this case, it’s not only for collecting and remitting sales tax; this document also helps you apply for the 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 Information

Having 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 the IRS assigns for 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 business not only aids in streamlining financial operations but also serves as concrete evidence of your online business’s legitimacy.
  • Trademark Registration: Trademark registration can help deter others from using your mark and give you the exclusive right to use the mark in commerce. It also acts as evidence of ownership and helps protect your investment in your brand. 

#2. Apply to the State Department of Revenue Website

The State Department of Revenue is a vital government institution entrusted with tax collection and enforcement of tax laws. Each state operates its own Department of Revenue, overseeing taxation matters within its jurisdiction. 

Here are things to remember about registering your online business:

a step by step guide on how to register for a sales tax permit for drop shipping sales tax exemption


Await confirmation and be patient about the issuance of your sales tax permit. Following these steps establishes your commitment to operating within legal frameworks.

How to Get Tax Exempt on Amazon in Minutes 

Now that you have your sales tax permit, you're one step closer to getting your tax exemption status approved.

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

Online sellers under US law are required to collect sales tax in states with a physical presence or nexus. Amazon has used this loophole to its advantage, systematically avoiding collecting sales tax in most states.

Dropshippers can get Amazon tax exemption from some states, so be sure to check them before applying.

States Subject to Tax But Can Apply For Tax Exemption
AlabamaNebraska
ArizonaNevada
ArkansasNew Jersey
CaliforniaNew Mexico
ColoradoNew York
ConnecticutNorth Carolina
District of ColumbiaNorth Dakota
FloridaOhio
GeorgiaOklahoma
HawaiiPennsylvania
IdahoPuerto Rico
IllinoisRhode Island
IndianaSouth Carolina
IowaSouth Dakota
KansasTennessee
KentuckyTexas
LouisianaUtah
MaineVermont
MarylandVirginia
MassachusettsWashington
MichiganWest Virginia
MinnesotaWisconsin
MississippiWyoming
Missouri

Source: Amazon

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

Not Included in Amazon Business Tax-Exempt
Alaska (only some municipal governments)New Hampshire
DelawareOregon
Montana

#2. Fill Up Your Business Info 

Once you have determined the states in which you are seeking Amazon tax exemption, input the requested business information. This may include the business name and the type of products you're selling. 

This step entails submitting essential documents such as your sales tax permit and other important tax-exempt records.

#3. Get an Amazon Sales Tax Exemption Certificate

Sometimes, having a sales tax permit means having a resale certificate. But if you’re not confident about your eligibility, you must focus on obtaining exemption certificates. 

  • The rules for resale certificates vary by state. Some only accept multi-state tax certificates, which provide a comprehensive sales tax exemption certificate recognized by 38 states. 
  • There’s also Streamlined Sales and Use Tax Agreement (SSUTA), where you can benefit from a single exemption certificate if your business is registered under this program.

When you purchase from the supplier, you must provide them with your complete exemption certificate. Then, the supplier will not charge you sales tax.

Note: Some states may insist on their registration number on a separate form or on the MTC form itself for you to get a valid resale certificate. 

Don’t forget to double-check everything after you sign up for a resale certificate. Once you click “Activate Certificates, ” your Amazon tax-exempt status will take effect in 15 minutes. Meanwhile, Amazon Business will upload the Amazon Tax Exemption Certificates within 24 hours. 

Optimize Your Sales Tax Obligations With Unloop

Collecting, remitting, or paying sales tax is the bare minimum requirement in Amazon, but you also need to stay compliant with rules and regulations. Fortunately, sellers can now apply for sales tax-exempt status.
Unloop can help you through the process and ensure everything is filed correctly so you can continue earning profits without penalty. Are you ready to get tax-free income? Book a call today, and let’s see what Unloop can do for you!

Get Tax-Exempt With the Right Drop Shipping Sales Tax Strategy
Watch Now

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.

Amazon, the largest global platform for product sales, offers unparalleled opportunities for ecommerce businesses. But taxes are also an ever-present reality that can lessen their hard-earned income. Can you really drop the drop shipping sales tax on Amazon? Let’s find out.

As an Amazon seller, you have the painstaking responsibility to collect sales tax for every purchase. But there is a silver lining in the form of dropshipping. This business model is one of the few ventures eligible for the coveted Amazon Tax Exemption Program (ATEP).

But how do you achieve tax-exempt status on Amazon via dropshipping?

In the upcoming sections, we will delve into the specifics, equipping you with the knowledge to implement this tax-saving hack.

We will cover everything from the eligibility criteria to the intricacies of sales tax compliance in dropshipping. Get ready to discover practical tips, actionable steps, and expert guidance that will enable you to position yourself for financial success on Amazon.

Understanding Sales Tax in Dropshipping

Embarking on your drop shipping journey means understanding the key parties involved: 

  • you, 
  • your valuable customers, 
  • and the third-party company

Why is that?

The rules and regulations governing Amazon sales tax vary based on the locations of the buyer, seller, and third-party supplier engaged in each transaction. Discerning the precise methods for collecting and remitting sales tax is paramount to avoid legal consequences.

Here are a few important things to consider if you use the dropshipping model for your business:

Sales Tax Nexus

A sales tax nexus refers to the connection between a seller and a state, which requires you to collect and remit sales tax from customers in that state. Factors determining a sales tax nexus include having a physical presence, employees, or storing inventory in a state.

Nexus plays a crucial role in the context of dropshipping. If you have a nexus in a state where the sale occurs, collecting sales tax is paramount, even if you’re working with a third-party dropshipper. On the other hand, you’re exempted from collecting sales tax if you don’t have nexus. 

Retailer-Dropshipper Relationship

In business, a foundational principle holds true: the end customer is responsible for paying the consumption tax, as they directly benefit from the final product. This tax specifically targets consumption, encompassing personal and expenditure purchases.

business flow chart of amazon dropshipping

But when it comes to dropshipping, the sales tax process can get slightly confusing. You might wonder, “Am I obliged to pay tax on the orders I place with my suppliers? Is it the suppliers’ responsibility to collect tax?”

Here’s the good news: You’re not required to pay sales tax on purchases intended for resale. The key lies in a single requirement, which we will delve into in the next section.

Sales Tax Permit: The Answer to Tax-Exemption

If you want to resell products online, you will need a sales tax permit. In this case, it’s not only for collecting and remitting sales tax; this document also helps you apply for the 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 Information

Having 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 the IRS assigns for 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 business not only aids in streamlining financial operations but also serves as concrete evidence of your online business’s legitimacy.
  • Trademark Registration: Trademark registration can help deter others from using your mark and give you the exclusive right to use the mark in commerce. It also acts as evidence of ownership and helps protect your investment in your brand. 

#2. Apply to the State Department of Revenue Website

The State Department of Revenue is a vital government institution entrusted with tax collection and enforcement of tax laws. Each state operates its own Department of Revenue, overseeing taxation matters within its jurisdiction. 

Here are things to remember about registering your online business:

a step by step guide on how to register for a sales tax permit for drop shipping sales tax exemption


Await confirmation and be patient about the issuance of your sales tax permit. Following these steps establishes your commitment to operating within legal frameworks.

How to Get Tax Exempt on Amazon in Minutes 

Now that you have your sales tax permit, you're one step closer to getting your tax exemption status approved.

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

Online sellers under US law are required to collect sales tax in states with a physical presence or nexus. Amazon has used this loophole to its advantage, systematically avoiding collecting sales tax in most states.

Dropshippers can get Amazon tax exemption from some states, so be sure to check them before applying.

States Subject to Tax But Can Apply For Tax Exemption
AlabamaNebraska
ArizonaNevada
ArkansasNew Jersey
CaliforniaNew Mexico
ColoradoNew York
ConnecticutNorth Carolina
District of ColumbiaNorth Dakota
FloridaOhio
GeorgiaOklahoma
HawaiiPennsylvania
IdahoPuerto Rico
IllinoisRhode Island
IndianaSouth Carolina
IowaSouth Dakota
KansasTennessee
KentuckyTexas
LouisianaUtah
MaineVermont
MarylandVirginia
MassachusettsWashington
MichiganWest Virginia
MinnesotaWisconsin
MississippiWyoming
Missouri

Source: Amazon

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

Not Included in Amazon Business Tax-Exempt
Alaska (only some municipal governments)New Hampshire
DelawareOregon
Montana

#2. Fill Up Your Business Info 

Once you have determined the states in which you are seeking Amazon tax exemption, input the requested business information. This may include the business name and the type of products you're selling. 

This step entails submitting essential documents such as your sales tax permit and other important tax-exempt records.

#3. Get an Amazon Sales Tax Exemption Certificate

Sometimes, having a sales tax permit means having a resale certificate. But if you’re not confident about your eligibility, you must focus on obtaining exemption certificates. 

  • The rules for resale certificates vary by state. Some only accept multi-state tax certificates, which provide a comprehensive sales tax exemption certificate recognized by 38 states. 
  • There’s also Streamlined Sales and Use Tax Agreement (SSUTA), where you can benefit from a single exemption certificate if your business is registered under this program.

When you purchase from the supplier, you must provide them with your complete exemption certificate. Then, the supplier will not charge you sales tax.

Note: Some states may insist on their registration number on a separate form or on the MTC form itself for you to get a valid resale certificate. 

Don’t forget to double-check everything after you sign up for a resale certificate. Once you click “Activate Certificates, ” your Amazon tax-exempt status will take effect in 15 minutes. Meanwhile, Amazon Business will upload the Amazon Tax Exemption Certificates within 24 hours. 

Optimize Your Sales Tax Obligations With Unloop

Collecting, remitting, or paying sales tax is the bare minimum requirement in Amazon, but you also need to stay compliant with rules and regulations. Fortunately, sellers can now apply for sales tax-exempt status.
Unloop can help you through the process and ensure everything is filed correctly so you can continue earning profits without penalty. Are you ready to get tax-free income? Book a call today, and let’s see what Unloop can do for you!

Read more

Business accounting involves evaluating the past performance of your business and determining how well it is thriving. Peeking into your business's future performance is equally essential. Financial forecasting methods come into play here, enabling you to anticipate challenges and plan accordingly, ensuring a smooth business operation.

Unfortunately, many small business owners don't pay much attention to their organization’s future performance. But forecasting is a key factor that makes a venture successful. So let Unloop help you look closely at business forecasting, its importance for small businesses, and how to do accurate forecasts using different methods.

What is Business Forecasting?

Forecasting is looking into your business's historical and present financial data and market trends to predict its future financial performance. Forecasting can predict sales and potential expenses for a specific period. Due to the financial aspect, many business owners confuse forecasting with budgeting. 

They go hand in hand to help your business grow, but they are very different. A forecast predicts your company's future revenues, while budget forecasting involves allocating money to different business units to help you reach your revenue goals.

Why is Financial Forecasting Important?

Forecasting is more about business financial planning. There are several reasons forecasting is essential to a business. 

  • First, accurate financial forecasts help you make informed cash flow, inventory, and financing decisions. 
  • Forecasting also gives you an accurate picture of future income and helps you identify problems early on.
  • Lastly, accurate sales forecasting provides insights into the market conditions, so you can go head-to-head and stay on top of your competitors.

Forecasting is an ongoing exercise. Adapt your assumptions as your business evolves.

Financial Forecasting Methods for Every Business

Many factors can affect your business, some of which you cannot control. However, financial modeling allows you to see potential scenarios and be more prepared when they happen. There are two types of forecasting methods: qualitative and quantitative methods.

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

An expert presenting a graph model sketched on a small whiteboard in front of a diverse audience sitting around a boardroom table

Source: https://www.pexels.com/

Qualitative Forecasting Methods

Qualitative forecasting bases its predictions on experts' and customers' responses rather than using historical data. This method is valuable for new single or multi-channel ecommerce businesses and traditional businesses with no operational data, to begin with.

Here are some examples of qualitative methods.

Expert's Opinion

An expert's opinion involves asking an individual or group of experts about the subject matter, and they provide predictions according to their knowledge. An expert should offer opinions without bias to make the most accurate prediction possible. From there, business executives can evaluate and decide if they will push through 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 opinion to follow. They can rely solely on experts for future planning or try 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, metrics analyses 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 much time, effort, and resources to deploy. However, you'll get the most accurate financial forecast if done correctly.

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 to gain insight. But instead of giving them the freedom to make predictions based on their knowledge, they must 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 adjusting 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 some industries 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 like production levels and inventory prioritization to get more sales.
  • Construction: Qualitative 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 and increase production accordingly.
A pair of male hands holding a smartphone that projects a line graph of trends on its screen.

Source: https://www.pexels.com/

Quantitative Forecasting Methods

Quantitative financial forecasting is a data-driven forecasting method that businesses use to make accurate predictions for big decisions. This method uses historical financial forecasting 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 key financial forecasting methods using the quantitative approach.

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, usually based on your past performance.

The straight-line method predicts your business's future by calculating your previous and projected performance. Here’s an 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

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. This method suggests that your business performance will be the same as in the past. So if your business made $500,000 in sales last year, your business would generate the same amount this year.

This prediction does not consider dependent and independent variables, seasonal trends, or other factors that could affect your business. It 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. 

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)

Once you get the projected seasonal index scores, you can create 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 to 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 the following:

  • 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.

Other Forecasting Methods

Small businesses have various financial forecasting methods to choose from to predict their future financial performance. While budget forecasting aims to estimate future income and expenses, other popular methods include multiple linear regression, moving average forecasting methods, and simple linear regression.

Simple Linear Regression

Simple linear regression is a forecasting method for analyzing independent and dependent variables. It's a simple way to project company performance trends and inform business decisions in the near or far future.

Multiple Linear Regression

Multiple linear regression is a more complex version of the simple linear regression. It uses one dependent variable against two or more dependent or independent variables. 

Moving Average Forecasting Method

The moving average forecasting method is a simple technique that involves averaging data points from a specified period. This method is often used to forecast short-term trends in financial data, such as sales or revenue.

Financial Forecasting Tools

Financial forecasting is a crucial aspect of any business, several tools are available to help with the process. In this section, we will discuss three primary financial forecasting tools: Excel, financial forecasting software, and the role of executives in financial forecasting.

Excel

Excel is a widely used tool for financial forecasting due to its flexibility and versatility. It allows users to do financial modeling, simple to complex formulas, and churn out forecasts. Excel is also flexible and allows users to tailor their forecasting graphs models based on their business needs.

One of the best things about using Excel for financial forecasting is its ease of use. There's little to no training involved, especially for most finance professionals, and it's widely available and affordable, making it a cost-effective solution for businesses of all sizes.

Financial Forecasting Software

In recent years, financial forecasting software has become increasingly popular. These tools are designed to streamline the forecasting process without sacrificing accuracy. Many financial forecasting software solutions offer advanced features such as real-time data integration, scenario modeling, and predictive analytics.

One of the key benefits of using financial forecasting software is its ability to automate many of the manual tasks associated with financial forecasting. This can save businesses resources, giving them more space to focus on the crucial aspects of their business.

Be Future Ready With Unloop

There is no doubt that business forecasting methods help administrators and stakeholders make better financial 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 making business predictions, Unloop offers forecasting for businesses. Our service gives you a tailor-made forecasting model to drive your business to success. Get access to top-tier features, from recurring projections to insightful commentary. So what are you waiting for? Book a call with us today and learn more about our forecasting services.

Financial Forecasting Methods To Help Shape Your Business's Future Success
Watch Now

Business accounting involves evaluating the past performance of your business and determining how well it is thriving. Peeking into your business's future performance is equally essential. Financial forecasting methods come into play here, enabling you to anticipate challenges and plan accordingly, ensuring a smooth business operation.

Unfortunately, many small business owners don't pay much attention to their organization’s future performance. But forecasting is a key factor that makes a venture successful. So let Unloop help you look closely at business forecasting, its importance for small businesses, and how to do accurate forecasts using different methods.

What is Business Forecasting?

Forecasting is looking into your business's historical and present financial data and market trends to predict its future financial performance. Forecasting can predict sales and potential expenses for a specific period. Due to the financial aspect, many business owners confuse forecasting with budgeting. 

They go hand in hand to help your business grow, but they are very different. A forecast predicts your company's future revenues, while budget forecasting involves allocating money to different business units to help you reach your revenue goals.

Why is Financial Forecasting Important?

Forecasting is more about business financial planning. There are several reasons forecasting is essential to a business. 

  • First, accurate financial forecasts help you make informed cash flow, inventory, and financing decisions. 
  • Forecasting also gives you an accurate picture of future income and helps you identify problems early on.
  • Lastly, accurate sales forecasting provides insights into the market conditions, so you can go head-to-head and stay on top of your competitors.

Forecasting is an ongoing exercise. Adapt your assumptions as your business evolves.

Financial Forecasting Methods for Every Business

Many factors can affect your business, some of which you cannot control. However, financial modeling allows you to see potential scenarios and be more prepared when they happen. There are two types of forecasting methods: qualitative and quantitative methods.

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

An expert presenting a graph model sketched on a small whiteboard in front of a diverse audience sitting around a boardroom table

Source: https://www.pexels.com/

Qualitative Forecasting Methods

Qualitative forecasting bases its predictions on experts' and customers' responses rather than using historical data. This method is valuable for new single or multi-channel ecommerce businesses and traditional businesses with no operational data, to begin with.

Here are some examples of qualitative methods.

Expert's Opinion

An expert's opinion involves asking an individual or group of experts about the subject matter, and they provide predictions according to their knowledge. An expert should offer opinions without bias to make the most accurate prediction possible. From there, business executives can evaluate and decide if they will push through 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 opinion to follow. They can rely solely on experts for future planning or try 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, metrics analyses 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 much time, effort, and resources to deploy. However, you'll get the most accurate financial forecast if done correctly.

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 to gain insight. But instead of giving them the freedom to make predictions based on their knowledge, they must 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 adjusting 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 some industries 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 like production levels and inventory prioritization to get more sales.
  • Construction: Qualitative 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 and increase production accordingly.
A pair of male hands holding a smartphone that projects a line graph of trends on its screen.

Source: https://www.pexels.com/

Quantitative Forecasting Methods

Quantitative financial forecasting is a data-driven forecasting method that businesses use to make accurate predictions for big decisions. This method uses historical financial forecasting 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 key financial forecasting methods using the quantitative approach.

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, usually based on your past performance.

The straight-line method predicts your business's future by calculating your previous and projected performance. Here’s an 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

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. This method suggests that your business performance will be the same as in the past. So if your business made $500,000 in sales last year, your business would generate the same amount this year.

This prediction does not consider dependent and independent variables, seasonal trends, or other factors that could affect your business. It 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. 

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)

Once you get the projected seasonal index scores, you can create 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 to 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 the following:

  • 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.

Other Forecasting Methods

Small businesses have various financial forecasting methods to choose from to predict their future financial performance. While budget forecasting aims to estimate future income and expenses, other popular methods include multiple linear regression, moving average forecasting methods, and simple linear regression.

Simple Linear Regression

Simple linear regression is a forecasting method for analyzing independent and dependent variables. It's a simple way to project company performance trends and inform business decisions in the near or far future.

Multiple Linear Regression

Multiple linear regression is a more complex version of the simple linear regression. It uses one dependent variable against two or more dependent or independent variables. 

Moving Average Forecasting Method

The moving average forecasting method is a simple technique that involves averaging data points from a specified period. This method is often used to forecast short-term trends in financial data, such as sales or revenue.

Financial Forecasting Tools

Financial forecasting is a crucial aspect of any business, several tools are available to help with the process. In this section, we will discuss three primary financial forecasting tools: Excel, financial forecasting software, and the role of executives in financial forecasting.

Excel

Excel is a widely used tool for financial forecasting due to its flexibility and versatility. It allows users to do financial modeling, simple to complex formulas, and churn out forecasts. Excel is also flexible and allows users to tailor their forecasting graphs models based on their business needs.

One of the best things about using Excel for financial forecasting is its ease of use. There's little to no training involved, especially for most finance professionals, and it's widely available and affordable, making it a cost-effective solution for businesses of all sizes.

Financial Forecasting Software

In recent years, financial forecasting software has become increasingly popular. These tools are designed to streamline the forecasting process without sacrificing accuracy. Many financial forecasting software solutions offer advanced features such as real-time data integration, scenario modeling, and predictive analytics.

One of the key benefits of using financial forecasting software is its ability to automate many of the manual tasks associated with financial forecasting. This can save businesses resources, giving them more space to focus on the crucial aspects of their business.

Be Future Ready With Unloop

There is no doubt that business forecasting methods help administrators and stakeholders make better financial 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 making business predictions, Unloop offers forecasting for businesses. Our service gives you a tailor-made forecasting model to drive your business to success. Get access to top-tier features, from recurring projections to insightful commentary. So what are you waiting for? Book a call with us today and learn more about our forecasting services.

Read more

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.

benefits of financial projections

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.

financial forecasting

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!

Financial Planning and Forecasting for Newly Launched Businesses
Watch Now

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.

benefits of financial projections

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.

financial forecasting

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!

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It is impossible to determine your business's annual revenue to the exact dollar. However, high-quality revenue forecasting is necessary for every business. Forecasting allows your business to respond to challenges and prevent significant losses from happening.

Revenue forecasting is a difficult task, and if you are not well-versed in how to forecast revenue, many challenges will hinder you from creating an accurate revenue forecast for your business. Understanding where things could go wrong will help you improve your forecasting results and overcome potential difficulties.

5 Major Challenges To Forecast Revenue

A clear picture of the average revenue helps businesses make strategies to cater towards their growth. However, many factors affect the success of the forecasting process. Here are the biggest challenges in revenue forecasting and how to solve them.

Inadequate and Incorrect Data Points

The foundation of revenue forecasts is data points. Inadequate or worse, incorrect data basically makes your revenue projections useless. If something is inconsistent about your forecasted revenue, it's always best to go back to the data you gathered.

Obviously, improving your data gathering is the solution to this challenge. But how do you do it? Investing in forecasting software is the best way to eliminate the dangers of human error when gathering data for forecasts. If possible, you can assign a dedicated team to make sure all the data you have are valid.

Forecasting Period Range

You can project how much revenue you will have based on a specific period. For some businesses, annual forecasting is the most common way to see future revenue. However, you can make revenue predictions for five or even ten years.

The challenge starts with forecasting range. The shorter the time period, the more accurate the forecast you can get. Longer ones are more challenging since several unforeseen factors can affect your business revenue.

It's up to the business owner to decide the time period. But to avoid inaccurate forecasting, we recommend sticking to annual forecasts so that predictions reflect expectations and realities.

Accuracy of Past Data

Historical data is vital to create a revenue forecast. For example, your business has grown consistently at 10% in the last five years. You can predict that your business will still grow at 10% in the following years.

However, if your past performance varies, using historical data is useless, and you may want to try other revenue forecasting methods. Furthermore, using past data is not available for start-ups. In some situations, past data won't affect forecast revenues because of several external factors. Always take note of considerations when using historical data.

Wrong Computations

In plain view, wrong computations are easy to fix and prevent. You'll be surprised how many revenue forecasts go wrong because of simple arithmetic mistakes. Wrong computation stems from the lack of attention to detail. If you're using software or Excel sheets, double-check all data entries and formulas to guarantee accurate results.

Finding the Right Forecasting Method

A business can use several forecasting methods to determine their company's revenue. Choosing a financial modeling method is vital for an accurate prediction, and most business owners fail to consider the data they have at hand before going through the forecasting process.

There are four primary forecasting methods:

  • Quantitative: This method is best for short-term forecasting. It uses numeric data to predict a company's revenue for a specific period.
  • Qualitative: This method uses market research to predict a business's future. It also integrates human opinion, which creates bias.
  • Time Series Analysis: This method uses data over time and statistical reasoning to forecast.
  • Indicator Approach: This method uses vital variables and metrics like GDP to make a forecast.

Choosing the correct method starts with studying underlying patterns in your earnings. Don't be tempted to go the easy and short way if you want an accurate forecast.

forecasting professional services

Benefits of Accurate Business Forecasting

Not all businesses invest in forecasting, but a growing business should take advantage of forecasting to continue growing and make informed decisions for the improvement of the company.

Here are some benefits of proper forecasting for your business.

Continued Growth

In business, there's always room for improvement. When you do forecasting, you can see which area to improve to propel your business to success. Furthermore, forecasting can identify problems early before they can cause irreversible damage to businesses.

According to research, businesses that do regular and correct forecasting are 10% more likely to grow and outcompete their direct rivals.

Quantifies Your Business Health

It's one thing to say that your business is doing great but seeing the number gives you a clearer picture of how well you are doing. For example, your business has had a stable income of $300,000 annually in the past years. Your current revenue forecast shows that by the end of the year, your sales forecast will go up to $500,000.

The numbers show how many resources you can use for other business operations. Likewise, if your sales forecast drops, you can see precisely the deficit, and you can strategize how to bring your numbers back up.

Helps Achieve Your Business Goals

It's not enough to know that you want high sales, you have to identify the actual sales you want to achieve, and forecasting can provide you with the exact figures you want to reach. According to forecasting science, 97% of businesses who do forecasting reach their sales quota.

In contrast, for businesses that rely only on strategies and not maximizing forecasting, only 55% of them reach their sales goal by the end of the year.

Forecasting Helps Understand Customers

Revenue forecasting helps businesses attain sales efficiency by giving an insight into your customer's behaviour. By predicting your future sales, you can adjust your prices accordingly, roll out your advertising, and make time for product development.

Forecasting can show the period when your sales will spike. You can maximize the information to increase your inventory and generate more sales for your business.

Efficient Cash Flow Management

One of the reasons you should do forecasting is to help you manage your cash flow efficiently. The forecast can help you plan your payments and avoid delays and penalties. It also lets you see when customers' payments are coming into your business, so you strategically allocate your business resources.

Efficient cash flow management builds trust between your employee and suppliers. It can also help you negotiate properly when you need credit for paying your personnel or new business ventures.

forecasting revenue growth for 2023

Start Forecasting Your Success With Unloop

If you don't have experience with forecasting, you'll find it complicated to forecast revenue. Fortunately, Unloop offers forecasting services for small businesses looking to scale and assess their financial health.

Our forecasting services include:

  • Your business's revenue and cost of goods (CoGS) down to every dollar to ensure you have a complete picture of your finances.
  • Identifying pain points early on in your business so you can plan how to address them immediately.
  • Making changes as we go along the way. We update our predictions to give the most accurate forecast results as your business grows.
  • A team of professionals to guarantee that your finances are in good hands.

Forecasting revenue is essential if you want to continue scaling your business. However, forecasting is on the complicated side of accounting. We hope this blog post helps you plan better for forecasting.

If you need more accounting services, Unloop offers bookkeeping, accounts payable, and payroll. Book a call with us and talk to an expert for free!

Challenges and Solutions to Forecasting Revenue
Watch Now

It is impossible to determine your business's annual revenue to the exact dollar. However, high-quality revenue forecasting is necessary for every business. Forecasting allows your business to respond to challenges and prevent significant losses from happening.

Revenue forecasting is a difficult task, and if you are not well-versed in how to forecast revenue, many challenges will hinder you from creating an accurate revenue forecast for your business. Understanding where things could go wrong will help you improve your forecasting results and overcome potential difficulties.

5 Major Challenges To Forecast Revenue

A clear picture of the average revenue helps businesses make strategies to cater towards their growth. However, many factors affect the success of the forecasting process. Here are the biggest challenges in revenue forecasting and how to solve them.

Inadequate and Incorrect Data Points

The foundation of revenue forecasts is data points. Inadequate or worse, incorrect data basically makes your revenue projections useless. If something is inconsistent about your forecasted revenue, it's always best to go back to the data you gathered.

Obviously, improving your data gathering is the solution to this challenge. But how do you do it? Investing in forecasting software is the best way to eliminate the dangers of human error when gathering data for forecasts. If possible, you can assign a dedicated team to make sure all the data you have are valid.

Forecasting Period Range

You can project how much revenue you will have based on a specific period. For some businesses, annual forecasting is the most common way to see future revenue. However, you can make revenue predictions for five or even ten years.

The challenge starts with forecasting range. The shorter the time period, the more accurate the forecast you can get. Longer ones are more challenging since several unforeseen factors can affect your business revenue.

It's up to the business owner to decide the time period. But to avoid inaccurate forecasting, we recommend sticking to annual forecasts so that predictions reflect expectations and realities.

Accuracy of Past Data

Historical data is vital to create a revenue forecast. For example, your business has grown consistently at 10% in the last five years. You can predict that your business will still grow at 10% in the following years.

However, if your past performance varies, using historical data is useless, and you may want to try other revenue forecasting methods. Furthermore, using past data is not available for start-ups. In some situations, past data won't affect forecast revenues because of several external factors. Always take note of considerations when using historical data.

Wrong Computations

In plain view, wrong computations are easy to fix and prevent. You'll be surprised how many revenue forecasts go wrong because of simple arithmetic mistakes. Wrong computation stems from the lack of attention to detail. If you're using software or Excel sheets, double-check all data entries and formulas to guarantee accurate results.

Finding the Right Forecasting Method

A business can use several forecasting methods to determine their company's revenue. Choosing a financial modeling method is vital for an accurate prediction, and most business owners fail to consider the data they have at hand before going through the forecasting process.

There are four primary forecasting methods:

  • Quantitative: This method is best for short-term forecasting. It uses numeric data to predict a company's revenue for a specific period.
  • Qualitative: This method uses market research to predict a business's future. It also integrates human opinion, which creates bias.
  • Time Series Analysis: This method uses data over time and statistical reasoning to forecast.
  • Indicator Approach: This method uses vital variables and metrics like GDP to make a forecast.

Choosing the correct method starts with studying underlying patterns in your earnings. Don't be tempted to go the easy and short way if you want an accurate forecast.

forecasting professional services

Benefits of Accurate Business Forecasting

Not all businesses invest in forecasting, but a growing business should take advantage of forecasting to continue growing and make informed decisions for the improvement of the company.

Here are some benefits of proper forecasting for your business.

Continued Growth

In business, there's always room for improvement. When you do forecasting, you can see which area to improve to propel your business to success. Furthermore, forecasting can identify problems early before they can cause irreversible damage to businesses.

According to research, businesses that do regular and correct forecasting are 10% more likely to grow and outcompete their direct rivals.

Quantifies Your Business Health

It's one thing to say that your business is doing great but seeing the number gives you a clearer picture of how well you are doing. For example, your business has had a stable income of $300,000 annually in the past years. Your current revenue forecast shows that by the end of the year, your sales forecast will go up to $500,000.

The numbers show how many resources you can use for other business operations. Likewise, if your sales forecast drops, you can see precisely the deficit, and you can strategize how to bring your numbers back up.

Helps Achieve Your Business Goals

It's not enough to know that you want high sales, you have to identify the actual sales you want to achieve, and forecasting can provide you with the exact figures you want to reach. According to forecasting science, 97% of businesses who do forecasting reach their sales quota.

In contrast, for businesses that rely only on strategies and not maximizing forecasting, only 55% of them reach their sales goal by the end of the year.

Forecasting Helps Understand Customers

Revenue forecasting helps businesses attain sales efficiency by giving an insight into your customer's behaviour. By predicting your future sales, you can adjust your prices accordingly, roll out your advertising, and make time for product development.

Forecasting can show the period when your sales will spike. You can maximize the information to increase your inventory and generate more sales for your business.

Efficient Cash Flow Management

One of the reasons you should do forecasting is to help you manage your cash flow efficiently. The forecast can help you plan your payments and avoid delays and penalties. It also lets you see when customers' payments are coming into your business, so you strategically allocate your business resources.

Efficient cash flow management builds trust between your employee and suppliers. It can also help you negotiate properly when you need credit for paying your personnel or new business ventures.

forecasting revenue growth for 2023

Start Forecasting Your Success With Unloop

If you don't have experience with forecasting, you'll find it complicated to forecast revenue. Fortunately, Unloop offers forecasting services for small businesses looking to scale and assess their financial health.

Our forecasting services include:

  • Your business's revenue and cost of goods (CoGS) down to every dollar to ensure you have a complete picture of your finances.
  • Identifying pain points early on in your business so you can plan how to address them immediately.
  • Making changes as we go along the way. We update our predictions to give the most accurate forecast results as your business grows.
  • A team of professionals to guarantee that your finances are in good hands.

Forecasting revenue is essential if you want to continue scaling your business. However, forecasting is on the complicated side of accounting. We hope this blog post helps you plan better for forecasting.

If you need more accounting services, Unloop offers bookkeeping, accounts payable, and payroll. Book a call with us and talk to an expert for free!

Read more

There are a lot of reasons why bookkeeping and accounting are business essentials. Through proper financial management, you can track all the money coming in and out of your account. With all this data, you can calculate many details about your business finances, including your net income.

Net income may be a single detail in an income statement, but it means a lot for your business. Hence, you must know all about it.

In this blog post, we’ll dive deeper into the different methods you can use to calculate net income, why you should always be aware of this number, and what you can do after knowing your net income. Let’s go!

How To Calculate Net Income

The basic formula for calculating net income is Income - All Company Expenses. Though this formula is straightforward, what makes it challenging is the details you need to track, as expenses include the costs of goods sold, selling costs, operating and administrative expenses, asset depreciation, and tax payments. The good news is that methods are available to make your tracking and calculations easier and more accurate.

Automated Net Income Formulas

Bookkeeping and accounting have evolved from using Excel sheets to using automated software like QuickBooks, Xero, and Sage50 cloud. Although Excel sheets are still used today, it is more efficient to invest in software as they are less prone to errors. 

A bookkeeping and accounting software automates data acquisition from channels like ecommerce platforms, payment gateways, banks, and other applications. With software, there’s no need for manual input which minimizes errors.

Software also calculates automatically through built-in formulas, unlike Excel sheets where bookkeepers or accountants still need to add formulas to get results. Though the formulas may be correct, any error in linking cells can make the process more complicated and error-prone.

Through a software’s dashboard, you can easily see updates about your net income and many details about your business finances. You can also customize reports and generate them in just a few clicks.

Delegated to Experts

You can also delegate net income calculations to experts. Many bookkeeping and accounting firms have experienced professionals to handle your account. You can skip the hassle of learning the ropes of using software and let them do it for you as they use the same reliable tools. You’ll also have more time to manage your business with the peace of mind that qualified professionals are handling your books and accounts.

Aside from calculating net income, trained bookkeepers and accountants can also generate essential accounting reports like balance sheets, income statements, and cash flow statements to calculate net income. They know how to calculate net income from a balance sheet and other reports efficiently. 

With experts on board, your only tasks will be to check the accuracy of the details on the books, check reports, and use the data you get in decision-making for your company.

how to calculate net income

Reasons To Calculate Net Income

You already know that net income comes from deducting all your business expenses from your company’s income. Now, see the different reasons why you should always get the net income calculation correctly, and why you should give importance to this detail. What does net income signify, and what does it say about your business? 

Visibility on Gross Income

In computing net income, you’ll primarily see your business’s gross income. You’ll know whether you are hitting your sales target or not. If you see positive numbers, you’ll know your strategies are working. You can identify the best practices, so you can keep on doing them. On the other hand, if you see that you are not hitting your sales goals, you can strategize to change the situation.

Knowledge of Operating Expenses and More

Part of the reason you are not getting the net income you are aiming for is high expenses. Look into the details of your expenses and pinpoint the culprit of your high expenditures. See whether there are ways to lower costs to increase net income.

Realize Company Profitability

The net income reflects profitability, so it must be every business owner’s goal to see positive numbers. Though it takes work to turn your business into a profitable one, the efforts are worth it because it is through profitability that you can ensure that your business thrives.

Data for Investors

Since net income reflects your company’s profitability, it is among the first things investors will look at. Investors help grow your business through their investment, but they will only do so when they see that your business can maintain a stable income. A stable income shows that when they invest in you, their investments will return and grow.

Calculate Shareholders’ Earnings

If your business has shareholders, you’ll get their share from the net income. This share is called the dividend. You can agree on how often to send dividends, but it is common practice to send out dividends twice a year. The higher the net income, the higher the amount you and your shareholders will get. You and the shareholders have the option to reinvest this money to fuel the business’s growth, or spend it outside the company. 

calculating net income

Strategies To Spend Your Company’s Money Wisely

You’ve invested time, money, and effort to get the net income you’ve incurred, so it is just right to plan how you’ll spend it. To make the most of that money, these are the different things you can do.

  • Grow your savings: You can save the money, so when the rainy days come and sales are low, you’ll have the money to manage expenses.
  • Scale your business: You can reinvest your money to scale your company. There are many ways to do this, like improving your office, upgrading the tools you use for operations, or broadening the products you offer.
  • Pay your debts: Debts, especially those with high-interest rates, can hurt your business, so be on top of them by paying on time. You can also pay them off completely if your income allows it.
  • Reward yourself and your team: Give back to yourself, as you’ve been working hard to grow your business. You can do this by paying yourself. You can also give rewards to your team through bonuses and other incentives. 

Get Assistance From Unloop

Running a business means a lot of tasks to think about, including monitoring your business finances and net income. Net income reflects your company’s profitability which investors look at. It is also what you need to check in order to determine whether your business plans are working or not. And, of course, your net income defines your business success.If you are looking for help in net income calculation or bookkeeping to track all of your income and expenses, you can partner with us! We at Unloop have a team of experts to handle your financial tracking. Contact us now so we can discuss the details of our services and offers with you.

Calculate Net Income and Spend Your Company’s Money Wisely
Watch Now

There are a lot of reasons why bookkeeping and accounting are business essentials. Through proper financial management, you can track all the money coming in and out of your account. With all this data, you can calculate many details about your business finances, including your net income.

Net income may be a single detail in an income statement, but it means a lot for your business. Hence, you must know all about it.

In this blog post, we’ll dive deeper into the different methods you can use to calculate net income, why you should always be aware of this number, and what you can do after knowing your net income. Let’s go!

How To Calculate Net Income

The basic formula for calculating net income is Income - All Company Expenses. Though this formula is straightforward, what makes it challenging is the details you need to track, as expenses include the costs of goods sold, selling costs, operating and administrative expenses, asset depreciation, and tax payments. The good news is that methods are available to make your tracking and calculations easier and more accurate.

Automated Net Income Formulas

Bookkeeping and accounting have evolved from using Excel sheets to using automated software like QuickBooks, Xero, and Sage50 cloud. Although Excel sheets are still used today, it is more efficient to invest in software as they are less prone to errors. 

A bookkeeping and accounting software automates data acquisition from channels like ecommerce platforms, payment gateways, banks, and other applications. With software, there’s no need for manual input which minimizes errors.

Software also calculates automatically through built-in formulas, unlike Excel sheets where bookkeepers or accountants still need to add formulas to get results. Though the formulas may be correct, any error in linking cells can make the process more complicated and error-prone.

Through a software’s dashboard, you can easily see updates about your net income and many details about your business finances. You can also customize reports and generate them in just a few clicks.

Delegated to Experts

You can also delegate net income calculations to experts. Many bookkeeping and accounting firms have experienced professionals to handle your account. You can skip the hassle of learning the ropes of using software and let them do it for you as they use the same reliable tools. You’ll also have more time to manage your business with the peace of mind that qualified professionals are handling your books and accounts.

Aside from calculating net income, trained bookkeepers and accountants can also generate essential accounting reports like balance sheets, income statements, and cash flow statements to calculate net income. They know how to calculate net income from a balance sheet and other reports efficiently. 

With experts on board, your only tasks will be to check the accuracy of the details on the books, check reports, and use the data you get in decision-making for your company.

how to calculate net income

Reasons To Calculate Net Income

You already know that net income comes from deducting all your business expenses from your company’s income. Now, see the different reasons why you should always get the net income calculation correctly, and why you should give importance to this detail. What does net income signify, and what does it say about your business? 

Visibility on Gross Income

In computing net income, you’ll primarily see your business’s gross income. You’ll know whether you are hitting your sales target or not. If you see positive numbers, you’ll know your strategies are working. You can identify the best practices, so you can keep on doing them. On the other hand, if you see that you are not hitting your sales goals, you can strategize to change the situation.

Knowledge of Operating Expenses and More

Part of the reason you are not getting the net income you are aiming for is high expenses. Look into the details of your expenses and pinpoint the culprit of your high expenditures. See whether there are ways to lower costs to increase net income.

Realize Company Profitability

The net income reflects profitability, so it must be every business owner’s goal to see positive numbers. Though it takes work to turn your business into a profitable one, the efforts are worth it because it is through profitability that you can ensure that your business thrives.

Data for Investors

Since net income reflects your company’s profitability, it is among the first things investors will look at. Investors help grow your business through their investment, but they will only do so when they see that your business can maintain a stable income. A stable income shows that when they invest in you, their investments will return and grow.

Calculate Shareholders’ Earnings

If your business has shareholders, you’ll get their share from the net income. This share is called the dividend. You can agree on how often to send dividends, but it is common practice to send out dividends twice a year. The higher the net income, the higher the amount you and your shareholders will get. You and the shareholders have the option to reinvest this money to fuel the business’s growth, or spend it outside the company. 

calculating net income

Strategies To Spend Your Company’s Money Wisely

You’ve invested time, money, and effort to get the net income you’ve incurred, so it is just right to plan how you’ll spend it. To make the most of that money, these are the different things you can do.

  • Grow your savings: You can save the money, so when the rainy days come and sales are low, you’ll have the money to manage expenses.
  • Scale your business: You can reinvest your money to scale your company. There are many ways to do this, like improving your office, upgrading the tools you use for operations, or broadening the products you offer.
  • Pay your debts: Debts, especially those with high-interest rates, can hurt your business, so be on top of them by paying on time. You can also pay them off completely if your income allows it.
  • Reward yourself and your team: Give back to yourself, as you’ve been working hard to grow your business. You can do this by paying yourself. You can also give rewards to your team through bonuses and other incentives. 

Get Assistance From Unloop

Running a business means a lot of tasks to think about, including monitoring your business finances and net income. Net income reflects your company’s profitability which investors look at. It is also what you need to check in order to determine whether your business plans are working or not. And, of course, your net income defines your business success.If you are looking for help in net income calculation or bookkeeping to track all of your income and expenses, you can partner with us! We at Unloop have a team of experts to handle your financial tracking. Contact us now so we can discuss the details of our services and offers with you.

Read more

There is no greater feeling than enjoying the fruits of your labor. As a business owner, you pour passion and dedication, invest time, money, and energy to ensure your business succeeds. And as the saying goes, your efforts will pay off one day.

You’ll know when your hard work has paid off by checking different financial statements like cash flow statements, statements of owner’s equity, balance sheets, and income statements. If you want to know how much you can pay yourself as a business owner, owner’s equity is the detail to check.

In this article, we’ll discuss what owner’s equity is, the balance sheet details that come with it, and how you can spend your earnings once you’ve received it. Let’s begin!

Owner’s Equity, Business Assets, and Positive and Negative Owner’s Equity

What is owner’s equity? It’s the assets you own in the business, minus any liabilities. Owner’s equity is what it’s called if your business is operating on a sole proprietorship. It is called a stockholder’s or shareholder’s equity when a company is a limited liability company (LLC) or a corporation. 

How to calculate owner’s equity? Again, owner’s equity is a company's assets minus its liabilities. The money includes your initial investment and business profit. Hence, an owner’s equity shows how much money you have left after paying all your expenses. 

Owner’s equity can be positive or negative. Positive owner equity is when the assets are higher than the liabilities. It can be negative equity when the company's liabilities exceed its assets.

Although seen as excess money when the equity is positive, it is not considered a company asset but more of a liability as it is the money the company owes to the owner or the shareholder. Nevertheless, it is considered your asset once you claim it through an owner’s draw.

how to calculate owner's equity

Owner’s Equity and More Ways To Pay Yourself

As a business owner, you work as hard as possible to see your business succeed. Long work hours are now a part of your routine as there are a lot of business areas you need to be on top of. Despite having many tasks you need to accomplish, do not forget to pay yourself. For you to gain more strength to run your business, give yourself fair compensation. How? Here are the ways!

Owner’s Equity Draws

If you are the company's sole owner and work more than 40 hours a week, an equity draw is the best payment method for you. Here, you can withdraw part or the whole of your owner’s equity. Before you decide how much to withdraw, it is best to check the total amount of equity there is.

If the owner's equity is negative, you can still withdraw money, but it will come from your business’s capital and will now be tagged as capital gains. Capital gains will reflect in your income tax returns and are taxable. 

Meanwhile, if you have positive equity, you can withdraw any amount. These draws are also taxable despite not being included in the payroll. You still need to declare it in your income tax to pay the correct dues. 

Owner’s draw can also be in non-cash forms, like getting a discounted purchase from company vendors for personal items. 

Through a Salary

If you want to receive a fixed amount regularly, it would be best to count yourself as a company employee. This way, you can include yourself in the payroll and receive a salary as scheduled. This payment is beneficial as you can receive monthly payments to sustain your personal needs. You can continue your business course without worrying about your expenses as your salary will cover them.

When you receive your monthly salary, you will be charged payroll taxes like a regular employee. Nevertheless, your salary will be categorized under business expenses, which can lower your net income and decrease the business’s taxes.

Guaranteed Payments

Guaranteed payments are a compensation form that works best for partnerships or LLCs. This payment method ensures you, your partners, or members of the company get paid whether the company has a positive or negative profit. For additional security, terms and conditions of guaranteed payments should be established clearly and written and signed.

A guaranteed payment isn’t taxable, unlike salaries and owner’s draws. A guaranteed payment is tagged as partnership income and categorized as a business expense. It lowers the company's net income and contributes to lowering the taxes your company has to pay.

Through Dividends

Dividends are the company’s retained earnings and profits that can be given to you and to shareholders. Dividends are distributed to shareholders as a form of gratitude and to fulfill their purpose in investing, which is to get a return of investment. Continuous giving of dividends encourages shareholders to continue investing and partnering with you as they see the fruits of their investments. Note that dividends can be paid in shares or in cash.

what is owners equity

Calculate Owner’s Equity and Earnings Through Software 

To ensure the accuracy of your calculation of total owner’s equity and earnings, it is best to rely on bookkeeping and accounting software like QuickBooks, Xero, and Sage50 cloud. To begin with, these tools track all the inflow and outflow of cash in your company through bookkeeping. It will automatically compute your company’s assets and liabilities, which are crucial to getting the correct computation of your equity.

A bookkeeping and accounting software can also generatereports and financial statements automatically. Whether you choose owner's equity, a shareholder's equity, to be a part of the payroll, guaranteed pay, or dividends, you know what amount you and other shareholders will receive. When you know exactly how much you will get, you can plan how to spend your earnings wisely.

Spending Your Earnings Wisely

Once you’ve determined how you will get your share of money from the company’s profits, make sure that you also know how to spend it wisely. Here are some ways to do just that!

Pay Yourself

Experience the rewards of your hard work by spending your owner’s equity, salary, guaranteed payment, or dividends on yourself. You can use it to pay for your needs and wants. Since you are now a business owner, you can also make the most of your income by enrolling in programs and training that will help you become a more efficient business manager.

Of course, you cannot go wrong with the famous 50-30-20 budgeting hack to ensure you spend your money wisely. Allocate 50% of your income for your expenses, 30% for your wants, and 20% for your savings. 

Pay Debts

It is standard for businesses to get loans to increase the money they can use for business operations. Getting loans can also spike your company's money in case you are planning for growth

However, interest rates are increasing, so one way to spend your income wisely is to assist your business in paying liabilities owed. Once you’ve paid off your loans or credit card debt, you can allocate your succeeding income and company profit to the needs of your business operations instead of paying interest.

You can get plenty more benefits from paying debts, like improving your credit score and less stress on your end because you won’t have any interest and debt worry moving forward.

Invest in Growing Your Business

You can grow your business using the money you earn in different ways. First, you can let your income be retained and not claim it. In doing so, your business will have extra money to use for operations.

You can also withdraw the money and invest it in improving your business, like purchasing new office or factory equipment, investing in new software, or giving back to your team. Forms of giving back include skills and knowledge development and team building activities that promote employee wellness and company culture. 

These forms of giving back will benefit your business as you have tools to optimize your operations and a motivated workforce.

Owner's Equity, Balance Sheet, and Bookkeeping Assistance from Unloop

You are now knowledgeable about owner’s equity, how to pay yourself as a business owner, and how to spend your earnings wisely. Remember that equity is the money a business owes to the owner or the shareholder and can be calculated by subtracting liabilities from assets. 

Aside from equity, there are other ways to pay yourself including salaries, guaranteed payments, and dividends. To ensure accurate calculation, it's recommended to use bookkeeping and accounting software. Finally, remember the several ways to spend your earnings wisely, including paying off debts and investing in growing your business.If you need assistance generating financial statements, knowing owner’s equity, or in bookkeeping, partner with us at Unloop! Let us help you track, monitor, and understand your finances so you can make informed decisions. Contact us now!

Owner’s Equity, Ways To Pay Yourself, and Spending Your Earnings Wisely
Watch Now

There is no greater feeling than enjoying the fruits of your labor. As a business owner, you pour passion and dedication, invest time, money, and energy to ensure your business succeeds. And as the saying goes, your efforts will pay off one day.

You’ll know when your hard work has paid off by checking different financial statements like cash flow statements, statements of owner’s equity, balance sheets, and income statements. If you want to know how much you can pay yourself as a business owner, owner’s equity is the detail to check.

In this article, we’ll discuss what owner’s equity is, the balance sheet details that come with it, and how you can spend your earnings once you’ve received it. Let’s begin!

Owner’s Equity, Business Assets, and Positive and Negative Owner’s Equity

What is owner’s equity? It’s the assets you own in the business, minus any liabilities. Owner’s equity is what it’s called if your business is operating on a sole proprietorship. It is called a stockholder’s or shareholder’s equity when a company is a limited liability company (LLC) or a corporation. 

How to calculate owner’s equity? Again, owner’s equity is a company's assets minus its liabilities. The money includes your initial investment and business profit. Hence, an owner’s equity shows how much money you have left after paying all your expenses. 

Owner’s equity can be positive or negative. Positive owner equity is when the assets are higher than the liabilities. It can be negative equity when the company's liabilities exceed its assets.

Although seen as excess money when the equity is positive, it is not considered a company asset but more of a liability as it is the money the company owes to the owner or the shareholder. Nevertheless, it is considered your asset once you claim it through an owner’s draw.

how to calculate owner's equity

Owner’s Equity and More Ways To Pay Yourself

As a business owner, you work as hard as possible to see your business succeed. Long work hours are now a part of your routine as there are a lot of business areas you need to be on top of. Despite having many tasks you need to accomplish, do not forget to pay yourself. For you to gain more strength to run your business, give yourself fair compensation. How? Here are the ways!

Owner’s Equity Draws

If you are the company's sole owner and work more than 40 hours a week, an equity draw is the best payment method for you. Here, you can withdraw part or the whole of your owner’s equity. Before you decide how much to withdraw, it is best to check the total amount of equity there is.

If the owner's equity is negative, you can still withdraw money, but it will come from your business’s capital and will now be tagged as capital gains. Capital gains will reflect in your income tax returns and are taxable. 

Meanwhile, if you have positive equity, you can withdraw any amount. These draws are also taxable despite not being included in the payroll. You still need to declare it in your income tax to pay the correct dues. 

Owner’s draw can also be in non-cash forms, like getting a discounted purchase from company vendors for personal items. 

Through a Salary

If you want to receive a fixed amount regularly, it would be best to count yourself as a company employee. This way, you can include yourself in the payroll and receive a salary as scheduled. This payment is beneficial as you can receive monthly payments to sustain your personal needs. You can continue your business course without worrying about your expenses as your salary will cover them.

When you receive your monthly salary, you will be charged payroll taxes like a regular employee. Nevertheless, your salary will be categorized under business expenses, which can lower your net income and decrease the business’s taxes.

Guaranteed Payments

Guaranteed payments are a compensation form that works best for partnerships or LLCs. This payment method ensures you, your partners, or members of the company get paid whether the company has a positive or negative profit. For additional security, terms and conditions of guaranteed payments should be established clearly and written and signed.

A guaranteed payment isn’t taxable, unlike salaries and owner’s draws. A guaranteed payment is tagged as partnership income and categorized as a business expense. It lowers the company's net income and contributes to lowering the taxes your company has to pay.

Through Dividends

Dividends are the company’s retained earnings and profits that can be given to you and to shareholders. Dividends are distributed to shareholders as a form of gratitude and to fulfill their purpose in investing, which is to get a return of investment. Continuous giving of dividends encourages shareholders to continue investing and partnering with you as they see the fruits of their investments. Note that dividends can be paid in shares or in cash.

what is owners equity

Calculate Owner’s Equity and Earnings Through Software 

To ensure the accuracy of your calculation of total owner’s equity and earnings, it is best to rely on bookkeeping and accounting software like QuickBooks, Xero, and Sage50 cloud. To begin with, these tools track all the inflow and outflow of cash in your company through bookkeeping. It will automatically compute your company’s assets and liabilities, which are crucial to getting the correct computation of your equity.

A bookkeeping and accounting software can also generatereports and financial statements automatically. Whether you choose owner's equity, a shareholder's equity, to be a part of the payroll, guaranteed pay, or dividends, you know what amount you and other shareholders will receive. When you know exactly how much you will get, you can plan how to spend your earnings wisely.

Spending Your Earnings Wisely

Once you’ve determined how you will get your share of money from the company’s profits, make sure that you also know how to spend it wisely. Here are some ways to do just that!

Pay Yourself

Experience the rewards of your hard work by spending your owner’s equity, salary, guaranteed payment, or dividends on yourself. You can use it to pay for your needs and wants. Since you are now a business owner, you can also make the most of your income by enrolling in programs and training that will help you become a more efficient business manager.

Of course, you cannot go wrong with the famous 50-30-20 budgeting hack to ensure you spend your money wisely. Allocate 50% of your income for your expenses, 30% for your wants, and 20% for your savings. 

Pay Debts

It is standard for businesses to get loans to increase the money they can use for business operations. Getting loans can also spike your company's money in case you are planning for growth

However, interest rates are increasing, so one way to spend your income wisely is to assist your business in paying liabilities owed. Once you’ve paid off your loans or credit card debt, you can allocate your succeeding income and company profit to the needs of your business operations instead of paying interest.

You can get plenty more benefits from paying debts, like improving your credit score and less stress on your end because you won’t have any interest and debt worry moving forward.

Invest in Growing Your Business

You can grow your business using the money you earn in different ways. First, you can let your income be retained and not claim it. In doing so, your business will have extra money to use for operations.

You can also withdraw the money and invest it in improving your business, like purchasing new office or factory equipment, investing in new software, or giving back to your team. Forms of giving back include skills and knowledge development and team building activities that promote employee wellness and company culture. 

These forms of giving back will benefit your business as you have tools to optimize your operations and a motivated workforce.

Owner's Equity, Balance Sheet, and Bookkeeping Assistance from Unloop

You are now knowledgeable about owner’s equity, how to pay yourself as a business owner, and how to spend your earnings wisely. Remember that equity is the money a business owes to the owner or the shareholder and can be calculated by subtracting liabilities from assets. 

Aside from equity, there are other ways to pay yourself including salaries, guaranteed payments, and dividends. To ensure accurate calculation, it's recommended to use bookkeeping and accounting software. Finally, remember the several ways to spend your earnings wisely, including paying off debts and investing in growing your business.If you need assistance generating financial statements, knowing owner’s equity, or in bookkeeping, partner with us at Unloop! Let us help you track, monitor, and understand your finances so you can make informed decisions. Contact us now!

Read more

Question after question and the endless desire to seek the right answers is normal for new Amazon sellers like you. One difficult inquiry you’ll encounter is about taxes, a topic that not everybody is interested in. Still, you need to understand this because it is a huge part of your Amazon store management.

To give you a little background about Amazon taxes, we’ll list five of the most frequently asked questions newbies have. We’ll also include the assistance you can get from an Amazon accounting and bookkeeping agency to know what you can expect. Let’s start!

1. What is Amazon tax?

When talking about Amazon tax, two important things will come up, the Marketplace Tax Collection and the 1099 Amazon tax form. The Marketplace Tax Collection came when the Marketplace Facilitator Law was enacted, which mandates that facilitators like Amazon collect and remit sellers' sales tax

Meanwhile, Form 1099 is the information submitted by Amazon to the Internal Revenue Service (IRS) every year to report the gross sales income of sellers who are above $20,000 unadjusted Amazon sales income and have more than 200 transactions. 

2. What are the different Amazon tax forms?

Aside from the Form 1099, here are the other forms on Amazon that are meant for different types of sellers:

  • W-9: Amazon mandates that all US taxpayer sellers go under a tax interview to accomplish the W-9 form that will contain your basic information and your TIN.
  • W-8BEN/W8-BEN-E: All sellers undergo the tax interview, even those who aren’t US taxpayers and are foreign sellers. Non-US taxpayers and foreigners should accomplish the two forms: W-8BEN or the Certificate of Foreign Status and W-8-BEN-E declaration of foreign entity.
  • Form 1042S: Amazon and the IRS still track the income of foreigners through Form 1042S.

3. How can I find my Amazon tax forms?

You can access Amazon 1099 online through taxcentral.amazon.com by logging into your seller account. The form is readily available beginning January 31 of each year or the day after January 31 if it falls on a holiday. 

Amazon also allows the sending of the file via email and even a hard copy through delivery. Just make sure to provide the correct addresses in your tax interview. To avoid missing the hard copy through your mail, always update the address details if there are any changes. 

Meanwhile, you can get a preview of the forms W-9, W-8 BEN, W-8BEN-E, and 1042S on the tax interview page.

4. What do I need to prepare for the tax interview?

The Amazon tax interview will involve questions and answers you’ll accomplish on your seller account on Amazon Seller Central.

US sellers need to prepare their business TIN, while non-US sellers must prepare an income tax identification number issued from their country. If you are part of the people and groups who are tax-exempt, you need to prepare your tax-exempt certificate too. 

amazon tax form

5. How can I use the Amazon 1099 form?

You can use Amazon 1099 for your income tax return. A tax expert can deduct refunds from the unadjusted gross sales for you to pay taxes based on the actual money you’ve earned.

Aside from this, there is plenty of essential data collected by Amazon like sales fulfilled by sellers, sales through Fulfillment by Amazon, shipping payment, gift wrapping payment, and more! When included in the books and reports, these are helpful data that can give you a full view of your business.

Bookkeeping and Accounting Assistance

It is best to partner with experts if you will use the Amazon 1099 for your income tax return. Bookkeepers and accountants can use the data Amazon gathers to further understand your business finances. In doing so, you can reap these benefits:

Checking Amazon 1099 for income tax purposes

Filing income tax returns involves monitoring your income and expenses throughout the tax year, including details from your Amazon 1099. You can skip the worry of paying more than you should because they will deduct the refunds from your gross income jotted on Amazon 1099. Bookkeepers will ensure all details in your books are accurate.

Accounting and bookkeeping software integration

By keeping all your data in a single software, tracking will be easier. A bookkeeping and accounting agency can integrate their software with Amazon to extract data the platform provides, like inventory information, sales, shipping costs, and fulfillment charges.

Making sense of the numbers through reports

After all the data is in the books, an Amazon accountant and bookkeeper will work together to create financial reports. Report generation is easier because the agency has reliable bookkeeping and accounting software. As a business just starting out, you should check your store’s financial health as often as possible to enact necessary adjustments or continue best practices. 

Partner With Unloop!

As an Amazon seller, taxes and obligations will be a part of your life. This includes understanding the different Amazon tax forms, what’s included in them, which one you need, and how to accomplish them.

It is also important for you to know that you can make the most of the financial data you get from Amazon with the help of a bookkeeping and accounting agency. At Unloop, we can help you file your income tax returns, integrate with accounting and bookkeeping software, and make sense of your data through reports. So book a call with us now to learn more about how we can help you manage your Amazon business!

5 Amazon Tax Form FAQs and Agency Assistance to Make Sense of the Numbers
Watch Now

Question after question and the endless desire to seek the right answers is normal for new Amazon sellers like you. One difficult inquiry you’ll encounter is about taxes, a topic that not everybody is interested in. Still, you need to understand this because it is a huge part of your Amazon store management.

To give you a little background about Amazon taxes, we’ll list five of the most frequently asked questions newbies have. We’ll also include the assistance you can get from an Amazon accounting and bookkeeping agency to know what you can expect. Let’s start!

1. What is Amazon tax?

When talking about Amazon tax, two important things will come up, the Marketplace Tax Collection and the 1099 Amazon tax form. The Marketplace Tax Collection came when the Marketplace Facilitator Law was enacted, which mandates that facilitators like Amazon collect and remit sellers' sales tax

Meanwhile, Form 1099 is the information submitted by Amazon to the Internal Revenue Service (IRS) every year to report the gross sales income of sellers who are above $20,000 unadjusted Amazon sales income and have more than 200 transactions. 

2. What are the different Amazon tax forms?

Aside from the Form 1099, here are the other forms on Amazon that are meant for different types of sellers:

  • W-9: Amazon mandates that all US taxpayer sellers go under a tax interview to accomplish the W-9 form that will contain your basic information and your TIN.
  • W-8BEN/W8-BEN-E: All sellers undergo the tax interview, even those who aren’t US taxpayers and are foreign sellers. Non-US taxpayers and foreigners should accomplish the two forms: W-8BEN or the Certificate of Foreign Status and W-8-BEN-E declaration of foreign entity.
  • Form 1042S: Amazon and the IRS still track the income of foreigners through Form 1042S.

3. How can I find my Amazon tax forms?

You can access Amazon 1099 online through taxcentral.amazon.com by logging into your seller account. The form is readily available beginning January 31 of each year or the day after January 31 if it falls on a holiday. 

Amazon also allows the sending of the file via email and even a hard copy through delivery. Just make sure to provide the correct addresses in your tax interview. To avoid missing the hard copy through your mail, always update the address details if there are any changes. 

Meanwhile, you can get a preview of the forms W-9, W-8 BEN, W-8BEN-E, and 1042S on the tax interview page.

4. What do I need to prepare for the tax interview?

The Amazon tax interview will involve questions and answers you’ll accomplish on your seller account on Amazon Seller Central.

US sellers need to prepare their business TIN, while non-US sellers must prepare an income tax identification number issued from their country. If you are part of the people and groups who are tax-exempt, you need to prepare your tax-exempt certificate too. 

amazon tax form

5. How can I use the Amazon 1099 form?

You can use Amazon 1099 for your income tax return. A tax expert can deduct refunds from the unadjusted gross sales for you to pay taxes based on the actual money you’ve earned.

Aside from this, there is plenty of essential data collected by Amazon like sales fulfilled by sellers, sales through Fulfillment by Amazon, shipping payment, gift wrapping payment, and more! When included in the books and reports, these are helpful data that can give you a full view of your business.

Bookkeeping and Accounting Assistance

It is best to partner with experts if you will use the Amazon 1099 for your income tax return. Bookkeepers and accountants can use the data Amazon gathers to further understand your business finances. In doing so, you can reap these benefits:

Checking Amazon 1099 for income tax purposes

Filing income tax returns involves monitoring your income and expenses throughout the tax year, including details from your Amazon 1099. You can skip the worry of paying more than you should because they will deduct the refunds from your gross income jotted on Amazon 1099. Bookkeepers will ensure all details in your books are accurate.

Accounting and bookkeeping software integration

By keeping all your data in a single software, tracking will be easier. A bookkeeping and accounting agency can integrate their software with Amazon to extract data the platform provides, like inventory information, sales, shipping costs, and fulfillment charges.

Making sense of the numbers through reports

After all the data is in the books, an Amazon accountant and bookkeeper will work together to create financial reports. Report generation is easier because the agency has reliable bookkeeping and accounting software. As a business just starting out, you should check your store’s financial health as often as possible to enact necessary adjustments or continue best practices. 

Partner With Unloop!

As an Amazon seller, taxes and obligations will be a part of your life. This includes understanding the different Amazon tax forms, what’s included in them, which one you need, and how to accomplish them.

It is also important for you to know that you can make the most of the financial data you get from Amazon with the help of a bookkeeping and accounting agency. At Unloop, we can help you file your income tax returns, integrate with accounting and bookkeeping software, and make sense of your data through reports. So book a call with us now to learn more about how we can help you manage your Amazon business!

Read more

Accounting is an essential part of any business. Whether you're an online seller, a small business owner, or the head of a big company, making sense of your business numbers through thorough accounting will show the state of your business's financial health.

However, finances are not many people’s strong suit, and selecting the best expert to assist you is essential. For example, do you need an ecommerce accountant or a CPA? Additionally, are these two professionals even different? This blog post will help you decide who you should hire. We'll differentiate their roles, so you’ll know which professional is suitable for your ecommerce business.

Spotting the Difference: Ecommerce Accountants vs. CPAs

Many people use the term accountant and CPA interchangeably. The confusion is understandable since both jobs involve accounting. But the two roles differ greatly from one another. Although not all accountants are CPAs, all CPAs are accountants.

To help you tell the two apart, consider these significant differences.

Training and Licensing

Licensure is the primary distinction between an accountant and a CPA. Accountants don't need to take and pass a state-mandated exam to offer their services. However, before becoming a CPA or a certified public accountant, they must first obtain a license.

Furthermore, before CPAs are qualified to take their licensing exam, they should earn a bachelor's degree in financing and accounting. They must also complete rigorous training with specific hours in advanced accounting, auditing, and business courses.

Accountants can have a bachelor's degree in related courses like finance, business management, and accounting. From there, they will gain experience and training from school internships. After getting their diploma, accountants can expand their careers by getting certifications from accredited accounting organizations.

Knowledge on Taxation

There is no doubt that both professionals can help you with tax planning, returns, and filing. These basic tax services are covered in their training. However, when it comes to taxation laws and codes, a CPA has a more in-depth understanding.

Also, only CPAs can represent a business in front of the IRS. There are times, especially with big companies, when a business gets audited. Only CPAs can answer for your business and sign tax documents when necessary.

Code of Ethics

A governing body handles certified public accountants. Naturally, organizations have strict regulations and requirements to follow. The American Institute of Certified Public Accountants establish these professional standards, which fall under five broad categories and include:

  • Responsibilities
  • Due care
  • Public interest
  • Integrity
  • Objectivity and independence

Fiduciary Responsibility

A key CPA responsibility that accountants cannot do is act as fiduciaries for their clients. This means that an individual or an organization is legally allowed to represent and has authority on behalf of their client's best interest.

If you need representation in front of banks, board members, and government auditors, you should hire a licensed CPA.

Key Roles of Accountants for Ecommerce Businesses

Although ecommerce accountants don't have the exact detailed and rigorous training as CPAs, they still have significant roles to play that could benefit ecommerce business owners. Here are some duties they do so you can see if they are suited for your business.

Managing Financial Data

There are many financial statements accountants should handle. There are the balance sheets, profits and loss statements, sales and expense reports, tax return forms, and many more. An accountant should be able to organize financial documents, create copies, and keep them secured and prepared for analysis.

Data Analysis and Consultation

Small business owners can rely on accountants to do accurate financial analysis for their businesses. Since small businesses don't involve many departments, owners can ask for financial advice from their accountants. In addition, ecommerce clients often turn to professionals when it comes to decision-making involving finances, and accountants should be able to help with situations like that.

Timely Business Reports

Financial reporting is essential for an ecommerce company to know the status of its business health. It is an accountant's duty to make these reports in a timely manner. For example, inventory management reports should be done at least once a month to know the exact number of your products.

Reports like these can also determine which products are fast selling and which stay in storage longer. As a result, timely financial data assists businesses in making better corporate decisions. Furthermore, in some situations, these reports are presented to board members, so they should always be prepared beforehand to ensure their accuracy and validity.

Key Roles of Certified Public Accountants

You can expect that CPAs can cover the roles and responsibilities of accountants. But with more training, they can offer more services. Let's look at the duties that CPAs can provide for your business.

Overseeing the Overall Accounting

Accounting services are broad, but a CPA understands and can perform all of the tasks if needed by the business. CPAs are interested in the company's bigger picture and focus their expertise on ensuring that their client's financial and business goals are achieved. Furthermore, CPAs ensure that the money circulates around the business well, so that all business functions are running.

Business Research

CPAs spend most of their time researching the business and diving into financial data to analyze its performance. Research can identify the strengths of a business and develop them. Furthermore, it can pinpoint weaknesses and potential issues.

Communication and Project Management

You can think of the CPA as the head of all the accountants in one company. Naturally, bigger companies will need a team of accountants to handle their finances. You can think of the CPA as the head of all the accountants in one company. CPAs make sure they delegate responsibilities properly for the accounting system to function.

Furthermore, it's a CPAs duty to talk with the members of the business. They directly report to higher-ups and different business managers, and update and make them understand the business plans moving forward.

Making a Choice: Ecommerce CPA or Accountant

Now that you know the difference between CPAs and accountants, you can decide which professional to hire for your business. There is no doubt that both professionals can help with your finances but choosing the right one can affect your business greatly.

If you're a small business owner, you'll need an ecommerce tax accountant more. Sales tax can be a handful for new business owners, but since the number of financial transactions is not significant, accountants can handle accounting for you.

But when your company expands, it will be advantageous to work with a certified public accountant. They can do more, and backed with their accounting expertise, you will be sure that your business finances stays in good hands. However, allocate money in your budget for CPA. Because of their training and expertise, they will cost more than professional accountants.

Final Thoughts

Hiring a professional is beneficial for every business. It is just a matter of choosing the correct one for your needs. Accountants and CPAs are almost similar in work, but to ensure that your resources are used effectively, be sure to understand what exactly your company needs.
If you're looking for a reliable accounting firm that will handle the needs of your ecommerce business, Unloop is the ecommerce accounting solution for you. We have a team of dedicated professionals that can help you with your business’s finances. Book a call with us today and learn more about our services now.

Ecommerce CPAs vs. Accountants: What's the Difference?
Watch Now

Accounting is an essential part of any business. Whether you're an online seller, a small business owner, or the head of a big company, making sense of your business numbers through thorough accounting will show the state of your business's financial health.

However, finances are not many people’s strong suit, and selecting the best expert to assist you is essential. For example, do you need an ecommerce accountant or a CPA? Additionally, are these two professionals even different? This blog post will help you decide who you should hire. We'll differentiate their roles, so you’ll know which professional is suitable for your ecommerce business.

Spotting the Difference: Ecommerce Accountants vs. CPAs

Many people use the term accountant and CPA interchangeably. The confusion is understandable since both jobs involve accounting. But the two roles differ greatly from one another. Although not all accountants are CPAs, all CPAs are accountants.

To help you tell the two apart, consider these significant differences.

Training and Licensing

Licensure is the primary distinction between an accountant and a CPA. Accountants don't need to take and pass a state-mandated exam to offer their services. However, before becoming a CPA or a certified public accountant, they must first obtain a license.

Furthermore, before CPAs are qualified to take their licensing exam, they should earn a bachelor's degree in financing and accounting. They must also complete rigorous training with specific hours in advanced accounting, auditing, and business courses.

Accountants can have a bachelor's degree in related courses like finance, business management, and accounting. From there, they will gain experience and training from school internships. After getting their diploma, accountants can expand their careers by getting certifications from accredited accounting organizations.

Knowledge on Taxation

There is no doubt that both professionals can help you with tax planning, returns, and filing. These basic tax services are covered in their training. However, when it comes to taxation laws and codes, a CPA has a more in-depth understanding.

Also, only CPAs can represent a business in front of the IRS. There are times, especially with big companies, when a business gets audited. Only CPAs can answer for your business and sign tax documents when necessary.

Code of Ethics

A governing body handles certified public accountants. Naturally, organizations have strict regulations and requirements to follow. The American Institute of Certified Public Accountants establish these professional standards, which fall under five broad categories and include:

  • Responsibilities
  • Due care
  • Public interest
  • Integrity
  • Objectivity and independence

Fiduciary Responsibility

A key CPA responsibility that accountants cannot do is act as fiduciaries for their clients. This means that an individual or an organization is legally allowed to represent and has authority on behalf of their client's best interest.

If you need representation in front of banks, board members, and government auditors, you should hire a licensed CPA.

Key Roles of Accountants for Ecommerce Businesses

Although ecommerce accountants don't have the exact detailed and rigorous training as CPAs, they still have significant roles to play that could benefit ecommerce business owners. Here are some duties they do so you can see if they are suited for your business.

Managing Financial Data

There are many financial statements accountants should handle. There are the balance sheets, profits and loss statements, sales and expense reports, tax return forms, and many more. An accountant should be able to organize financial documents, create copies, and keep them secured and prepared for analysis.

Data Analysis and Consultation

Small business owners can rely on accountants to do accurate financial analysis for their businesses. Since small businesses don't involve many departments, owners can ask for financial advice from their accountants. In addition, ecommerce clients often turn to professionals when it comes to decision-making involving finances, and accountants should be able to help with situations like that.

Timely Business Reports

Financial reporting is essential for an ecommerce company to know the status of its business health. It is an accountant's duty to make these reports in a timely manner. For example, inventory management reports should be done at least once a month to know the exact number of your products.

Reports like these can also determine which products are fast selling and which stay in storage longer. As a result, timely financial data assists businesses in making better corporate decisions. Furthermore, in some situations, these reports are presented to board members, so they should always be prepared beforehand to ensure their accuracy and validity.

Key Roles of Certified Public Accountants

You can expect that CPAs can cover the roles and responsibilities of accountants. But with more training, they can offer more services. Let's look at the duties that CPAs can provide for your business.

Overseeing the Overall Accounting

Accounting services are broad, but a CPA understands and can perform all of the tasks if needed by the business. CPAs are interested in the company's bigger picture and focus their expertise on ensuring that their client's financial and business goals are achieved. Furthermore, CPAs ensure that the money circulates around the business well, so that all business functions are running.

Business Research

CPAs spend most of their time researching the business and diving into financial data to analyze its performance. Research can identify the strengths of a business and develop them. Furthermore, it can pinpoint weaknesses and potential issues.

Communication and Project Management

You can think of the CPA as the head of all the accountants in one company. Naturally, bigger companies will need a team of accountants to handle their finances. You can think of the CPA as the head of all the accountants in one company. CPAs make sure they delegate responsibilities properly for the accounting system to function.

Furthermore, it's a CPAs duty to talk with the members of the business. They directly report to higher-ups and different business managers, and update and make them understand the business plans moving forward.

Making a Choice: Ecommerce CPA or Accountant

Now that you know the difference between CPAs and accountants, you can decide which professional to hire for your business. There is no doubt that both professionals can help with your finances but choosing the right one can affect your business greatly.

If you're a small business owner, you'll need an ecommerce tax accountant more. Sales tax can be a handful for new business owners, but since the number of financial transactions is not significant, accountants can handle accounting for you.

But when your company expands, it will be advantageous to work with a certified public accountant. They can do more, and backed with their accounting expertise, you will be sure that your business finances stays in good hands. However, allocate money in your budget for CPA. Because of their training and expertise, they will cost more than professional accountants.

Final Thoughts

Hiring a professional is beneficial for every business. It is just a matter of choosing the correct one for your needs. Accountants and CPAs are almost similar in work, but to ensure that your resources are used effectively, be sure to understand what exactly your company needs.
If you're looking for a reliable accounting firm that will handle the needs of your ecommerce business, Unloop is the ecommerce accounting solution for you. We have a team of dedicated professionals that can help you with your business’s finances. Book a call with us today and learn more about our services now.

Read more

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.

When it comes to selling products on Amazon, it's crucial for Canadian sellers to understand their income tax obligations. With the rise in online businesses and the increasing popularity of Amazon as a selling platform, you need to know the details and pay the right amount each time.

This article aims to provide Canadian Amazon sellers with a general overview of Amazon seller income tax in Canada. We hope to equip eCommerce sellers like you with the necessary knowledge in securing tax obligations and maximizing business profits.

Here are 8 frequently asked questions, answered:

  1. What Is Sales Tax?

A sales tax is a value-added consumption tax included in the sales price of goods and services. The sales tax is paid at the buyer's expense, which the seller must file to the appropriate tax authorities.

  1. What Are General, Harmonized, Quebec, and Provincial Sales Taxes?

The Canadian government imposes three different taxes for the computation of a sales tax:

Federal Goods and Services Tax (GST)

The federal goods and services tax, or GST, is a value-added tax imposed by the government on goods and services. The standard rate for the GST is 5%.

Provincial Sales Tax (PST)

Provincial sales tax, or PST, on the other hand, is a different value-added tax levied locally on the same goods and services that business owners have sold. The rate for the PST is 6%-7%.

Harmonized Sales Tax (HST)

The Harmonized Sales Tax (HST) is a uniform rate for five of the thirteen provinces and territories of the Canadian government. In provinces following the HST, the GST or the provincial sales tax PST do not apply. 

Instead, there is a single rate for all five provinces, which is 15% (except for Ontario, which charges a 13% sales tax). With the harmonized sales tax (HST), you only need to file one (1) tax return for all five provinces, removing the hassle of doing your taxes.

Quebec Sales Tax (QST)

The Quebec Sales Tax is similar to the Canadian provincial sales taxes (PST) in function, with only the rate being different. If the provincial sales tax is at 6%-7%, then the Quebec sales tax is at 9.975%

The sales tax, while consistent among countries as an attachment to purchasing goods and services, comes in different computations depending on a nation's tax policy.

  1. How Do You Compute Sales Tax?

Now, here's where it can get confusing. You can compute Canada's sales tax in three ways:

First, there is the standard federal sales tax plus provincial taxes. In these provinces, you must add the federal goods and services tax to the local taxes. For example, the sales tax in British Columbia and Manitoba is 12%, coming from a federal sales tax of 5% and provincial taxes of 7%.

Next, some provinces do not impose provincial sales taxes and instead collect only the federal sales tax of 5%. Such provinces include: 

  • Alberta, 
  • Nunavut, 
  • Yukon, 
  • and the Northwest Territories.

Finally, there is the HST. Since the federal taxes and local taxes no longer apply, you can mark your sales tax in provinces under the HST at 15% (except Ontario, with an HST rate of 13%).

Check out the different Canadian sales tax rates below for the specifics:

Provinces Using Harmonized Sales Tax
Newfoundland/Labrador (15%)New Brunswick (15%)Nova Scotia (15%)Ontario (13%)Prince Edward Island (15%)
Provinces Using Goods and Services Tax + Provincial Sales Tax
British Columbia (12%)Quebec (14.975%)Saskatchewan (11%)Manitoba (12%)
Provinces Using Goods and Services Tax Only
Alberta (5%)Northwest Territories (5%)Nunavut (5%)Yukon (5%)
  1. Does Amazon Collect Sales Taxes for Sellers in Canada?

Marketplace facilitators (MPF) handle tax work for third-party sellers. MPF legislation defines ab MPF as a marketplace that allows third-party sellers to sell physical and digital property, goods, and services online. 

Amazon, being an MPF, is now responsible for calculating, collecting taxes, and remitting Canadian taxes for their third-party Amazon sellers on taxable sales covered by MPF legislation.

  1. What Happens If I Fail to Pay Canadian Taxes?

Fulfilling your tax obligations as a Canadian seller can be tedious, but it’s a must. Failure to file and remit sales taxes could lead to criminal charges and could foresee the end of your time as a business owner.

  1. Who Should Pay Sales Taxes?

Canadian eCommerce sellers or international sellers have to pay GST/HST.

As the business owner of a Canadian company, you're obliged to pay your Canadian taxes. But for your sales to be taxable, you'll have to open a sales tax account with the Canada Revenue Agency, also known as a GST/HST account. 

If you're a Canadian seller with worldwide business income less than or equal to $30,000 for a period of 12 months, you're considered a small supplier and are prohibited from filing for and charging sales taxes. You can collect sales tax and remit on the product or service that surpasses $30,000.

Foreign Amazon sellers with a gross income of over $30,000 in Canadian sales are required to open a sales tax account to pay HST/GST.

  1. When Should I Pay Sales Taxes?

Sales tax filing deadline in Canada is April 30, with income tax returns collection beginning around February. Nevertheless, payment for Canadian taxes is usually collected monthly or annually. If your business income is less than $1.5 million in sales, then you can pay annually.

In some provinces, however, the cap is lower. For instance, in Saskatchewan, if you collect less than $3,600, you can pay annually. Then if your taxes are paid on time during the first year, you'll be paying the next few years annually. It would be best to check with the province local rules on monthly, quarterly, or annual tax filing to be sure.

  1. How Do I Pay My Sales Taxes?

You can pay your GST/HST in three ways:

  • Remit sales taxes at a financial institution
  • Remit taxes electronically
  • Send Canadian sales tax by mail

You can pay your Goods and Services Tax/Harmonized Sales Tax using a financial institution's transaction methods or online banking services. The Canadian Revenue Agency (CRA) has a new online payment method called MyPayment. You can try different payment options using MyPayment. Check their website for different payment options for businesses and individuals.

On the other hand, if you want to pay your GST/HST through a financial institution, use Form RC158, Remittance Voucher - Payment on Filing to pay the amount you owe. These tax forms aren't available online since they come in pre-printed format.

The following tax-related forms are also available:

  • Form RC159, Remittance Voucher - Interim Payments
  • Form RC160, Remittance Voucher - Amount Owing
  • Form RC177, Remittance Voucher - Balance Due

You can also send your payment by mail. However, payment sent by mail should be under $50,000, regardless of currency. Any mail equal to or above $50,000 should be remitted electronically or through a financial institution.

If you're not paying in Canadian dollars, simply pay the equivalent amount in the available currency.

Partner With Unloop!

There you go! 

We hope we've provided you with valuable information on Canadian sales taxes, including the different rates and how to compute them. 

Remember the recent changes in tax policy that allow Amazon to collect and remit taxes for third-party Amazon sellers. And of course, do not forget that failing to pay taxes can have serious consequences, including criminal charges. 

If you need assistance from a tax professional for your Harmonized Sales Tax, Provincial Sales Tax, Quebec Sales Tax, and Goods and Services Tax to keep a clear record to the Canada Revenue agency, partner with Unloop!

We can handle your sales taxes or accounting solutions specifically for your Amazon store. Feel free to contact us. We'd love to discuss your services with you.

Amazon Seller Income Tax (Canada): 8 Frequently Asked Questions, Answered!
Watch Now

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.

When it comes to selling products on Amazon, it's crucial for Canadian sellers to understand their income tax obligations. With the rise in online businesses and the increasing popularity of Amazon as a selling platform, you need to know the details and pay the right amount each time.

This article aims to provide Canadian Amazon sellers with a general overview of Amazon seller income tax in Canada. We hope to equip eCommerce sellers like you with the necessary knowledge in securing tax obligations and maximizing business profits.

Here are 8 frequently asked questions, answered:

  1. What Is Sales Tax?

A sales tax is a value-added consumption tax included in the sales price of goods and services. The sales tax is paid at the buyer's expense, which the seller must file to the appropriate tax authorities.

  1. What Are General, Harmonized, Quebec, and Provincial Sales Taxes?

The Canadian government imposes three different taxes for the computation of a sales tax:

Federal Goods and Services Tax (GST)

The federal goods and services tax, or GST, is a value-added tax imposed by the government on goods and services. The standard rate for the GST is 5%.

Provincial Sales Tax (PST)

Provincial sales tax, or PST, on the other hand, is a different value-added tax levied locally on the same goods and services that business owners have sold. The rate for the PST is 6%-7%.

Harmonized Sales Tax (HST)

The Harmonized Sales Tax (HST) is a uniform rate for five of the thirteen provinces and territories of the Canadian government. In provinces following the HST, the GST or the provincial sales tax PST do not apply. 

Instead, there is a single rate for all five provinces, which is 15% (except for Ontario, which charges a 13% sales tax). With the harmonized sales tax (HST), you only need to file one (1) tax return for all five provinces, removing the hassle of doing your taxes.

Quebec Sales Tax (QST)

The Quebec Sales Tax is similar to the Canadian provincial sales taxes (PST) in function, with only the rate being different. If the provincial sales tax is at 6%-7%, then the Quebec sales tax is at 9.975%

The sales tax, while consistent among countries as an attachment to purchasing goods and services, comes in different computations depending on a nation's tax policy.

  1. How Do You Compute Sales Tax?

Now, here's where it can get confusing. You can compute Canada's sales tax in three ways:

First, there is the standard federal sales tax plus provincial taxes. In these provinces, you must add the federal goods and services tax to the local taxes. For example, the sales tax in British Columbia and Manitoba is 12%, coming from a federal sales tax of 5% and provincial taxes of 7%.

Next, some provinces do not impose provincial sales taxes and instead collect only the federal sales tax of 5%. Such provinces include: 

  • Alberta, 
  • Nunavut, 
  • Yukon, 
  • and the Northwest Territories.

Finally, there is the HST. Since the federal taxes and local taxes no longer apply, you can mark your sales tax in provinces under the HST at 15% (except Ontario, with an HST rate of 13%).

Check out the different Canadian sales tax rates below for the specifics:

Provinces Using Harmonized Sales Tax
Newfoundland/Labrador (15%)New Brunswick (15%)Nova Scotia (15%)Ontario (13%)Prince Edward Island (15%)
Provinces Using Goods and Services Tax + Provincial Sales Tax
British Columbia (12%)Quebec (14.975%)Saskatchewan (11%)Manitoba (12%)
Provinces Using Goods and Services Tax Only
Alberta (5%)Northwest Territories (5%)Nunavut (5%)Yukon (5%)
  1. Does Amazon Collect Sales Taxes for Sellers in Canada?

Marketplace facilitators (MPF) handle tax work for third-party sellers. MPF legislation defines ab MPF as a marketplace that allows third-party sellers to sell physical and digital property, goods, and services online. 

Amazon, being an MPF, is now responsible for calculating, collecting taxes, and remitting Canadian taxes for their third-party Amazon sellers on taxable sales covered by MPF legislation.

  1. What Happens If I Fail to Pay Canadian Taxes?

Fulfilling your tax obligations as a Canadian seller can be tedious, but it’s a must. Failure to file and remit sales taxes could lead to criminal charges and could foresee the end of your time as a business owner.

  1. Who Should Pay Sales Taxes?

Canadian eCommerce sellers or international sellers have to pay GST/HST.

As the business owner of a Canadian company, you're obliged to pay your Canadian taxes. But for your sales to be taxable, you'll have to open a sales tax account with the Canada Revenue Agency, also known as a GST/HST account. 

If you're a Canadian seller with worldwide business income less than or equal to $30,000 for a period of 12 months, you're considered a small supplier and are prohibited from filing for and charging sales taxes. You can collect sales tax and remit on the product or service that surpasses $30,000.

Foreign Amazon sellers with a gross income of over $30,000 in Canadian sales are required to open a sales tax account to pay HST/GST.

  1. When Should I Pay Sales Taxes?

Sales tax filing deadline in Canada is April 30, with income tax returns collection beginning around February. Nevertheless, payment for Canadian taxes is usually collected monthly or annually. If your business income is less than $1.5 million in sales, then you can pay annually.

In some provinces, however, the cap is lower. For instance, in Saskatchewan, if you collect less than $3,600, you can pay annually. Then if your taxes are paid on time during the first year, you'll be paying the next few years annually. It would be best to check with the province local rules on monthly, quarterly, or annual tax filing to be sure.

  1. How Do I Pay My Sales Taxes?

You can pay your GST/HST in three ways:

  • Remit sales taxes at a financial institution
  • Remit taxes electronically
  • Send Canadian sales tax by mail

You can pay your Goods and Services Tax/Harmonized Sales Tax using a financial institution's transaction methods or online banking services. The Canadian Revenue Agency (CRA) has a new online payment method called MyPayment. You can try different payment options using MyPayment. Check their website for different payment options for businesses and individuals.

On the other hand, if you want to pay your GST/HST through a financial institution, use Form RC158, Remittance Voucher - Payment on Filing to pay the amount you owe. These tax forms aren't available online since they come in pre-printed format.

The following tax-related forms are also available:

  • Form RC159, Remittance Voucher - Interim Payments
  • Form RC160, Remittance Voucher - Amount Owing
  • Form RC177, Remittance Voucher - Balance Due

You can also send your payment by mail. However, payment sent by mail should be under $50,000, regardless of currency. Any mail equal to or above $50,000 should be remitted electronically or through a financial institution.

If you're not paying in Canadian dollars, simply pay the equivalent amount in the available currency.

Partner With Unloop!

There you go! 

We hope we've provided you with valuable information on Canadian sales taxes, including the different rates and how to compute them. 

Remember the recent changes in tax policy that allow Amazon to collect and remit taxes for third-party Amazon sellers. And of course, do not forget that failing to pay taxes can have serious consequences, including criminal charges. 

If you need assistance from a tax professional for your Harmonized Sales Tax, Provincial Sales Tax, Quebec Sales Tax, and Goods and Services Tax to keep a clear record to the Canada Revenue agency, partner with Unloop!

We can handle your sales taxes or accounting solutions specifically for your Amazon store. Feel free to contact us. We'd love to discuss your services with you.

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About unloop

Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.

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