One of a business owner's top priorities is filing taxes. Since almost every sale or purchase comes with taxes (particularly sales tax), accounting for every single one can be a headache. Fortunately, if you're an Amazon seller, the ecommerce platform has got you covered.
Here's how Amazon made selling a lot easier with the Amazon Tax Exemption Program (ATEP).
For most purchases you make, you'll notice there are additional costs included in the receipt. One of them is the sales tax, which is a percentage-based value-added tax attached to the purchase of goods and services. According to law, every sale must be taxed, which is why you must account for each item’s sales tax.
The buyer, specifically the end consumer, shoulders the sales tax. If you are a reseller purchasing the product, you'll have to charge your customer the sales tax levied by the government to pay your product's sales tax.
Since the end consumer should cover the sales tax, resellers usually have to ask for tax refunds since they have to pay it initially. However, if the seller has tax exemptions, they can forgo paying the sales tax until they sell the product.
Yes, you do. Even if your purchases are made online, every sale must still be taxed according to law. The tax rate applicable for a given order is the combined state or local rate for the location to which the order was sent or fulfilled. In some states, the tax on sales is lower than in others.
No, Amazon cannot charge sales tax; only the government is allowed to levy taxes on the sale of goods and services. However, Amazon can collect taxes for you through the Amazon Tax Exemption Program (ATEP).
While all business owners are legally obliged to pay taxes, there are some individuals or organizations whom tax exemption applies to are the following:
Individuals or organizations who are granted tax exemptions are allowed to waive taxes for purchases, therefore saving them money. On the other hand, resellers are still required to pay the sales tax, but they can ask for refunds after selling their products.
If you're a reseller on Amazon, you can get sales tax exemptions through the ATEP.
The Amazon Tax Exemption Program is Amazon's way of handling your sales taxes for you. Instead of having to pay and refund sales taxes individually, you can instead apply for tax exemptions, buy your products tax-free, and have the end consumer pay the sales tax directly to Amazon as part of the ATEP.
Amazon sellers with an Amazon business account qualify for ATEP by default. By saving your tax settings through Amazon's Tax Exemption Wizard, you automatically enroll yourself in ATEP.
If you want to enroll as a buyer, however, you'll have to go through the whole process of getting your Amazon Tax Exemption Certificate. The Tax Exemption Wizard will walk you through the process.
If for some reason, you feel like ATEP isn't for you, you can always choose to leave the program and organize your sales taxes on your own. The Amazon Tax Exemption Program is not mandatory, so you shouldn't feel pressured to leave the program if it doesn't work for you.
However, we do recommend you use ATEP since it comes with many benefits.
Collecting taxes can be tricky, not to mention crucial for every business. But with the creation of ATEP, Amazon and its business have had an easier time selling to their customers. Here are two ways Amazon sellers benefit from ATEP.
In general, Amazon resellers get their products from another business, and when they make purchases, they have to pay sales taxes initially and then collect the sales tax from customers when the sale has been made.
By having tax exempt status through ATEP, you can make tax exempt purchases for your business. This means you don't not only save money by not paying the sales tax for your purchases for resale, but you can also save time by allowing Amazon to waive your sales taxes and collect it directly from the end consumer.
You can get a lot of headaches as a reseller since part of a reseller's job is to collect sales taxes from each sale. That's why, as a seller, ATEP saves you a lot of time and money by collecting these taxes for you. Now you can worry less about your taxes and focus more on selling your product.
If your customer also has tax exempt status, Amazon's tax exemption program will also handle the process for you, lessening the burden on your accounting.
As stressed, taxes are every business owner's legal obligation. If you don't pay your taxes— or if you pay them incorrectly—you could be looking at the suspension of your business or, worse, legal implications like going to jail.
In 2020 alone, around 593 people were sent to jail for tax-related crimes, like tax fraud or tax evasion. The same goes for Amazon sellers. Even if ecommerce sellers don’t have brick-and-mortar businesses, the same tax laws apply depending on your location. So as a business owner, you should be wary of such violations since they could mean the end of your business.
Having trouble with your taxes? You're not the only one. Organizing and filing taxes can be a nightmare, especially for ecommerce businesses. If you're thinking of outsourcing help for your taxes, then it's time you give Unloop a chance.
We offer bookkeeping, accounts payable, payroll, forecasting, and tax services. Book a call, and let's work out how Unloop can help you!
During your ecommerce business operations, you may have wondered about the difference between bookkeeping and accounting. You have probably used the terms interchangeably during the course of your business activities, especially during the times you and your financial consultant were trying to figure out missing payments or tax remittances.
But despite the frequent use of these terms, people are still confused about whether bookkeeping and accounting are the same. Let Unloop answer that question so you can distinguish what they are and how to use each for your business's growth.
Many new business owners need clarification on bookkeeping and accounting. They interchange the terms and think they mean the same thing, but they differ in many ways.
Bookkeeping focuses on the activity of recording financial transactions. It's a rigorous accounting process that needs attention to detail and patience.
The discipline of bookkeeping follows the accounting cycle when recording business transactions.
Charting helps bookkeepers establish the recordkeeping system of a business by identifying the labels of each business transaction. In most cases, bookkeepers can proceed to recordkeeping if your company already has accounting and bookkeeping software with a preset Chart of Accounts (COA). On the other hand, in the absence of software, bookkeepers can create a COA for you.
After the bookkeeper identifies or charts the accounts, they can use them to record business transactions in a journal. Bookkeepers use a double-entry method for each journal entry, which includes the accounts debited and credited and a given amount.
To bookkeepers, the ledger is another book they maintain containing all the debit and credit transactions of a given account. They often record the amount on the ledger on a given period and calculate its net total (i.e., debit minus credit).
After getting the net totals of all the ledger accounts, the bookkeeper can proceed with a trial balance. This activity aims to ensure every transaction amount is accurate and corresponds with one another. Consequently, a trial balance also helps bookkeepers find recording errors and fix them before they generate reports.
Financial Statement Generation
Once everything is balanced and set, the bookkeeper can prepare an accurate financial statement. The business owner or the accountant will then use these reports for decision-making or tax purposes.
At the end of the business period—usually every 12 months—the bookkeeper is also in charge of closing the books and carrying over the real account balances, the accounts showing in the balance sheet, and their corresponding amounts, to the new business period.
Accounting is broader in scope in which bookkeeping plays an essential role. While professional accountants also study bookkeeping, the bulk of what they learn from accounting helps them read and interpret financial reports and create accounting standard procedures customized to the industry or business.
Accounting branches into different subdisciplines.
This is the process of interpreting and analyzing financial statements made by the bookkeeper. Financial accounting is big-picture accounting that applies to any enterprise, whether corporate or a small business. It is concerned with profit maximization, general management policies, and increasing shareholder value.
This branch of accounting deals with production and manufacturing. Cost accounting takes a thorough approach to costing raw materials and production processes to ensure they are priced appropriately, which is important when pricing the finished product.
Just like financial accounting, the managerial approach uses the same financial data the bookkeeper records. What makes managerial accounting different is how it uses information.
Aside from a monthly financial statement report, managerial accounting also uses financial records to generate other internal reports used by business decision-makers. Managerial accountants audit these reports and govern the system that produces them, while business owners and managers use the information to help with day-to-day business operations.
Tax accounting focuses on the specific knowledge of tax rules and regulations. This subdiscipline helps tax accounting practitioners to comply but, more importantly, allows them to maneuver the taxation system and make efficient tax decisions for the business's benefit.
Understanding tax accounting benefits a business tremendously and is highly valued. A professional who has mastered tax accounting can build the most beneficial accounting processes, methods, and business structures that result in paying less in tax liabilities.
Aside from discipline, the job of bookkeepers and accountants also differ. Bookkeepers can either be accountants or non-accountants, but the job functions that involve the accounting discipline will require a professional with a degree.
Bookkeepers are the ones in charge of recordkeeping. Their functions can be considered back office and involve a lot of paperwork and file organization. Here are several highlights of a bookkeeping job.
Record Financial Transactions
The primary job function of a bookkeeper is to record transactions in line with generally accepted accounting practices. They follow the accounting cycle when recording daily business trades.
Find and Fix Recording Errors
Bookkeepers are well-equipped to identify and find errors in the books they maintain. They start with a trial balance and work their way into the ledgers, journals, and financial records to find and fix records.
Prepare Financial Reports
All the recording eventually leads to the creation of financial statements. The bookkeepers will prepare an income statement, balance sheet, and cash flow statement for the business owner or accountant's review.
Work With Accountants and Managers
In day-to-day tasks, bookkeepers coordinate with business managers to give them the financial data they need to make decisions. They also aid accountants during tax season and allow them to access records for consulting or auditing purposes.
An accountant is any professional with a degree in accountancy. They can be licensed as a certified public accountant (CPA) and hold other certifications in a given specialty. But they can also be a non-licensed practitioner employed by a business. Here are the broad strokes of their job function.
Report Analysis and Interpretation
Accountants analyze financial statements and other reports to find areas where the business can improve. They also interpret financial data and make reports of their own. From there, they can recommend policies or managerial actions to benefit the business financially.
Audit Processes and Financial Records
In some cases, bookkeepers record transactions using different principles and techniques, which alters the numbers in financial statements and other reports. For example, a bookkeeper may choose to register a huge expense as is, or they can capitalize it; this can affect the bottom line of an income statement. In this case, it's the auditor's job to check whether these choices are sound and correct them if needed.
Accountants are primarily internal auditors. They check the recordkeeping processes of a business. But some large financial firms and tax institutions hire external auditors to review companies' books.
A controller oversees and directs different accounting and financial systems of a business. They help ensure a business's accounting and financial processes are running smoothly. So they help plan and manage the business's budget and supervise accurate payroll disbursement.
Non-certified and certified public accountants can offer consulting services to big and small businesses. They can help establish accounting processes for newly established companies or provide actionable steps to reduce cost, maximize profit, or efficiently use the business's assets.
Knowing the functions of bookkeeping and accounting will teach you one thing—you need both to run a successful business. If you're participating in a fast-paced, highly competitive ecommerce marketplace, you'll also need to learn these disciplines quickly if you're going to do it yourself. This will be a challenge if you're in the thick of things.Your best option is to get both bookkeeping and accounting services. Our team at Unloop is composed of professional accountants who know how to do bookkeeping. If you still need an accountant, we can help connect you with one. So book a call for a consultation or check out our bookkeeping services now.
Monitoring your business's accounts payable is crucial to determine the state of its financial health. Accurate forecasting allows you to gain control of your cash flow. In addition, knowing when your payments are due builds a good relationship with your suppliers and opens up strategies for money-saving plans for your payables.
Forecasting accounts payable may not be your priority when handling business accounting, but it can benefit your business. In this blog post, we'll talk more about forecasting accounts payable so you know how to do it for your business.
Accounts payable refers to short-term liabilities a business needs to pay off within a year or a shorter time frame. Understanding and seeing your business expenses fully allows you to do the groundwork for building a suitable budget for your business.
Forecasting will help you prepare to meet your payments by considering different scenarios. For example, if the price of raw materials increase or third-party fees change their rates, you can ensure your business can still fulfill its obligations and make wise decisions regarding your business finances.
You can monitor the money going out of your business in several ways. Here are some things you can do to help you build an accurate accounts payable forecast.
The payment patterns for your business are an important piece of information in creating an accurate forecast. Your expenses on payroll and inventory are relatively consistent month to month and easier to track. But always look at past spending data to see accurate patterns.
For example, look at the months you spend more on inventory. Some of your items may be in demand in certain months, so be mindful of that so you can plan your budget accordingly. You can also accumulate your past invoices to have a picture of where your money is going.
Noticing the patterns will also help you see where you can save, which can be good for your cash flow.
Understanding trends in the marketplace, like technological advances and consumer behaviour, will help determine if these changes can affect your business payables. Changes in the industry are quick, and if you're not keen enough to see them, you may fall behind, which can make your forecast less accurate.
You can track some marketing trends by:
Using historical data is advantageous for forecasting because many methods maximize historical data. The most common way of using past data is through extrapolation. However, there's room for error with this method because it doesn't consider the changes that happened in your business.
Statistical modelling is a more accurate method for creating accounts payable forecasts. This method helps business owners identify behavior in ways businesses do their payments and create a forecast based on its current conditions. This forecasting method is the most accurate but requires a huge investment in time and resources.
If you're new to forecasting, it is best to use both methods for the best results. Then, play with the strength of each method to make better business decisions.
You need all the data to create an accurate forecast. That's why it is crucial that you keep track of your invoices and dues. Here are some ways to do it effectively:
Accounting software is a valuable tool for businesses. Think of it as a virtual assistant that handles certain tasks that you can't because your hands are full. For example, you can start with a Microsoft Excel spreadsheet to organize your cash flow in a certain accounting period. Although this may keep things organized, you still have to input data and create financial statements manually when needed.
If you want something more convenient, there are several accounting software you can choose from. These software options can perform basic accounting tasks and even more complex ones. Furthermore, they can produce financial statements like income statements, balance sheets, and other reports in just a few clicks.
Some even have a feature to create financial models for your business based on the data you input into the system. The right accounting software will help create your business's accurate accounts payable forecast.
Knowing how much you need to pay at the end of each period will help you plan your budget. Fortunately, there is a simple calculation method that allows you to get an overview of your expected accounts payables.
Here is how to do it:
Once you have this data, you can simply follow the formula:
(Current liabilities)/(Total operating cash/Number of days) = Expected accounts payable
So, for example, if your business has an outstanding liability of $10,000 and your total
operating cost is $25,000, and you have 25 days to complete your payments. You can calculate your expected payables by:
(10,000)/(25,000/25) = $10,000
You can expect your business needs to pay $10,000 by the end of 25 days.
Forecasting is an optional part of accounting, and some business owners find it unnecessary. However, forecasting is a good move for your business if you want a clearer view of your financial ratios. Here are some benefits of doing it.
The results of the accounts payable forecast are valuable for improving your cash flow forecasting. This will help get key insights into how much of your working capital is available for business growth and investment. In addition, a clear picture of your forecast will help you maximize your working capital more confidently and risk-free.
Nothing makes your suppliers happier than you paying them on time. Forecasting accounts payable will help you see your deliverables ahead of time so you won't incur late payments. In addition, timely payments build trust and good relationships with your suppliers.
Moreover, forecasting helps you identify if you will run into problems with your payments. This way, you can give your suppliers a warning if there's no choice but to delay your payments.
Knowing your expected liabilities will help prevent disruptions in your payments. Understanding how much working capital comes in and out of your business in a specific period will help you eliminate risks and other potential disruptions.
Now that you have an overview of how forecasting accounts payable can benefit your business, you should start planning how you can forecast. Forecasting is not an easy task, so it is better to have a professional handle this for you.
Unloop offers AP forecasting for small ecommerce businesses. Our team of experts will ensure:
Unloop can handle all your accounts payable needs and even other accounting needs. Our team is ready to work with you on your bookkeeping, income tax, payroll, financial forecasts, and accounting. Book a call and work with us today!
Cash flow forecasting can be tricky—it requires skills, attention to detail, and dedication. But when done right, cash flow forecasting can offer tremendous value and invaluable insight into the future of your startup business or project.
Many organizations face significant challenges while attempting this exercise, but some workarounds can help you achieve success in predicting your financial future with confidence.
In this blog post, we'll explore some common cash flow forecasting challenges and solutions for improving your forecasts' accuracy. With these tips, you'll have valuable information to make better decisions about where to allocate resources and set appropriate expectations for revenue and expenses.
As an owner of a startup business, at the beginning, your cash flow may be slow and manageable using manual bookkeeping and accounting. A common mistake would be sticking to this day-to-day cash flow monitoring system and not forecasting. Seeing only daily cash flow and having no visibility about your company's future income and expenses is like operating a business in the dark.
Understand that cash flow management is essential for all businesses, even startups. Know that with it, you can see how much income and expenses you’ll have daily, weekly, monthly, quarterly, or annually. As a result, you can use the data as the basis of your financial game plans. You can use it to decide the following:
Having limited historical data is common to startups either because owners have failed to store financial data in the past or because the business hasn’t been running for a significant period of time yet. Historical data is the most basic information needed when creating a cash flow forecast, and the absence of these numbers makes the forecast result less reliable.
Despite the absence of historical data, there are still ways to get a reliable cash flow forecast. To begin, whether you lack past numbers because of a personal choice or not, it is time to invest in software and applications to help you track your business finances.
These apps and software can also help you conveniently create simulations, or before and after trials. Use the following data for your forecasts:
The biggest enemy of a cash flow forecast is inaccurate data, which can happen when tracking income and expenses manually. Although Excel sheets are readily available (and free), they may lose your business money in the long run as human errors bring costly damages to your finances.
Inaccurate data leads to making bigger loans, being overconfident in forecasting income, making fewer investments, and saving less—all detrimental to your business growth.
The most efficient workaround to the data inaccuracy problem is bidding goodbye to your company's manual systems. Accept that part of growth is optimizing your bookkeeping and accounting technology so that you can track your finances better.
Accounting software is highly automated, and you can also integrate various apps. As a result, you can minimize or even eradicate manual inputs, which can cause inaccurate data.
If there are a couple of teams in your company, you’ll need input for their income and expenses. This task becomes a roadblock when there is no collaboration between different departments. When different teams do not practise open communication, you might get incomplete or erroneous financial data from them. Another challenge is not having an established system for workflow and data submission processes in the company.
Excellent accountants and bookkeepers need to be well-versed in their tasks or have certifications and training to perform them correctly. On top of that, they should have communication skills and be team players. This is to make sure that they can connect to the various departments in your company to get the needed data. They also need to be forward thinkers to suggest and enact the best systems to make this data acquisition as smooth as possible for everyone.
Expect that a cash flow forecast doesn’t mean you’ll get 100% accuracy, as the following variables are prone to changes:
As a result, the final accounts receivable and payable won’t be exactly as what you forecasted.
The best workaround to ensure that you get the forecast closest to the truth is keeping numbers and data updated. Be in the know with the latest interest and foreign exchange rates. Know if there are changes in sales taxes and other tax dues you need to pay. If there are updates on commodity and raw material prices, they should also be reflected in your forecast. And do not forget about your customers too. Check sales trends to know when your peak sales occur.
Successfully launching a cash flow forecast is not the end of the cash forecasting process, but it becomes a problem if you make it so. As we’ve learned, some variables are subject to change, so if one variable adjusts, the income and expenses will as well. If you keep on using the old data without any adjustments, your business finances will suffer these consequences:
The best way to do a cash flow projection and actual cash flow analysis is through the help of software. An accounting software already has the forecast and the latest data of your business stored. They also have templates to show a comparison of current cash flow and forecast data. With software, generating reports is easier, and you can regularly analyze data to see if you need to optimize your cash flow plans and strategies.
Creating and maintaining a cash flow forecast is a major task for every company. Not having a dedicated team to handle it makes report generation impossible. And if even one is created, there wouldn’t be anyone to update it and let you know the latest data analysis results. Like a snowball, a series of the above mentioned challenges will surely accumulate.
There are plenty of choices a company can go for to hire a bookkeeper and accountant to handle forecasts. An in-house accountant is the traditional choice, but you can also choose to work with remote team members and freelancers. With these choices, building a dedicated team to handle forecasting becomes easier.
Your finance team will ensure your business has a defined forecasting process, an efficient way to acquire and manage data, and the best software to make forecasting cash flow easier and more accurate.
With cash forecasting being so important to any business’s success, startups must understand common challenges and how to avoid them. We hope that these common challenges startups face when forecasting cash flow and some workarounds have helped you. At Unloop, we have seen firsthand how important cash flow forecasts are to businesses. Proper forecasts can help businesses stretch their budgets and stay ahead of payments. With that in mind, take advantage of our forecasting services to experience the power of having a reliable and secure forecasting platform at your fingertips. Call us today!
Many entrepreneurs are drawn to ecommerce because it's an easy start. Selling items online through big platforms such as Amazon, eBay, and Shopify seems like no challenge. This is partly true. You have the potential to earn big because there are millions of shoppers on the internet.
But at some point in running an online store, you will encounter challenges. Almost every business owner can agree that ecommerce accounting is the most tedious part of running a business. But the company's finances play a key role in ensuring the business runs smoothly.
This post will focus on ecommerce bookkeeping since it is the first step in building a reliable accounting system for your business. We'll look into the common challenges business owners face in bookkeeping and share some tips and practices to overcome them.
When you hear the word bookkeeping, the first thing that comes to mind is documenting all financial transactions around the business. Keeping track of your transactions may seem easy at first, but when they pile up, that's when it starts to get messy. So be a step ahead with these challenges, and take note of the tips we'll share with you.
Proper bookkeeping is crucial in monitoring your cash flow. In order to create a working budget for your business operations and assess your financial health, you must know how the money goes in and out of your business. Unfortunately, according to research, almost 80% of small businesses have problems with their cash flow.
At the end of each accounting period, businesses tend to have unbalanced cash flow because they fail to keep tabs on their accounts receivable and payable. But there are still many factors that could affect your cash flow.
Here are simple tasks you can do to ensure your cash flow remains consistent:
Even seasoned small business owners find inventory management confusing. The more products you sell and the more sales channels you open, the harder it is to keep on top of your inventory management.
The basic task of inventory management is tracking the number of items you have, knowing their value, and tracking their location if you have multiple warehouses or are outsourcing to a fulfillment center. Every sale you make means a change in the number of inventory. Changes also happen when you have returns and refunds.
Your inventory is the backbone of your business's cash flow management. Manually tracking inventory is a difficult endeavor. To avoid any issues, it is best to have accounting software with inventory tracking features. The software will automate the whole inventory management process, so you can be in full control of the movement of your products.
Running a business is not all about income. Of course, gaining sales is the better part of running it, but you also have to manage and understand your expenses. If you don't monitor your expenses, you can spend over your budget, which could reflect in a negative income. Here are some types of business expenses you should consider:
These expenses can add up rapidly. If you fail to monitor them, they could exceed your profit margin. Fortunately, there are ways you can manage your expenses and build a working profit margin that suits your business.
The biggest challenge for ecommerce business owners is handling sales tax. Taxes, in general, are the most complicated part of accounting. Sales tax is the amount the government requires to be added to the cost of goods that consumers pay. Sellers are required to apply these taxes, collect them, and remit them to the tax collection agency.
The issues with sales tax start with identifying your tax nexus. Depending on where you belong, sales tax rates may differ. In bookkeeping, sales tax has its own ledger. This will help the owner track if they are collecting the right amount. But, if you don't know the proper rates, these mistakes can disrupt your cash flow.
You can overcome difficulties in sales tax by:
The most common scenario in selling online is paying monthly fees to continue selling on the platform. Unfortunately, these miscellaneous fees are difficult to track because they are applied differently. For example, there are fees for listing, advertising, shipping fulfillment, and other merchant fees.
When you have bulk orders, these fees may go unnoticed and unlisted. Failing to list them as expenses can reflect discrepancies on your balance sheets at the end of the accounting period. Fortunately, there are online calculators that can calculate fees in popular marketplaces like Amazon and Shopify.
But different selling platforms may vary in their fee structures. Tracking seller fees can be difficult if you're selling on multiple platforms. The best solution to not get overwhelmed by these fees is automation through accounting software. Don't play a guessing game with your fees. When mistakes pile up, it will cost you more money in the future.
We are not saying that the traditional bookkeeping method is wrong, but it's a thing of the past. Even if you have a small business, don't underestimate the number of entries you need to jot down for record-keeping. You may find manual entry easy at first, but as your business keeps growing, it will be harder for you to keep up.
Once again, the best solution for this problem is investing in accounting software. You don't have to worry about investing big money in an accounting system. Instead, take advantage of software you can use for free. Even free versions can do the basic task of ecommerce bookkeeping. So you don't have to spend much, if at all, to automate your record-keeping process.
Fraud is probably the biggest concern that will get your bookkeeping into shambles. Imagine your records being manipulated. This can affect your business's financial health if things get out of hand. According to research, small businesses are more prone to fraud compared to larger companies.
Small ecommerce businesses don't have as much security for their financial documents as big companies do, and that's why many people take advantage of it. Here are some common fraud cases you should look into:
You can prevent fraud by being consistent and transparent with your records. Furthermore, assigning a dedicated ecommerce bookkeeper for your bookkeeping process can keep your financial records secure.
If you're an ecommerce business owner, you must have many things on your plate. Managing a business has many aspects, and bookkeeping can be time-consuming and confusing for some. Instead of worrying about it, let Unloop handle it for you.
Our bookkeeping services include:
Bookkeeping for ecommerce may sound simple initially, but when your business starts to grow, it is better to let professionals handle it. This way, the process goes smoothly and without problems.
More than just bookkeeping, Unloop also offers different accounting services for small business owners. Book a call with our experts and work with us today!
If you start a business, whether putting up a physical store or selling things online, you can't run from the fact that you have tax obligations. Almost everything you sell is imposed with taxes, and as a business owner, it's important that you know how to navigate around taxes to operate your business properly.
Understanding your tax liabilities will help your business grow and even help strategize your next move to improve your income. Moreover, neglecting your taxes can result in fees and penalties that can damage your company and lead to your business’s closure.
To help you jumpstart your business, we'll give you a quick and easy overview about ecommerce taxes. So take down notes and carve your way up to success.
If you’re a business owner and a seller, it’s guaranteed that you will encounter sales tax. All the items you will put on sale will be levied with sales tax. These taxes are certain percentages added to the final bill of your consumers. Customers pay for the sales tax, and business owners act as the middlemen that collect the tax and remit them to the proper tax collections agency.
However, as an online seller, your potential buyers can come from different places. In different countries and across states, sales tax differs, which may cause confusion among the sellers. Here are some practices to keep you up on track with these ecommerce taxes to run your business smoothly and properly.
If you are a business owner in the United States, it's important to know that 45 states impose different sales tax percentages, and five states don't collect them. Understanding how the sales tax works in your economic nexus will help collect them properly. Here are some key points to help you further.
If you sell your products through online marketing platforms like Amazon, Shopify, or Etsy, make sure to be aware of their policies. Online marketplaces have different programs that can help you collect and remit taxes hassle-free.
For example, when you sell on Amazon, the sales tax is automatically added to the final bill of your customer upon check out. Amazon will collect sales tax for you, and you can access the records of the amount collected in your Amazon seller profile to file the report at the end of each fiscal year.
According to Amazon policies, the sales tax rate they charge is higher than the law mandates because the collection service fees are payments for their simplified tax collection service. However, online platforms may vary in their policies, so it's best to check them out first to determine which marketing platform is best for your business.
If you already know your location and percentage of the sales tax, your next step is to register for a seller's permit so you can start collecting taxes. Not all states require permits, but it's best to check their local websites if they require one.
Furthermore, each state has different tax compliance and paperwork requirements. But, most states allow applications through an online process, so you can skip those long lines and hours of waiting in the revenue department.
There are different ways each state processes remittance of sales taxes. For example, some states require monthly and some allow for quarterly remittance. As a result, managing the collection and remittance of sales tax can be time-consuming and confusing. To help you manage the taxes, you can:
The ecommerce market is rapidly growing day by day. However, it's not enough that you know all the product trends to stay alive with the heavy competition. Other aspects of your business like inventory, advertising, finance, and taxes are also essential to keep your business on top. We hope this blog on the overview of ecommerce taxes helps you create a strategy for running your company smoothly.
If you need an extra hand to take care of technical stuff like finances and taxes, you can find your help here at Unloop. We have professionals who are experts on everything about ecommerce. Bookkeeping, income tax, sales tax, and even strategizing plans for your business—we’ve got them all. Your step ahead to success is with us, so what are you waiting for? Book a call with us now!
Tax is a word people don't like to hear—especially Shopify sellers. It's enough to make anyone feel nervous. But you can't avoid it if you don't want to pay penalties or possibly face jail time.
Fortunately, Shopify has robust sales tax collection software that collects sales tax on your behalf, but these software don't file or remit your sales taxes. So it's up to you to organize and take care of the nitty-gritty bit of filing your taxes, not to mention issuing tax refunds.
Sales tax compliance can be a daunting aspect of your Shopify business, but there are software apps that can help you with automation. Here are five software apps you can use to automate Shopify sales tax compliance in 2023.
TaxJar is a leading provider of sales tax automation services for eCommerce businesses. They help online sellers collect, file, and pay their sales taxes. TaxJar makes sales tax filing and payment easy, so shop owners can concentrate on what they should be doing: selling online.
Price: Starts at $19/month
Free Trial: 30 days
Zonos Duty & Tax is an eCommerce software developed by a team of professionals with extensive experience in the field. It can help you rest at ease with tax and duty compliance in the United Kingdom, Europe, and other international borders.
Customers won't be blindsided when they receive their items. There will be no unexpected taxes, duties, or other hidden costs. This should minimize issues with returned goods and costly returns.
Price: Starts at $20/month + 1.9% transaction fee for international orders.
Free Trial: None
Quaderno is a Shopify app that helps store owners with tax obligations and international compliance. It can help store owners who want to comply with international laws while also providing them with peace of mind that their enterprises' major tax, invoicing, and accounting concerns are taken care of.
It also helps owners keep track of their sales tax liability. The tool automatically calculates the sales tax rate for each state and jurisdiction and provides a streamlined way to file and pay taxes. Quaderno offers several other features, such as invoicing and reporting, that can help businesses save time and money. Quaderno is essential for any business that needs to manage its sales tax liability.
Price: Starts at $49/month
Free Trial: 7 days
LatoriApps' Tax Exempt Manager is a tax management software designed for store owners who want to stay compliant with the complex EU tax laws. Compliance with VAT rules for business-to-business transactions in Europe is tough. However, it's made a lot easier thanks to this software, which captures and verifies each customer's VAT ID automatically.
Free Trial: 14 days
Intuit's QuickBooks Online is a small business accounting software that gives users the ability to handle their accounting data in a single app. In addition, the software is accessible from any internet-connected device, making it a convenient option for business owners who are always on the go.
Price: Starts at $8.50/month
Free Trial: 30 days
If you're looking for a comprehensive sales tax solution or need help staying on top of your tax compliance, TaxJar or QuickBooks should do the trick. But as an eCommerce shop owner, you have a lot of things to worry about. From keeping up with inventory to managing shipping and customer service—there's a lot to stay on top of.
Of course, there's also the financial side of things. Keeping track of your sales, expenses, and profits can be daunting, especially if you're not accounting-savvy. That's where we come in. Unloop has a team of eCommerce accountants who are well-equipped and trained to handle accounting services in the US and Canada. Book a call with an expert today to learn more!
Financial forecasting is the backbone of good financial planning. It directly affects your budget planning, investments, and strategic decisions for your business. If you're not doing budgeting and forecasting for your business yet, this year is the time to start.
There's more to forecasting than spreadsheets. Many things can affect a financial forecast other than numbers and some formulas. Fortunately for business owners, technology makes forecasting easier.
Businesses can use several budgeting and forecasting software to help predict their finances. To help you choose which one is best for your business, we've listed some of the best forecasting software options in 2023.
Even a structured business model needs financial forecasting to prepare for the future. It's a big problem when businesses run out of cash or are not prepared for the surge of expenses to keep their business running and retain their clients.
Accurate financial forecasts are valuable to every business, may it be big or small. Most businesses start with an Excel spreadsheet to develop their financial forecasting. However, doing forecasting in spreadsheets can be complicated because of the following reasons:
Forecasting in Excel is doable, but it is time-consuming and tedious. Developers are continually making software solutions for more progressive, innovative, and convenient forecasting. With that, here are the top budgeting and forecasting software products you should check out.
Cube is one of the top-rated forecasting software for businesses. Here is a quick overview of the great features of Cube.
Cube is the best financial software for startups that want to quickly transfer their data from manual spreadsheets to forecasting software without having to study complicated interfaces. Cube is best for faster workflows and is optimized for easier collaboration. Some of the functions of Cube include:
AnaPlan forecasting software is designed to plan for complex scenarios and do intelligent forecasting for faster and more accurate decision-making. Some of the key benefits of using AnaPlan are:
AnaPlan is best for bigger businesses with a dedicated IT team that can handle the complex controls of the software. But for smaller businesses, Vena is a suitable choice and almost similar to AnaPlan.
Planful is an affordable cloud-based solution for structured and dynamic planning, consolidation, and reporting. Planful offers:
Planful has AI-enhanced operations and functions that allow businesses to lessen the number of people they need to hire in the financial department. This overall lessens expenses in hiring staff.
SAS Forecast Server is popular for businesses because of its ability to generate accurate forecasts in a short period. More than quick forecasts, SAS has many great features to let you be in full control of your finances.
The forecasting software has easy-to-use GUI that can:
Its scalability and modeling offers:
The SAS forecasting software has many great and advanced features which makes this forecasting software good for small businesses and large enterprises. It can take some time for business owners to familiarize themselves with the software, but the product has official demo videos to help new users out.
Bizview is another cloud-based solution that can streamline your planning, forecasting, and budgeting processes in one software. You can access this software anytime and on any device as long as you have a stable internet connection.
Here are some of the features of Insight Software's Bizview:
Bizview has an interactive Excel-like interface which is also why many business owners prefer to use this software. It is also the most affordable software you can use for small businesses.
Streamline is the leading forecasting software of the first quarter of 2023. Its revenue forecasting processes are realistic, innovative, and quick to ensure that your business is on the right track when it comes to planning budgets and making strategic decisions.
Here are some of the key features of this forecasting tool:
There are hundreds of financial budgeting software available for businesses to use. It is just a matter of choosing the right software for your needs. The aforementioned forecasting tools are some of the best examples you can get for your business, but don't be afraid to explore and find software to suit your liking and needs.
If you need a professional for your budgeting and forecasting needs, Unloop can do the job! Our services include revenue forecasting so we can help small businesses like yours in their growth trajectory.
We use your business's historical data to determine any pain points and fix them before they happen. We will also set your business up with reporting software for accurate forecasting. Monitor your financial performance today and book a call with our experts!
A common characteristic of an early-phase startup is that it is all cost. During the early phase, the startup founder tries to build a new product without the certainty of commercial value. Perhaps they even put their savings on the line to get to the product launch, and for most entrepreneurs, that's all they care about.
That's why accounting never crosses their minds. Yet, this can also be the key to measuring how far they've come and if they should continue. Let Unloop unpack the methods of startups and why founders should establish an accounting system early on.
A startup is a newly founded business, regardless of size and methodology. Until the late 2000s, most people's idea of a startup was just that—a new business. But since then, the idea of creating startups has become standardized and more focused on innovation. That's why people in the business world often associate it with big tech.
But the standard methods of a startup aren't exclusive. So whether you're a budding small business owner trying to launch a new product on Amazon or a group of co-founders creating a better AirBnb, you're most likely following the steps below, consciously or otherwise.
The founder sees the problem or the opportunity in the market, but there's no one offering a solution. If there's anyone offering one, it's ineffective. The founder sees this and knows there can be a better way, so they think of ideas on how to make things better.
They run every idea under the feasibility, profitability, and market reception criteria. Then a shortlist is created and screened until the founder decides on one solution to pursue.
After the founder decides on a solution, they may bring in more people to help materialize it. The team will conduct further research to flesh out the processes and features of the product.
The idea is to develop a product with all the essential features to make it functional. This is called the minimum viable product (MVP) or prototype.
During the beta testing phase, the founder and their team release the prototype to a select group of consumers. These people will use the product and give the team feedback about user experience and possible improvements relative to their needs.
This process can be a continuous cycle for each proposed product. Iteration means going back to the drawing board to make improvements to the product prototype or, if found unviable commercially, to scrap the product and move on to the next.
Iteration usually happens after beta testing, but it can still happen even if the product has already been launched.
Formally founding the startup by determining the legal structure is also flexible. It can happen even before the brainstorming process or after a successful beta testing. This step involves registering the startup as a formal business—usually a corporation—with the founders and the team getting a piece of the initial private stock offering.
The point of legalizing the business is to manage risk. For example, the founders can limit their risk exposure to the shares they own with the startup. The government requires that startups register for compliance and tax payments, while the consumers will see a legalized business as trustworthy.
Formal product development starts when the consumers see value in the product they're testing, enough to pay the price the startup is asking. At this phase, the team has gathered all data from the beta testing and all the necessary iteration data. They're now ready to build the product with more polished features.
The final phase is when the startup produces the final product and officially enters the market. If it's an application, consumers can download it for a price. If it's a physical product, it's put on the shelves or uploaded as a product listing on a website or an ecommerce marketplace.
Based on the methods laid out above, we can build a case for getting your accounting ready as early as possible. Here are some things that happen when you run a startup.
The development will take time, whether you’re innovating a disruptive solution or offering a simple product. Depending on the complexity of the product, it can be days or even years before you build your first MVP.
We've all heard of the adage time is money. So all the time spent renting a co-working space to brainstorm and develop a product will add up and cost the founder. In most cases, they will lose track.
Funding doesn't always come from the founder. In some cases, the founder may only have an idea, a skillset, and a few people willing to contribute labour. If they want the startup to take off, they'll need outside funding.
The best bet will be venture capitalists and private investors, and they will need to see how their investment is performing. So it's always a good idea to account for the money you're meant to grow.
In a typical scenario, people working in a startup are doing it part-time as a passion project. But once it gets off the ground, things can get more hands-on to the point that most or all the people involved in the project will need to work full-time.
When the founder and their team dedicate themselves to the project like regular employees, they'll need a salary. This means they have to pay taxes. That's where startup accounting can help.
If there's a single expectation you should have before performing accounting for startups, it is that profits may not roll in soon. Like product development, it can take months or years to realize a positive bottom line.
By establishing an accounting system early on in the startup, you'll know whether you're already making a profit from the day-to-day operations or are still on the road to paying your startup costs before the product launch.
When it comes to startups, the decision to establish an accounting system early on is a low-priority task. That’s reasonable, considering there is no business coming in yet. Everything is a study. It’s only when investors throw big money at it that founders begin to appreciate the benefits of accounting. But let us show you what getting your accounting fixed early will do for your startup.
For startups, establishing an accounting system can be as easy as subscribing to accounting software and having a team of experts run it part-time. An accountant or bookkeeper recording financial transactions of the startup helps place the foundation of the accounting process that will grow along with the startup.
This means no more headaches about planning the right processes later, as it can get more complex when the startup becomes a medium or large-scale business.
All the financial data should be recorded properly at the beginning. Even if it's all going to the expense account, it can become part of financial reports during the product development phase. This information is useful to the founders and other stakeholders as it gives them an idea of how the business is budgeting its startup resources.
Once the startup becomes a fully-operational business that earns profit, all the business transactions recorded also form part of the financial statements (i.e., the income statements, balance sheets, and cash flow statements). This information will be essential for evaluating how the business is doing.
Financial statements help owners make important business decisions, such as taking the company public, requesting another round of investments, or closing shop.
Another thing that happens with startups is disorganized finances. Some founders think that the money they toss into their de facto startup is unofficial as it isn't formally registered to any trade and commerce authority. So their personal finances and their startup are one and the same.
Employing an accounting system from the get-go helps founders separate personal and startup transactions. This makes reconciling bank statements and financial reporting for the startup smooth sailing in the long run.
Recall that when founders and the team start getting salaries for their work in the startup, they're obligated to remit payroll taxes, especially if the startup is already legalized.
Once the startup earns significant profits, it may be subject to different taxes. For example, an income tax is an obligation of any business entity. During tax season, they must file income tax returns to stay compliant. Establishing an accounting system early on and having it run by experts will make filing easier and more accurate.
To close, consider that even the smallest projects incur costs. To measure the project’s success, the cost incurred to pull it off is always part of the equation. That goes the same for startups.
So whether you’re in the ideation phase or already on your 100th iteration pre-product launch, an accounting system will help you count your costs. This gives you, the founder, the chance to recoup them.Unloop can help you establish an accounting system that fits your needs, whatever startup stage you’re in. So book a call with us if you want an accountant for your startup business, or check out our bookkeeping services now.
The wine business is one of the most vertically integrated businesses there is. A vineyard can work down the supply chain by building a winery. It can even go further and establish an ecommerce storefront!
This integration may come with reduced cost and higher profit margins, but it also comes with complexity, particularly in accounting. Having three businesses means having three separate accounting systems. Sounds daunting? Let Unloop show accounting for vineyards and wineries to you as simply as we can.
At the top of the wine industry supply chain is the vineyard. This business takes care of grapefruit planting up to harvesting, which wineries will use as a raw material for making wine. The following is the vineyard's production process.
Farmers plant rows of grapes on a vast land using machinery and direct labour, which takes days to finish depending on the vineyard's land area and available labour.
From the time when farmers plant the grapes, there's a period of dormancy that takes years. During these times, activity is focused mainly on pruning the growing branches to ensure high-quality grape yields.
Veraison is the peak period of growth for grapes. A time when the grapes are ripe and ready for picking.
Manual laborers select grapes and clip them off the branches. This is the final step in a vineyard's lifecycle. During this time the grapes are shipped to a winemaker or made into wine in-house.
A vineyard is heavy on agricultural activities. So the production is long-winding and it will take years before the vineyard realizes a profit. Given the situation, accountants follow these practices.
Accountants and bookkeepers use the cash accounting method, also known as the cash-based method. That's because this method makes it easy to record production costs accurately.
According to accounting principles, since a vineyard vertically integrates to a winery, accountants use COGP to allocate vineyard costs associated with growing grapes, such as direct labour, overhead, and other supplies and activities involved in the process. Accounting professionals do this to avoid any miscalculations and confusion between the cost pool of the winery and the vineyard.
Grapes take years to grow. As a result, the vineyard only gets revenue after several years. During that time, farming costs add up without any income to offset them. To resolve this problem, accountants may capitalize the vineyard's expenses so the business realizes a profit according to the total sales in the given period.
Harvesting the grapes is the departure point of the vineyard and the start of the winery production processes. In the winery, the grapes are turned into wine and are stored as collections for sale in the future.
In most cases, vineyards also have a wine production facility (i.e., winery)—that's why the two terms are often confused. But a winery has a separate process.
The winemaking process starts by pouring the grapes into a crusher to extract the juice and make the must.
After the winemakers extract the grapes to form must, they introduce yeast strains into the must to start the fermentation. In most cases, wine producers also purify the must of any unwanted natural yeast to achieve desired quality.
From the fermenting tank, the winemakers will filter out any unwanted debris or pomace from the wine. They do this by transferring the liquid to the barrel or filtering using chemical processes.
At this stage, the must becomes wine. If the winemakers want to age the wine for a better taste, they will put it in bulk wine barrels and store it for inventory.
If the wine producers want a quick turnover, they can transfer the wine to a green bottle and sell it in the market. The consumer can opt to bottle-age the wine or consume it after purchase.
As briefly shown above, wine production has a different behaviour compared to the vineyard. It has similar functions to a general manufacturing process, with some nuances. As a result, accountants adjust their practices according to the winery's needs.
Accountants use the accrual basis accounting method for wineries. It's a rational choice because obtaining the raw material for winemaking may not need to be paid immediately due to integration. On the other hand, getting cash from a sale of a barrel or bottles may also take time. To avoid any miscalculations, accountants record transactions once incurred.
Wineries use the common COGS system primarily because they have a tangible good that they can sell for a profit.
At present, many wine sellers take their products online. Ecommerce marketplaces offer a vast network of wine consumers, making it attractive for sellers of all kinds. Below we will discuss two models wine sellers can get into.
A third-party seller can offer a wide variety of wines from different wineries. They are strictly retail. A third-party wine seller must also follow the steps a direct-to-consumer takes to have an ecommerce presence (see next section), but they have two additional core steps they must do to enter the ecommerce market.
Source a Wine Supplier
Sellers search for wineries, wine wholesalers, and distributors to get their products. They buy bulk to get a lower price and sell for a profit.
Create a Brand
To get credibility, third-party wine sellers create a brand that will serve as their identity for doing business. This will help them differentiate themselves from the rest.
Wineries now have the ability to sell their wine bottles directly to consumers using the power of ecommerce. Smaller wineries are often the ones engaging in a D2C. This model offers a high profit margin and makes for a smooth transition, given that they already have the supply and the brand. All wineries have to do are the following.
Set Up an Online Store or Marketplace Seller Account
If they're selling their wine on Amazon, they'll have to register for a seller account and put all the necessary information about their winery. They'll have to wait for the account activation afterward.
Upload Wine Inventory
Once they have an active seller account, the winemakers can start taking photos of their wine inventory and post them online with full descriptions and other helpful content.
Plan for Wine Packaging and Shipment
Wine bottles are fragile, so producers must plan their packaging and shipping to avoid any in-transit mishaps. They also have to check state laws regarding alcohol selling and distribution.
Engage in Digital Marketing and Advertising
Once producers have an online presence and have sorted out their shipping and packaging, the wine producers can start marketing online. They can hire a digital marketer and other online professionals to find customers and turn their bottles and barrels to revenue.
The challenge of running a winery is that it has two different accounting systems in place—one for the vineyard and another for the winery itself. Plus, taking the business online will be like creating a separate retail business. Therefore, wine producers must establish another accounting system. Here's what wineries can get when they outsource their financial management.
Accounting professionals will record all the ecommerce business financial data using double-entry accounting software, such as QuickBooks. This service will include generating financial statements and other financial reporting documents as needed.
The ecommerce retail side of the wine business will have separate COGS recordkeeping. Accountants and bookkeepers report this financial data to you or include them in the income statement for your analysis.
The ecommerce business will have to pay different taxes for accounting compliance. The usual ones are sales tax and income tax. Outsourcing your accounting for ecommerce will give you a team of experts who can help your accountant with their tax filing obligations using an accurate record and other data as needed.
Whether you own a vineyard or are a third-party seller, outsourcing your bookkeeping and accounting will lift a huge burden off your back.
Ecommerce has a lot of potential to scale. If the demand for wine spikes, it will be more challenging to do your accounting on your own, so leave it to experts and focus on growing your wine business.Book a call with us if you want to discuss how this works, or you can also check out our bookkeeping services now.
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.