For decades, ecommerce has been changing the way companies across various sectors do business including selling products and delivering services. There has been an even greater uptick in online business in recent months, as the pandemic has kept people at home and forced businesses to find new ways of engaging with customer bases.
These days, more and more accountants are looking to help clients engage in ecommerce. What they’re quickly finding, however, is that the process for ecommerce can look very different than what they’re used to with a typical brick-and-mortar business client. Among the biggest differences are issues related to tax and inventory.
On August 11, 2020, at 2:00 p.m. Eastern Time, Webgility is offering an in-depth webinar on the nuts and bolts of ecommerce for accountants looking to join the world of online retail. In this webinar, we’ll discuss the most pressing inventory and tax issues relating to accounting ecommerce. You can register for this webinar here.
Controlling Inventory
New sales channels adds complexity to inventory management, receivables and business analytics. When supporting ecommerce clients, you need to make sure that you’re still tracking inventory and that the software tools you use for inventory management are suitable for handling online inventory. If not, you should consider implementing new tools that are designed to track what clients are moving online, so that you can accurately manage workflows and numbers. Monitoring order processing, shipping, and account information are all critical to successful accounting for ecommerce.
In order to best prepare yourself for the new complexities of online inventory management and accounting, you need to strategically choose a useful system and then commit to consistently using it. Make sure that the guidelines built into the online inventory management system align with the physical inventory that already exists and the processes for managing that inventory. The two systems need to work as one over time as clients establish themselves as a dual-channel business.
Adding ecommerce is also a great opportunity to clean up a client’s data surrounding current inventory. This is important because then a client’s new system is poised to produce clean data for better tracking. As you help clients implement a new online business model, it’s important to rely on business analytics for success. It’s critical to monitor things like product levels and returning customer levels to gauge performance and sales levels to ensure maximum profitability.
Tax and Compliance Issues
Adding ecommerce channels for clients also means that you’ll need to become familiar with new tax laws and payment methods. Familiarizing yourself with the U.S. tax rules and the specific tax laws of each state is the most important thing you can do to ensure success with accounting ecommerce.
Taxes can change based on a number of factors, including whether a client has employees or inventory in certain states and what the shipping thresholds are. Shopping cart tools are very useful for calculating tax, but it’s critical that the tools are calibrated and running correctly, or the client may end up paying taxes themselves. As sales activities start to ramp up in certain locations, you can add tax channels to reporting, improving the ability to manage taxes over time.
As with inventory, when you help clients add ecommerce and become a dual-channel business, the tax treatment will change. Between educating yourself and choosing the right tools, the goal is to develop a seamless system for calculating and acquiring taxes for your clients. Chances are, this system will look very different than whatever system you used when the client was only a brick-and-mortar business.
For more need-to-know tips for accountants transitioning to ecommerce and to get answers to your most pressing questions, please join us for our Insightful Accountant webinar on August 11 at 2:00 p.m. Eastern Time. You can register fo this webinar here.
Author Bio: Colin Cates is product manager at Webgility, Inc. He started his career with Webgility five years ago as a customer success engineer team lead and worked his way up to product manager. Through is continued conversations with customers and industry-specific research, Colin has provided strategic direction as well as creating value-add opportunities for product development. Colin is based in the San Francisco Bay Area and can be reached by emailing colinc@webgility.com.