With many stores still closed and everybody spending more time online, it’s no surprise that there has been an explosion in demand for online shopping. Going online is a great opportunity for small businesses to expand their offering and grow their customer base (including their international reach), but setting up a successful ecommerce platform comes with its own challenges.
It’s essential to have your financial house in order before you start expanding into new areas, and it’s vital to implement best practices from the beginning of your ecommerce journey to avoid headaches down the line. Fortunately, accountants can offer expert guidance through the world of digital sales.
Breaking down reports
If you don’t know your numbers, you’re flying blind – but Amazon, Etsy, eBay, and other online sales platforms all use vastly different reporting methods. If you’re using multiple platforms, this can quickly become tricky to manage. Fortunately, accountants can interpret the various reports and ensure nothing slips through the cracks.
Paul West, Director of Strategy, Training & Acquisitions at AVASK Accounting emphasises, “It’s vital that ecommerce businesses understand the options available for reporting provided by the various selling platforms to obtain correct information. For example, there are so many different Amazon reports, an accountant specialising in ecommerce can make sure that you’re using the right one.”
Paul also insists that management reporting is essential for any business launching in a new industry. “Financial reporting allows you to view the areas of your business that are profitable and make relevant business decisions. Ecommerce is fast-moving and requires sellers to quickly adapt to remain profitable. Entrepreneurs require transparency and easy access to their accounts so they can make quick business decisions.”
Juggling tax regulations & legislative changes
Ecommerce business leaders have the luxury of storing and sending goods from wherever they like. That can mean keeping costs down, faster delivery times or boosting supplier relationships. However, there are hidden tax implications to where you choose to store your stock if you’re selling in multiple countries.
Paul explains, “Choosing an accountant with a sound knowledge of currency, import and export rules, and the compliance issues around that are vital for ecommerce businesses.”
Additionally, European governments are implementing rapid legislative changes to ecommerce regulations. Paul believes a seismic change is coming as Governments’ become increasingly aware that they need to have stringent checks and controls on ecommerce sellers to ensure tax compliance. “It’s becoming clear that at the heart of all strategic planning should be the contingency for prudent advice on taxation,” he says.
One significant benefit of ecommerce is the ability to sell globally, but this means that foreign income needs to be considered. While losing amounts to currency transactions can seem minor at the time, these losses can quickly add up. Accountants are best positioned to advise on ways to minimise exchange losses.
Paul recommends setting up a currency account: “A currency account will enable you to hold funds in a certain currency and then make relevant payments in that currency also, meaning no exchange into your domestic currency needs to take place.”
Bring on an accountant
Expanding your business onto an ecommerce platform is a great opportunity. It’s important to work with an accountant who understands online sales and cross-border tax implications to help you avoid any pitfalls along the way. If you don’t have an accountant, check out the Xero Advisor Directory to find one.
Visit our dedicated site for more resources, webinars and inspirational stories to help you emerge stronger from the COVID-19 pandemic.