Why Is Accounting For eCommerce More Expensive?
The complexities and nuances of eCommerce accounting can be a challenge for a traditional bookkeeper. Having an Amazon Seller Accountant preparing your monthly financials can be worth its weight in gold. At the same time, you need to understand that there are a number of differences between accounting for a traditional business and accounting for an eCommerce business which causes it to be more expensive as well.
Why Don’t Bookkeepers Understand eCommerce Accounting?
Oftentimes we find that the reason a traditional bookkeeper doesn’t understand the nuances of eCommerce accounting is not that they don’t understand accounting. It’s that they don’t understand the flow of information for an eCommerce business. Understanding the flow from Amazon to A2X to QBO and the details that take place are typically the hang-up. Or if they aren’t utilizing tools like those to create monthly financials, they struggle to understand what the Amazon Seller Statement is telling them. As the owner, you will more than likely consistently review financials that are understating sales and expenses.
The in-between steps are critical.
For a traditional business, you can tend to lean heavily on the bank statement in order to get a correct picture of the month. For eCommerce companies, we need to start with the sales channels instead of the bank account. The bank account only reflects the net deposits for a seller. While Cash is king it is important to understand that it doesn’t paint a clear picture of how the business did. It also doesn’t tell the owner important information in terms of fees, discounts, returns etc. The information that an Amazon Seller Accountant needs in order to get that clear picture is in a couple of different sources.
For many eCommerce companies, inventory management is not as straightforward as a company with a brick and mortar location. Inventory can be spread across multiple locations and then reconciled across multiple channels. Ensuring that your inventory is being properly accounted for directly affects your Cost of Goods Sold and subsequently your Gross Margin. Both of these accounts are extremely important as an eCommerce owner. COGS will be your biggest P&L item and Inventory is your biggest use of cash.
If you are having significant fluctuations in Gross Margin month to month or possibly writing off inventory and then finding it the next month dig in here. To ensure that inventory is being tracked properly it takes someone trained in the intricacies of eCommerce accounting and more time. Typically, this is one of the areas we spend the majority of our time in order to ensure accuracy. This will allow you as the owner to make decisions on sound information.
So why does it cost more?
If you want accurate financials as an Amazon Seller you need to understand that it is a more in-depth process. A process that an Amazon Seller Accountant took the time to educate themselves on gain knowledge and understanding with regard to the flow of information. Outside of the expertise, there is also additional software costs that go along with the process to help manage the volume of transactions. Also, understand that the longer you go with inaccurate information the harder it will be to grow over time.
We are eCommerce accountants. We would be happy to assist.