Accounting for eCommerce

Should you hire an accountant?

The answer to this question depends on a number of factors – although in the majority of cases, businesses need accounting support.

While it is easy to see hiring an accountant as a cost to your business, it is better to consider it an investment – because they will free your time, give you advice, and keep your business on track to achieve the growth you’re aiming for.

What can accountants handle for me?

When you start working with accountancy professionals – especially those that have specialist knowledge of the eCommerce industry, you can expect:

Someone who understands the challenges of online retail and the relevant financial regulations

Someone who knows how different sales channels work, and release your money

Someone who can recommend, and help you use the right bookkeeping and accounting tools effectively

There’s often confusion about what accountants can handle for your business, and there are different types of accountant, which makes it even more confusing. The key services below are the ones that you’re most likely to need assistance with in an eCommerce business, so when you start your search, these are the ones you’re going to be looking for.

Accounting

Accountants are the professionals that help you to ensure your business is fully compliant with HMRC and Companies House. They can act as an authorised representative for you, which means they can liaise with those bodies on your behalf. An accountant will complete reporting and forecasting, as well as helping you with strategies to support the growth of the company, and of course, preparing and submitting your annual tax returns. In most cases, they will provide you with access to cloud-based accounting services such as QuickBooks, Sage, or Xero, and they may connect these to your business bank account, as well as your Shopify, WooCommerce, and other retailing apps like iZettle, to streamline processes.

In addition to these key services, because accountants see exactly what is going on in your business, they are best placed to offer you advice about how to make improvements. Some accountants may not say they are business experts, but they can definitely highlight areas that you can make savings, streamline your operations, and more.

Bookkeeping

Bookkeeping isn’t the same as accounting – you can think of it as like the bit before accounting happens. This is the bit where all the financial data, and information about transactions is sorted, before the accountant takes over to make their recommendations.

Many experienced bookkeepers will have knowledge about accounting processes, and as such may be able to offer you advice about your business, but accountants have a very different skillset. Don’t expect that a bookkeeper will be able to offer you the same service as an accountant – and indeed, most will tell you that they cannot advise you or carry out accounting services, as they are not qualified, or may feel ill equipped to do so.

Payroll

Depending on how you have your business set up, and if you have regular employees, you may need payroll taking care of for you. They may use QuickBooks, Sage, or Xero, or they may use a different platform for payroll activities, such as BrightPay.

VAT

You’ll need to be concerned with VAT as you scale your business. In the UK, businesses must register for VAT when their annual VAT taxable turnover hits the legal threshold – at the moment, that’s £85,000. There is a lot involved in staying compliant with VAT requirements, including:

This can be a bit of a headache to handle, which is why so many VAT registered businesses rely on their accountant to help them manage their VAT.

Self Assessment

Your individual circumstance will dictate whether you’re required to submit an annual Self Assessment Return. Accountants can help you to manage your submission, and are likely to send you reminders to ensure you don’t miss deadlines. HMRC are hot on deadlines, and there are large penalties to be paid if you don’t pay your Income Tax on time.

Registered office

If you don’t have a physical location – an office – then you might just go ahead and use your personal, home address to register the business. However, that can create serious security concerns, especially if you’re going to be using that address on your marketing materials and communications. Most accountants will allow you to use their address, or a virtual office, which means you can use a registered business address in all of those places, without worrying about security.

How to choose an accountant

It can be tempting to choose an accountant based on one that a friend has recommended – that is how so much in business works, right? But while recommendations are important (check reviews, just the same as if you were looking at any other business) if your friend is a builder, their accountant may specialise in CIS for tradesmen, which isn’t so helpful for you in the eCommerce industry. There’s a lot of nuances between industries, and so it is worth finding one that has specialist knowledge of how marketplace disbursements are issued and so on.

When you’re looking for an accountant, you’ll need to decide whether a one-person practice, a small accountancy firm, or a larger company is right. And don’t forget, because most accountancy work can be done remotely, you can work with companies that are further away if they’re the right fit for you – although being close by may be desirable for some people.

If you’re deciding to work with a certain accountant, make sure you know the answers to these questions:

Each business owner will have other questions that are relevant to their particular business, but these are the ones that will give you a good feel for how the accountant works, and whether they are a good choice for you. You should be able to find most of this information on their website, but if not, make sure you get these answers by the time you’ve spoken to them. That way, you can minimise the chances of needing to change accountant down the line.