If you are like most eCommerce business owners, you don’t know what you don’t know when it comes to finding and vetting a new eCommerce accountant.
Is the accounting firm qualified? And, how do you even check this if you don’t have a finance background?
What services do they offer? Do they match up with what your business actually needs right now?
Have they worked with businesses like yours? Not just revenue-level, but also the channels you sell through?
Does their personality and communication style mesh with you and your team?
Can you actually trust them with intimate company and personal finance details?
Then, there’s the topic of budget. Do they charge by the hour, a fixed fee, and can you actually afford it?
These are all questions you need to be thinking about when you are hiring an accountant, especially since the switching costs of having to replace your accountant if it doesn’t work out are painful and potentially VERY expensive.
In this guide, we’re sharing everything you need to know when hiring an eCommerce accountant.
- What does an eCommerce accountant do?
- When should I hire an accountant for my eCommerce business?
- How much does it cost to hire an eCommerce accountant?
- When to hire a general accountant vs. a niche eCommerce accountant
- What to think about when hiring your new eCommerce accountant
- Ready to hire an eCommerce accountant?
What does an eCommerce accountant do?
An eCommerce accountant specializes in helping businesses that sell products online stay compliant. From helping handle bookkeeping to accounting and tax help, your eCommerce accountant should create and maintain reliable financial systems and processes.
These processes might include the following:
- Tax preparation: This can include everything from sales tax registration in any state where you have “nexus” to your annual tax returns.
- Inventory and cash flow forecasting: If you know where your money is going and how fast specific SKUs are selling, you can create detailed forecasts to help with business decisions and planning.
- Prepare financial reports: From your P&L to your balance sheet and cash flow statement, an accountant can help you not only prepare these reports but also analyze them.
- Bookkeeping: Make sure your chart of accounts is up to date on a weekly or monthly basis. This is essential for accurate financial reporting as well as making tax time less stressful.
When should I hire an accountant for my eCommerce business?
In an ideal world, the first person you work with should be a freelance accountant or third party firm. That’s because they can help you get set up with a solid financial foundation—be it business setup, tax prep, and general financial processes.
Hiring someone to handle your finances the right way from the start of business ensures that you won’t need to worry about tax law, payroll processes, or updating systems on your own.
It is particularly important to have a great one early on if you plan to sell your business someday. That’s because you need a minimum of 18 months of detailed seller financials leading up to a potential sale.
How much does it cost to hire an eCommerce accountant?
It depends. However, the two most common pricing models for eCommerce accountants and accounting firms are:
- Fixed-fee: This means you pay based on agreed-upon deliverables instead of paying your accountant or accounting firm based on the hours they spend.
- Hourly: Initial pricing can range from $30 and $350 per hour depending on their skill set, experience, niche, etc.
Another factor to consider is if you are looking to hire a freelance accountant, a third-party full-service accounting firm like Bean Ninjas, or an in-house accountant.
When to hire a general accountant vs. a niche eCommerce accountant
When you are first starting out, a general accountant in your hometown can work well. They likely serve a hodgepodge of businesses in your town, from the local diner to the personal injury law firm to your eCommerce business. That’s totally fine if all you need help with is tax prep at the end of the year.
However, as your business scales to 6 and 7 figures and beyond, you are likely going to outgrow your local accountant. That’s where a niche accountant firm that only works with eCommerce businesses, like Bean Ninjas, can come in handy. Because they do so much work with eCommerce businesses, they have deep expertise that is particularly useful when it comes to cash flow forecasting, inventory management, and financial strategy and reporting.
For example, if you sell on your site via Shopify or WooCommerce and also through third-party marketplaces like Walmart, Amazon, and Etsy, you are going to need to streamline your inventory and cash flow management as you scale. That’s when working with a niche eCommerce accounting firm can be a competitive advantage.
What to think about when hiring your new eCommerce accountant
Here is how to think about hiring and building your dream accounting team.
Under $100k in annual revenue
While we recommend hiring an accountant as soon as you can afford it, you don’t need much when you are doing less than 6-figures in annual revenue. In fact, your best bet will be a general tax accountant to make sure you are starting your eCommerce business on the right foot.
Here is what a tax accountant can help you with at this point:
- Help with business incorporation and setup
- Set you up with cloud accounting software like Xero
- Prepare and file your end of year tax returns
Related Reading: 8 Xero Setup Things Most People Forget
6-figure eCommerce businesses
At this time, you should have either a third-party full-service accounting firm or a freelance accountant and a bookkeeper.
In addition to the accounting tasks outlined above, you should also be doing the following:
- Keeping your bookkeeping up to date in Xero / Quickbooks
- Sales tax filing and compliance
- Inventory management & reporting
- Financial reporting and light modeling
- Payroll processing for both employees and independent contractors
One of the biggest mistakes that we see business owners make at this stage is delegating their bookkeeping to their virtual assistant to save money. If your virtual assistant isn’t a certified bookkeeper, this will often result in losing lots of time and costing you more money at tax time.
7-figure eCommerce businesses
Many eCommerce business owners think they need to upgrade to a full ERP and hire an in-house CFO when they are solidly in the 7-figure club. That’s often not required at this size of business.
For most eCommerce businesses, you are not going to run into serious limitations within Xero or Quickbooks until you are doing at least $25 million in annual revenue.
As for hiring a full-time CFO, this can run you upwards of $400,000 a year in annual salary and benefits.
A much more cost-friendly alternative at this stage is to work with a full-service accounting firm that has a virtual CFO on staff. This way, you can get the strategic financial advice you need on a part-time basis at a fraction of the cost of a full-time hire.
In addition, at this point, you should also be doing the following on a regular basis:
- Inventory forecasting
- Cash flow forecasting
- Setting financial goals & KPIs
- Financial dashboard setup & analysis
If you are still using a generalist accounting firm, this is when you will likely experience more pain by not switching to a niche eCommerce accounting firm. This will either manifest in “not knowing what you don’t know,” or your firm making mistakes.
8-figure eCommerce businesses
By the time you are doing $25 million, you should have at least one full-time financial employee in-house. This will most likely be a financial controller. The primary role of a controller is to oversee the financial strategy and activity of the company.
This can include everything from establishing financial budgets to overseeing everyone on the accounting team—be it in-house accountants and bookkeepers or third-party accounting firms.
Ready to hire an eCommerce accountant?
You don’t need to go it alone. If you are looking for a new eCommerce accounting firm, our team at Bean Ninjas can help. We specialize in working with 7-figure eCommerce businesses in the US, UK, and Australia. Many of them sell in multiple currencies on both their website and through third-party marketplaces. Schedule a free call today.