Blog
Business
How the Accounting Industry Can Help Businesses Keep Up

How the Accounting Industry Can Help Businesses Keep Up

How the Accounting Industry Can Help Businesses Keep Up

E-commerce is on the rise – there’s no doubt about that – and we know the pandemic has played a part in accelerating the shift. We analysed over 100 million anonymised business transactions between 2019 and 2021 revealing how businesses spent their money during the pandemic. 

Our research showed that businesses are shifting to e-commerce and digital solutions at a faster rate than before the pandemic. Software and technology spending rose 66% above pre-pandemic levels with a boom in digital advertising in the UK alone. 

But what does this mean for the accounting industry? Our in-house ‘Dextperts’ Paul Lodder and Katie Hoare weigh in.

1. New tax implications

With many more businesses choosing to do some selling online, the world of potential consumers is suddenly wide open. But this can open a whole new can of worms when it comes to tax compliance and planning. 

It can be easy to set up a Shopify business, but that doesn’t mean business owners have thought through all the planning that goes with it – which is an opportunity for accountants and bookkeepers to make sure business owners have got the right structure for their e-commerce business.

Some businesses may very quickly approach and go over the sales threshold and so need to register with the appropriate tax authority (e.g. HMRC in the UK). However, if the business owner is only checking activity on a quarterly basis or even less frequently, then they may end up going over the sales tax threshold without the accountant or business owner realising. This could have implications (cash flow, penalties and interest) due to under-declared output tax that would need to be subsequently disclosed and rectified.

2. New services

Accountants and bookkeepers who are specialised in e-commerce accounting and who have a good knowledge of the processes involved can also help business owners maximise their opportunities and help them achieve their goals. They can advise on what platforms have been the most successful and help them keep track of all the information and insights that are needed to make informed and timely decisions – particularly if they are a first time business owner and need help through all stages of starting and running a business.

Accountants specialising in this area may even choose to take on a virtual Financial Director (FD) role – taking part in the day-to-day operations of a small business, attending board meetings and preparing the management accounts. 

3. New tools

A good e-commerce accounting tool needs to help clients specifically collect information from as many different different online sales platforms as possible and provide that information in a format that is user friendly and easily understandable. Ensuring that sales income has been correctly recorded as gross with any fees deducted being shown separately is key so that sales are not understated – most platforms bring in sales net (after the deduction of any fees by the platform provider). By not showing sales before the deduction of any fees the risk is any output VAT is miscalculated.

It also needs to be able to standardise the way in which the information is presented, because each of the online sales platforms will present and export information differently. And it needs to be able to support meeting local tax requirements and create reports that are helpful for both insights and for compliance reporting. Reporting will tell you if the clients are about to hit that threshold and keep them from making costly mistakes like that. 

Accountants are also best placed to provide insights, e.g. benchmarking – so they can help inform the choice of appropriate platform for their business e.g. Shopify versus Etsy. 

Dext Commerce is the best way to get the reporting and insights you need, consolidate sales data, and ensure tax compliance. Request a free trial today.