At Turas Accountants, we have dealt with many ecommerce businesses over the past 10 years.
We have seen so many businesses that struggle with keeping their accounts in good order, and it’s no surprise when you are trying to juggle all the different elements of running a business.
We have put together a list of 10 of the most common mistakes ecommerce businesses make with their accounts:
1. Not having a clear accounting system
An essential part of running a business is making sure you have a clear and organised accounting system in place right from the get go. The system needs to be set up so that it is quick and easy for you to keep up to date and allows you to track your income and expenses accurately. This will help you massively to make informed financial decisions about your business. Keeping your records filed securely and in an organised manner is very important for completing your tax returns.
2. Not keeping your books up to date
Bookkeeping is one of the elements of accounting that we really like to promote having a good system in place for, above everything else. It really will make your life easier for so many reasons. Having your bookkeeping up to date at all times means you have a clear picture of your business’ financial situation allowing you to avoid any nasty surprises and meet your financial goals. There are lots of different software’s that can be used and that can “talk” to your e commerce platform which will automate your record keeping, and pull data in to your bookkeeping seamlessly. This will save you hours of time that you can then dedicate to your business to help it grow.
3. Not preparing your taxes on time
It is very important to keep on top of any tax deadlines – these will be individual to your business. Deadlines are different for VAT, PAYE, Self Assessment and/or corporation tax, but your accountant can help you with the dates that you need to be aware of throughout the financial year. Submitting any tax documents late can result in penalties being issued.
4. Not taking advantage of tax deductions and credits
There are lots of tax schemes and credits that are available to various businesses. Your business size, turnover and industry will determine what you can apply for. You should always ask your accountant for details on any schemes that you may be eligible for as it can reduce your tax liability – saving you money! These can change whenever there is a new budget announced.
5. Not planning for cash flow problems
Businesses can be hit with cash flow problems at any time, for many different reasons. A cashflow problem can unfortunately be a huge setback for a business, and can sometimes result in a business failing. But by future planning for things like this, you can avoid major issue in your business. Try putting money aside each week or month to plan ahead for unexpected expenses or situations.
6. Not having a contingency plan
Things don’t always go according to plan. It’s important to have a contingency plan in place so that you can deal with unexpected events that may have a negative impact on your business both financially and logistically. Do you have a back up courier if there is a postal strike? If your PC failed, do you have a back up of your data?
7. Not getting accounting help when you need it
If you’re not comfortable with your accounting, or would like to save yourself time, get in touch with an accountant. A qualified accountant can help you with your accounting needs and ensure that your business is compliant with all current rules and regulations, whilst saving you money on your tax bill! It is always better to contact an accountant early in your business journey. They can help with software and systems, and it can be a huge relief knowing there is someone at the end of a phone!
8. Not being up-to-date with HMRC regulations
The rules and regulations that HMRC set out surrounding tax, payroll and business in general are constantly changing. It can be overwhelming for business owners to keep well informed and up to date on all of these regulations but your accountant will be able to go through them all with you and explain the ones that are applicable to you and your business. Also, as an e commerce business, you need to be aware of the rules on sales around the world and VAT implications on overseas sales.
9. Not being profitable
This can really be a thing! Understanding how much your product costs to buy, how much it costs to ship (and adjusting this for different places around the world), taking in to account the costs of running your business eg insurance, accountancy fees, subscriptions/IT costs, means that you can price your item to sell accurately and ensuring you are making a profit! Profit should be prioritized over scaling your business. The business has to be profitable before you start to grow it.
10. Not being proactive
Don’t wait until the last minute to deal with your accounting and bookkeeping tasks. One of the benefits of being organised is that you can see how your business is performing during the year. You don’t have to wait until the end of the year (or later) to work out what your tax liability might be. You can also make decision about your business and see if it is performing how you want it to, and if it is the right time to try and grow it.
Do you have an ecommerce business?
Our specialist team can help you to make sure you are doing everything to comply with the latest tax regulations and guidelines, and taking advantage of any tax saving schemes available to you.
Get in touch with Turas Accountants today to find out more about how we can help you.