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Sales Tax Services for E-commerce Clients – Part 3

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Apr 30th 2018
CPA Catching Clouds
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If you have e-commerce or retail clients in some capacity, you know how complex sales tax compliance has become.

As part of a three-part series, e-commerce expert Patti Scharf, CPA will address the growing concerns of accountants who have this client base, by offering tips on compliance and growth from start-ups to larger businesses. The third article in this series addresses the needs of larger businesses

What kind of focus do you want for your accounting practice? Do you want to work with startups and small businesses, or are you more interested in larger businesses with more complex tax and accounting needs, especially in sales tax reporting and compliance?

No one can answer these questions for you but yourself, but you can bet on the fact that any company seeking an accountant will want to know about your knowledge, experience, and track record before signing on as a client.

This article focuses on the larger client that falls in stage three of the three evolutionary stages of business – companies with $50,000 to $3+ million per month in sales – also known as "established sellers." These companies have been around the block a few times and are serious about treating their business like a real business. Other articles in this series focus on startups (stage one) and small businesses (stage two).

Larger Company Challenges

Clients are now probably selling on three or more sales channels and want to understand their profitability broken down by a variety of factors, including profitability by channel, profitability by SKU, and others. They need to know their numbers so they can make concrete decisions without having to use a "gut feeling."

They want to know best-selling products across many channels and how much they’re making on them. They realize that a cloud inventory system may be able to help with all this, but there are too many choices and nobody in the company seems to understand how to help get from point A to point B.

The client is probably still selling on Amazon but has a love/hate relationship with Amazon. They are working on building their own unique brands so they aren't constantly at Amazon's mercy. They also are concerned about being on the states' "radar" for sales tax, and frustrated by the amount of time, energy, and money it costs simply to be compliant.

Larger clients need help optimizing their back office so they have the information they need to make decisions that will make them more profitable. They are still concerned about cash flow but on a grander scale. They are interested in seeing overall trends in their business.

They are making enough money to be able to hire a team to help, but team members are still wearing too many hats. They want to operate the business from a bird's eye view without having to be involved in the minutiae all the time.

A Scalable Solution

At this level, this type of business needs a combination of resources to run most effectively. They need an actual accounting department.

They should have a bookkeeper to handle the daily tasks necessary to keep the business running as well as a controller or internal CPA to oversee the accounting systems, train the bookkeeper, and help deal with issues as they come about. In addition, the business needs tech talent to make sure that systems are talking to each other appropriately and that the accountants are getting what they need to get their job done.

However, most businesses don't want to hire three people. This is where outsourcing comes into play. For about the same price as hiring a regular bookkeeper, a business can pay for a fraction of all three roles to get an entire accounting department to support the business.

If you are trying to work with this type of business, here are the questions we suggest larger businesses ask their accountants. In a previous article, we covered four key tips in Stage 1:

  1. how do they work
  2. how they bill
  3. do they specialize exclusively in ecommerce
  4. are their references good

If the client passes all those questions, here are several other questions we suggest businesses should ask accountants:

  1. Do they have CPAs ensuring quality control over their clients’ books?
  2. Do the CPAs meet with the clients to review financials at least monthly?
  3. Are the books maintained on a daily basis, and do the clients have access to pull up their information at any time?
  4. Can they provide you with gross margin by sales channel?
  5. Can they help advise you on the right cloud inventory solution?
  6. Can they handle filing sales tax returns for you in 25+ states on a monthly, quarterly and/or annual basis?
  7. Do they reach out and work directly with your accounting tools if something breaks?
  8. Can they evaluate whether a solution is optimal for their business, and can they go to an arsenal of other options if something isn't working out for you?

Go for the Best Fit

Hopefully, you can now see how a business evaluates an ecommerce accountant and why the choice of accountants for a small business may not be the same as the choice after the business has grown. I've seen so many discussions about how much is a "reasonable" amount to pay for accounting services, and that's such an oversimplification of the issue.

Your clients should hire the accountant who can get them the results they want, at the stage they're in, and at a price they can afford.

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