What A CPA Firm Can Do For Your Amazon FBA Business?
Amazon FBA Sellers comprise a significant portion of the site’s online marketplace. About 73% of all sellers on Amazon use their FBA program to sell, with some estimates stating a 30 to 50% increase in their overall sales. Also, selling your products without worrying about shipping, packaging, and even refunds and returned items seems like the best deal for online sellers nowadays.
With that in mind, you might think that now’s the time to enter such a lucrative business. Not so fast, though, as many aspects of this business lie in wait to surprise you with more problems than you may feel it’s worth.
That’s where the prospect of Bookkeeping comes into play, a measure that can save you both time and resources should it be managed well enough. We’ll be going through what a CPA Firm such as ourselves can do for Amazon FBA Sellers and discussing other services such as Tax Planning.
Bookkeeping for Amazon FBA Sellers
Now, the first thing to realize is that keeping track of all your finances can save you much more than just precious time. It’s not just important during the tax season, as responsible Bookkeeping can save business owners significant time and money and provide them with accurate metrics upon which they can base their decisions. This is immensely important for startup operations, as proper Bookkeeping can be a good foundation for further developments.
There are multitudes of ways to keep track of your cash flow and finances, but we recommend doing that through Cloud Based Bookkeeping services. A reputable accounting software package is invaluable to businesses no matter the size, as it can help you to more easily keep track of the various dynamic aspects of your business.
CPA Firms, including our own, use cloud-based accounting software to efficiently manage things such as Reports, Inventory Stocks, Charting of Accounts, and other aspects of your business.
What Is Cloud-Based Accounting Software?
These online accounting apps are hosted on a virtual server called a “cloud.” Through these virtual servers, clients can easily access important data about their business from the comfort of their own devices.
Potential Benefits of Cloud-Based Accounting
Not only that, but another benefit of cloud also based software includes easier collaboration between you and your assigned accountant. You can also improve how your business gathers performance metrics and other vital information regarding your daily operations. For companies aiming for an eco-friendly setup, using cloud-based software can help you lessen the amount of paper needed for your accounting affairs.
Automation of Accounting Affairs for Amazon FBA Sellers
Automation is another key advantage of using Cloud Based Accounting Software. Manual accounting can be subject to a multitude of problems, with the most notable being having to make decisions using inaccurate data. This can be circumvented with automation that streamlines reconciliations and provides insights about your business quickly and efficiently.
Specific Cloud Based Accounting Software, such as “QuickBooks,” a well-known accounting software package, offer invoicing and inventory tracking features. This is why many CPA Firms, including ours, use their services to keep our client’s finances in order.
Although it’d be easy for you to use the software, the real draw in using a CPA Firm’s services lay in their specialized knowledge and grounded advice. Their expertise in leveraging business metrics to pivot your operations in a lucrative direction can be essential in establishing the growth of your business.
Tax Planning for Amazon FBA Sellers
Another added benefit that a CPA Firm can bring to your online commerce business is the implementation of key strategies to increase tax deductions and make sure you pay the lowest amount possible. They can also help you to keep on top of your tax obligations and help you to identify the states where you qualify for sales taxation.
This is especially notable for US-Based Amazon sellers operating within states that require sales tax collection and remittance.
The Concept of a “Substantial Nexus”
For many states, one of the conditions for sales tax collection depends on whether you have a “Substantial Nexus.” This means that your business is connected to the state you’re operating in. For Sales Tax, this connection must be found to be a physical one.
This can be an office or warehouse, even though non-concrete means, such as affiliations with advertisers and activities that can be linked to your business. Some good news for Amazon FBA sellers is that it’s easier to nail down which activities can be considered as ones that create a business nexus.
For Amazon FBA Sellers, it’s a good idea to note where Amazon stores your items for sale. The company’s various Fulfillment Centers are located within 16 different states, with 14 of those enforcing sales tax on all vendors who own inventory within the state. Keeping your list in one of those 14 states is counted as establishing a substantial nexus, requiring you to meet their sales tax requirements.
This only covers sellers in the US, as each country can stipulate how they enforce this policy.
Other aspects of Sales Tax
For sellers, they also need to look into whether or not the products they sell fit into specific categories. Most of the time, products sold on Amazon are called “Tangible Personal Property.” This can differ wildly according to location, so it’s safer to refer to professionals to assist you in navigating through this stipulation. Amazon may be able to help you somewhat, but a respected CPA Firm can bring you more value by presenting tax strategies for your specific location.
Selecting a CPA Firm to aid your FBA Business
You can choose from many CPA firms to help you manage the financial front of your business. However, how do you pick from the sea of firms available to you? We’ve put together some pointers that you can use to narrow down your choices.
- Does the firm specialize in dealing with Amazon FBA Sellers?
Ask the firm whether or not they have had experience in helping to manage a business like yours. Especially with how wide-reaching the sales of an Amazon FBA Seller can get, this puts a significant twist on your accounting problems compared to that of a brick-and-mortar store. These can include logistics problems, inventory management, analyzing financial data, and exploiting said data to induce positive business growth.
It’s also important to ask if they have experience in other online marketing platforms, especially if you’re aiming to expand or already have a presence on other E-Commerce sites. A CPA Firm with experience in your field of business can use industry expertise and a vast array of resources for business growth and management.
- What are your Firms measures for tax planning and audits?
We know how taxes can be a fickle matter, especially with the sales tax stipulations we went through in the previous section. Even a tiny accounting error can result in fines for your business, a prospect that no one wants to go through. Ask what the firm’s measures are in ensuring you stay compliant with your tax obligations, especially for businesses that sell across multiple locations. They should give you their strategies for avoiding errors and ensure that their accountants are familiar with the requirements you’ll need to meet.
Audits are also an important aspect that you should prepare for. As long as you meet the requirements and follow the guidelines set by the IRS, you should rarely have to be subjected to one. However, it would be good to partner with an agency that is equipped even in this fringe situation.
- Do you outsource your accounting work?
A rising trend in today’s industry is Outsourced Accounting, where certain firms outsource day-to-day transactions to other workers outside their respective organizations. This can be pretty off-putting to some as it exposes their business to certain security risks and reduces control over their finances. It can even cause dilemmas for Amazon FBA Sellers in the worst-case scenario. Find a CPA Firm which ensures that in-house accountants will be the ones to manage your accountancy affairs.
If all of this seems overwhelming, you can use our free consultation and strategy session to clarify this confusing topic. Alan Chen, the CEO of Free Cash Flow, will be the one to discuss with you the many routes and strategies that you can take to build your business further in this digital-leaning age.