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Accounting For Ecommerce Entrepreneurs: 15 Questions You Should Ask

By November 4, 2022 No Comments

Every ecommerce entrepreneur needs accurate financial information to make great business decisions. And accounting isn’t just a once a year process for your income taxes. It is a critical monthly management process to review the previous month’s books and adapt as needed.

A good ecommerce accounting partner will help you by providing consistent insight into your business, identifying where you have cash flow challenges and run away ad spend, and generally help you to run a healthy and profitable business. Not to mention the fact that when it comes to selling your business, you will need accurate accrual accounting to get the maximum value out of your business.

So, you need an ecommerce accounting partner who understands your industry, your unique business, and can provide you with insight into your financials. However, accounting for ecommerce companies doesn’t look the same across the board – there are so many different industries! That’s why we’ve put this guide together to help you narrow your ‘accounting for ecommerce companies’ search.

1. How many ecommerce experts do you have in your accounting practice? How do you train them, and how do you keep them in your company?

Our clients hate it when we change their controller or accountant. So here, you want to find out whether this accounting firm has an individual ecommerce expert, or a team of ecommerce accounting experts. This ensures that the firm you choose won’t leave you high and dry if/when an expert in accounting for ecommerce business leaves.

Make sure you know how many ecommerce accounting experts your partner has, how they keep their team up to speed on the ever-changing ecommerce industry, and how they retain the team that is supporting you and your business. Plus, how are they finding new accountants who specialize in accounting for ecommerce companies when they need to support new clients?

2. How experienced are you with accounting for ecommerce companies?

If they’ve worked with just a handful of ecommerce companies, you are their guinea pig. Maybe that’s ok with you, but make sure you’re going in with your eyes wide open. Expertise comes with a premium because it can save you time and frustration in the short and long term.

3. Can you name six sales channels you have worked with?

Most ecommerce accountants in the industry today have only worked with a few of the big name channels (Amazon, eBay, Shopify). If they can’t name six sales channels, they don’t have experience beyond the big ones. Maybe that’s fine for you, but this will help you assess where they are in the market.

We’ve been the leaders in ecommerce accounting for over a decade, so we’ve seen it all – sales channels, accounting technologies, payment processors – you name it. If you’re ready to make a change in your accounting for ecommerce, we’re always ready to help.

4. How can you help me grow my ecommerce company? 

You want to see if what they offer aligns well with what you’re looking for. (Hint: you’ll want financial insight and recommendations to run a more profitable business.)

5. How do you figure out the cost of goods sold for your clients? 

We’re lifting the curtain a little here. The standard approach in accounting for ecommerce companies is to ask the client how much inventory is on hand at the end of a period. Then, these accountants calculate the difference between what’s reported on the books and what you told them should be reported on the books at month end.

This difference between what you have spent on inventory and how much inventory you have in stock becomes the cost of goods sold (COGS), which impacts your profitability and is written off on your profit and loss statement.

The problem you’re looking for is…how did you come up with an inventory valuation? If you throw a dart at the wall based on your inventory value or COGs, the profitability for your entire business is just a guess, and that negates the “accurate accounting” you are about to pay for.

6. What payment processors have you worked with? 

This will tell you how well they understand the differences between shopping carts, marketplaces, and payment processors. And if they can’t name very many, they probably don’t have a lot of experience here.

7. Do your ecommerce clients use the cash or accrual method of accounting?

Yes, there’s a right answer here. Accrual-based accounting for ecommerce companies is the way to go. This gives you more comparable financial information, allowing you to see business trends over time.

Need more information on accrual accounting? Check out our blog post, Selling Your Amazon FBA Business? Here’s Why You Need Accrual Accounting, to learn more about the different accounting methods and why accrual is the gold standard for ecommerce sellers. We also highly recommend reading The EXITPreneur’s Playbook to learn more about business valuation and why the accrual method is preferred.

8. What accounting system do you use? Why? 

All ecommerce sellers under $30M per year, especially Amazon sellers, should be on either Xero or QuickBooks Online. Both platforms are reputable, effective accounting tools that can alleviate your financial pain points. If your accountant uses something else, you should probably move on.

If your accountant is using an ERP like NetSuite or Odoo and you are under $30M, you’ll want to look closely at the overhead cost and complexity of the new systems. Check out this eCommerce Fuel podcast episode on best of breed cloud accounting (Xero and QBO) and ERP systems.

9. Do any of your clients use inventory management systems? Why do they use them, and which one would you recommend? 

An inventory management system (IMS) is not a one-size-fits-all solution. Some are better than others for manufacturing or kitting or whatever. If they only use one tool for all of their accounting for ecommerce companies, run. (And if they recommend that you connect it to your accounting system, run, too.) 

10. What accounting system integrations do you recommend for recording sales income?

If you’re an Amazon seller, and they don’t recommend A2X, they are doing you a disservice. If you’re a Shopify seller, and they are recommending the Shopify integration, they are also doing you a disservice.

11. How do your Amazon FBA clients deal with sales tax?

The worst answers you can get are: “There isn’t an issue,” or “What do you mean?” This is a huge problem for ecommerce sellers. If your ecommerce accountant doesn’t have a reasonable answer for you, they are out of touch, and you should move on.

12. Who is paying for the accounting tools?

If you’re paying for accounting separately from the tools, you need to add in the cost of tools when comparing to another accountant who includes them for you. Keep this in mind so you’re comparing apples to apples.

13. How many industries do you serve? 

Be careful of accountants who specialize in more than one industry, especially if their team is small. Accountants have a tendency to try to be all things to all people, but online retail is one industry that is intensive and requires a ton of time and attention to be done well. 

14. How is your accounting firm using technology to provide detailed, accurate financials?

Accounting firms that leverage technology in their own firms to standardize processes, implement automation, and utilize databases instead of spreadsheets will provide a better service and more detailed financials.

Ask your accountant if they use Zapier, Airtable, Robotic Process Automation, and a standardized checklist solution, like

15. What are your responsibilities?

Make sure you have a clear understanding of who will be doing what. There’s a huge difference between a full-service firm who does the work daily and a firm who merely provides a monthly review of the work you do. You shouldn’t expect similar price tags, and you’ll want to know what you’re responsible for when you’re deciding which is the best fit for your business.

Takeaways: Accounting For Ecommerce Entrepreneurs

Without an expert by your side, it can be difficult to keep everything straight – you might get caught with big bookkeeping errors, or headaches and hurdles during tax season because you’re not compliant with the IRS.

By working with the right ecommerce accounting specialist, you’ll gain value through their understanding of the business, the market, and the best ecommerce accounting tools. We hope the questions above help you narrow your ‘accounting for ecommerce’ search.

Rather skip over the interview process and jump right into your ecommerce business? Rest assured, as the creators of this guide, we have the right answers to these 16 questions. Schedule a call with our team to get started today!