New E-commerce Business? You Need a CPA Firm on your Team
The Rise of E-Commerce
E-commerce is big business. During Q4 2019 for Amazon Marketplace (the platform on Amazon for third-party sellers), 53 per cent of paid units were sold by third-party retailers; and, according to Statista, as of 2018 nearly three quarters of Amazon Marketplace sellers were businesses with one-five employees. Shopify is another platform with serious clout. The brand boasts more than 500,000 retailers selling from the site. Let’s not discount the crafter and makerspace known as Etsy, where the active seller rate has grown rapidly from just under a million in 2012 to more than 2 million in 2018. E-commerce is a very viable way for Canadian entrepreneurs to launch sustainable businesses.
However, many of those new businesses will fail.
It’s not always a matter of jumping on a trend, having a unique product or even having the best customer service. Businesses that do not start with the best accounting procedures and products in place can spend hundreds of hours and lose thousands of dollars in dealing with audits, penalties, and missed opportunities/investors.
A CPA Firm is an Important Investment
Just as you would never launch a business without your suppliers, business plan, marketing strategy and employees/contracts in place, you should never launch without first investing in a CPA firm. This is because:
A CPA firm Provides the Best Tax Law Guidance
Do you know at what point you must collect and remit GST and/or HST? As a Canadian can you charge GST/HST to American customers? Are your products exempt from GST/HST? Are your products subject to tariffs? How does Canada Revenue Agency (CRA) deal with digital products like music and e-books?
These are things you need to know for your e-commerce business – and things in which a CPA firm can guide you. Canadian tax law is incredibly complex and changes often. Your job is to run your business, a CPA firm’s job is to stay on top of everything your business needs to remain compliant. Failing to engage the services of a CPA firm could lead to non-compliance issues – which could ultimately cause the demise of your business.
A CPA Firm Reduces Your Chance of Being Audited
Your chances of being audited go down exponentially when your taxes are filed by a CPA firm. CRA does not consider ignorance of the tax law, honest mistakes, or overlooking document requirements as just grounds for not submitting the correct remittances and paperwork on time. This is very difficult (again, because the tax laws are complicated and ever-changing) to achieve on ones own. Rather than have a small mistake trigger a huge audit, rely on a CPA firm to file your taxes correctly and on time. It’s not a 100 per cent guarantee against a random audit, but it drastically improves your odds.
A CPA Firm Makes You More Attractive to Investors
Investors partner with you to make money and have a right to inspect your finances to ensure they are making a wise financial decision. If your bookkeeping and accounting is not up to par, you will not attract investors, qualify for loans, get good rates on insurance, and be in a position to grow your business. Solid accounting management is also a requirement if you wish to sell your company in the future.
Affording Quality CPA Management
Most new businesses’ biggest challenge is capital. You may be thinking, “I simply cannot afford a CPA firm at this time.” The truth is, you can’t afford not to have one. Without the proper guidance you are not optimizing your tax filing, taking advantage of all your deductions, or putting yourself in a position for manageable growth. You run the risk of being non-compliant and being audited. Start your business on the strongest possible foundation and build a base for sustainable growth by speaking with a CPA firm today.
AF Accounting has affordable, cloud-based accounting services specifically designed for e-commerce sellers on Amazon and Shopify.