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Accounting for Amazon, Ebay, Etsy, Shopify, and Other E-commerce Businesses

Accounting for Amazon, Ebay, Etsy, Shopify, and Other E-commerce Businesses

Accounting Solutions For E-Commerce Businesses

If you run an Amazon Store, a Shopify business, or any other type of e-commerce investment, you will need to keep records and store them in a very organized manner. Accounting for an e-commerce business is no different to accounting for a brick and mortar business, but there are several more choices you can look into.

When it comes to the financial side of a business, there are often several common questions that an e-commerce business has. These include the following: 

•   Should you think about incorporating?
•   Should you charge sales tax?
•   Should you charge provincial sales tax?
•   Should you register for sales tax in the US?

Let’s explore these in turn.

Should You Think About Incorporating?

If you have worries about liability then incorporating is a good option. The reason is because it gives you more protection over your assets (personal) from creditors. In addition, if you’re making good profits, you should also consider incorporating, from a tax point of view. 

If you are going to incorporate, you might not have a clue where you should start. E-commerce businesses are truly global, after all. Put simply, you should incorporate in Canada if you do most of your business from there, i.e. that is your location physically.

Should You Charge Sales Tax? 

This depends on the products you’re selling online, and how much money you’re earning. The golden figure is $30,000 per year, and in that case, yes you will need to register and charge sales tax. You could still decide to do so, if you earn less.

When setting up your platform (Amazon, Shopify, etc), you should ensure that your setup allows you to collect this tax from multiple areas.

Should You Charge Provincial Sales Tax?

This depends on the province you’re in. You should check ahead of time to find out the specific areas which demand this, and which don’t.

Should You Register For Sales Tax in The US?

This is a complicated area, and a personal decision unless you decide to incorporate in the US. If you have an office in the USA, whether you are personally there or not, you’ll need to register. If you don’t, then you need to think about the advantages and disadvantages of whether to register or not. 

E-commerce businesses fall into that grey area much of the time, and the US sales tax side of things, when not physically in the US is one of those areas. If you have a lot of customers from the US, this is something you might want to consider registering for.

Overall, ensuring that you cover the absolute basics when it comes to tax and accounting for your e-commerce business is vital. Just because you don’t have a static office and employees, doesn’t mean that you are exempt from the complicated nature of tax requirements, and it actually means you’re more likely to miss something important, if you don’t do your research.

We hope this post helps you cover all bases and helps you pick a platform which allows you to charge taxes whenever necessary.

Click on the link below to book a meeting.
https://calendly.com/capexcpa/phone-call-with-jag

- Written by: Jag Bath

What is Working Capital?

What is Working Capital?

What is working Capital?

Capital is another word for money. All businesses in order to purchase assets and maintain their operations or to produce goods and services must have capital. In the most basic terms, ‘Capital’ is the money invested in a business to generate income. Instead of simply spending it like cash, capital is a more durable concept and it is used to generate wealth through investment. The term ‘Working Capital’ is a part of total capital used (or more technically capital employed) in the business, but it comprises of short term assets and short term liabilities only. ‘Working Capital’ is often defined as the difference between short-term assets and short-term liabilities. In simple words, working capital denotes a ready amount of fund available for carrying out the day-to-day activities of a business enterprise. Capital is the means of investments of an enterprise with long term consequences, whereas working capital is that part of capital used for short term financing like routine operations or for a term not exceeding one accounting period.

Importance of Working Capital in Your Business

Without working capital, you wouldn’t be able to stay in business. A business uses working capital in its daily operations. Any business should have adequate funds to continue its operations and it should have sufficient funds to satisfy both maturing short-term liabilities and upcoming operational expenses. Working capital is a common measure of a company's liquidity, efficiency, and overall health. It is actually a yardstick that measures whether or not the company has enough assets to turn into cash to pay upcoming expenses or debts. Because it includes cash, inventory, accounts receivable, accounts payable, the portion of debt due within one year, and other short-term accounts. A company's working capital reflects the results of a host of company activities, including inventory management, debt management, revenue collection, and payments to suppliers.

How Working Capital is Calculated

Thus, ‘working capital’ is the difference amount between short-term assets and short-term liabilities. To understand this clearly we must have an idea on what are the ‘short term assets’ and ‘short term liabilities. Assets are a company's resources— a useful or valuable things that the company or person owns and which give some economic benefit to a business. Examples of assets (both long term and short term) include cash, accounts receivable, inventory, prepaid insurance, investments, land, buildings, plant and equipment, and goodwill, etc.

Current assets are short term assets only either in the form of cash or a cash equivalent which can be liquidated immediately or within an accounting period. Examples of current assets are cash in hand and bank, debtors, bills receivable, short-term investments, etc.

Liabilities (both long term and short term) are the obligations or what a business owes to the outsiders. It results from purchasing of goods on credit, bank loan, payable accounts like salary payable, taxes due, etc. Current liabilities are short-term liabilities only of a business which are expected to be settled within 12 months or within an accounting period or a normal operating cycle. Examples of current liabilities are bank overdraft, creditors, bills payable, short term loan, etc.

Working capital is calculated by subtracting current liabilities from current assets. Working capital is the easiest of all the balance sheet calculations to calculate. Here's the formula you'll need:

Working capital = Current assets - Current liabilities

It's that simple. If current assets are greater than current liabilities, the company has a positive working capital, meaning it has extra cash on hand to fund growth projects. It also means the company has a nice safety net in place.

Say, from a company's balance sheet we find that a company has $1000 in the bank, $500 as cash in hand, $5000 as inventory and & $500 receivable from customers. Then its total of current asset is $7000. Now similarly, its balance sheet shows that the company owes $2000 to its suppliers, and it has short term loan amounting $1500. So the total current liability of the company is $3500. Therefore, the Working Capital of the company is $ (7000-- 3500) or $3500.

Why Working Capital Management Matters

If we divide the current assets of a company by its current liabilities, we get a figure which is called ‘Current Ratio’ (or working capital ratio). This ratio attempts to measure the ability of a firm to meet its current obligations. It can be used to make a rough estimate of a company’s financial health. Normally, a ratio much higher than 2 (i.e., current assets double the current liabilities) is a sign that you’re not properly using your funds – either you are carrying too much inventory or not capitalizing on extra cash by investing in growing your business. On the other hand, a Current Ratio below 1 suggests that the company may not be able to meet its obligations in the short run. Each business or industry might have its own ideal current ratio depending upon its practice. Acceptable current ratios vary from industry to industry and are generally considered between 1.5 and 3 for healthy businesses.

Hope this Blog post will help you to understand the importance of working capital and guide you to manage it effectively in your business. However, if you are overburdened with other responsibilities, or need some real professional assistance, we can help demystify and help navigate constant change.

We help our clients looking to get working capital loans to help finance their future growth. Have a question on your growth needs? let’s have a quick chat!

Click on the link below to book a meeting.
https://calendly.com/capexcpa/phone-call-with-jag


Written by: Jag Bath

Top 3 questions we get asked. Literally everyday!

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Top 3 questions we get asked. Literally everyday!

If you have a business can’t you expense everything?
This is a common misunderstanding amongst new business owners. There are many benefits of having your own business and having the ability to “expense” business expenses helps to reduce your taxes. This is because the tax act allows for business owners to be taxed on Net Income which is the net of Revenue minus Expenses. You have to be careful here because not all your expenses can be expensed such as personal clothing, Gym memberships and LCBO liquor. Generally, your accountant will provide guidance and restrict the personal expenses so you don’t get burned when it comes time for CRA Audits.

Is my data safe in the cloud?
Your data is actually safer in the cloud than on a PC. On the cloud your data is stored behind servers which are protected by companies like Quickbooks who spend millions of dollars to ensure the security upkeep. Now compare this to your $29.99 antivirus program on your PC. The cloud also has the benefits and ability to safe guard your financial data as no one can walk away with it. With a PC desktop based if someone has the backup of your data they now have complete historical access to customers, pricing and other things. So short answer is yes the cloud is much safer in the long run and also cheaper when accounting for the risks of having a desktop based.

What kind of Support should I expect from my accountant?
It’s easy to make a sale but it’s harder to provide robust support. Client’s almost always leave a business because of customer service and lack of support. Most people are so focused on the ‘next sale’ that they lose vision of the bigger picture. It’s important to adopt technologies like Join.me screen sharing which allows our team to effectively troubleshoot and resolve any issues clients have. The after support is so critical to the success of your business that we consider sales as #2 and support as #1. Our clients become our sales agents because of the awesome support they receive.

Business owners usually rush to hire an Accountant on the basis of them having Accounting and Tax experience. Although having Accounting and Tax experience is critical for a good accountant a great accountant would also have real life business experience. It’s important to decide on a Accountant that has business experience so that they can share those insightful business knowledge with you. Ask yourself this: Wouldn’t you rather have a strategic finance partner than a number cruncher? 

Click on the link below to book a meeting.
https://calendly.com/capexcpa/phone-call-with-jag

- Written by: Jag Bath

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3 Tips for Succeeding with an E-Commerce Business

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3 Tips for Succeeding with an E-Commerce Business

Most business owners will tell you that just starting out is the most exhilarating and stressful time of owning a business. The excitement and anticipation run high, but the funds run low. How can you make ends meet and ensure success for your new business? Our e-commerce tips will help.

1. Rely on E-Commerce to Boost Your Business
You may have heard that e-commerce can boost businesses, but you might not know exactly what e-commerce is. According to BigCommerce, “Essentially, e-commerce (or electronic commerce) is the buying and selling of goods (or services) on the internet. From mobile shopping to online payment encryption and beyond, e-commerce encompasses a wide variety of data, systems, and tools for both online buyers and sellers.” Because e-commerce is one of the fastest-growing aspects of retail today, business owners turn to it as a solution for growing their business. In fact, many find that they are more successful online than they are in a brick-and-mortar store because they can reach so many more customers.

There are several other reasons to rely on e-commerce, according to The Balance:

●      A website and online store establish your presence and improve your company image.
●      You can sell 24 hours a day, seven days a week, 365 days a year; you never close, and your customers             can always buy.
●      You can provide better customer support by creating videos, sharing frequently asked questions (FAQs),          offering product spec sheets, and making it simple for customers to contact you using a contact form.
●      You will have low start-up costs if you are starting from scratch online; you won’t have to purchase or                 lease a building, buy or rent vehicles, or hire excess staff.
●      You take advantage of the fact that the internet was built for business; customers are one click away                 from your online store, and you can accept orders and payments directly.
●      You have the flexibility of living and working from anywhere when you sell online. Simply set up your                 home office with any special equipment you might need, and you’re ready to go.

2. Put Your Business Online in the Right (Inexpensive) Way
The trick to relying on e-commerce is creating a website that appeals to customers and delivers a seamless shopping experience. Thankfully, there is a plethora of online website builders and services that help small business owners build their websites, even if you don’t have any web design know-how or experience.

Many small business owners who are just starting out choose a free website builder and then hire a website designer when they can afford it. These designers and developers have the experience needed to migrate your original content to your new site and to make the transition without affecting your existing customers.

3. Use Information Available Online to Boost Your Business
Today, customers rely on online reviews to make purchase decisions more than ever before. In fact, 84 percent of people now trust online reviews as much as they trust their friends, and 91 percent of people regularly or occasionally read online reviews. Because online reviews matter, you need to give your customers a way to leave reviews for your products and services. Consider emailing customers after they make a purchase to entice them to write a review, give you a star-based rating, or complete a customer satisfaction survey.

You also can create social media profiles for your business to give customers another avenue for finding you, and writing and reading reviews. Also, link to your social profiles from your website to make it easy for customers to start following you, and so they can share news and reviews about you with their followers. In fact, social media marketing is one of the best ways to increase sales and drive more traffic to your site.

You also can decide which products to sell and ensure you meet more customers’ needs by using information available online. For example, read reviews on Amazon or your competitors’ sites. Uncover what people like and dislike about the products, services, and companies and what they would improve. The more insights you can gather online, the better positioned you will be to meet needs and grow your business.

To succeed in business, you should rely on e-commerce. Put your business online by creating a website, online store, and social media profiles. Then, use other information available online to make sure you have found your niche market and are meeting customers’ needs.

Written by - Larry Mager

Click on the link below to book a meeting.
https://calendly.com/capexcpa/phone-call-with-jag

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Firm of the Future 2017 - CapexCPA

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Firm of the Future 2017 - CapexCPA

Firm of the Future 2017 - CapexCPA

Quickbooks just released the newest firm of the future accounting firm winners who have been recognized for leveraging the key trends in the Accounting industry. The four major elements being the cloud, service, technology and power reporting. When these four elements are put together, they allow us to create a strategic partnership with our clients and become a Firm of the future.

CapexCPA applied for this contest, where a total of 15 firms worldwide were selected with 4 from each country being Canada, USA, UK and Australia. In Canada, Quickbooks ranked our firm as one of the top 3 cloud accounting firms. We feel honoured to be recognized as one of the firms of the future. At CapexCPA we strongly believe in our signature DNA elements to help our clientele. Below is our take on how we became a Firm of the future. 

The first DNA element is Cloud. 
We feel that using the same cloud accounting platform like Quickbooks allow our clients to understand the numbers better. The cloud eliminates confusion and helps with timely decision making. Keeping transparency is critical in establishing a trusting relationship with our clients.  

The second DNA element is Service.
We make every effort to respond to all emails, phone calls, texts and social media to help communicate with our clients. Providing speedy responses to questions is essential to play the Virtual CFO role. 

The third DNA element is Technology. 
Using technology in every facet from client on-boarding to the tax year-end and repeat. We only use the best in class software providers. Our app closet essentials include Quickbooks, Hubdoc, Wagepoint, and Plooto. We wouldn’t be able to run our Cloud practice without these software platforms. 

The fourth DNA element is Power-Reporting.
Providing our clients with strong analytical reports that extend the Profit & Loss and Balance Sheet is what helps to differentiate us from traditional accounting firms in the industry. Our clients love getting weekly/monthly cloud reports which help resolve real operational issues before they become problems. 

We look forward to working towards introducing a completely paperless and cloud based accounting experience for our future clients. It’s been an amazing ride thus far, and we look forward to growing and helping to pioneer the future of Cloud Accounting. 

Choose Change. Choose Capex.

https://www.firmofthefuture.com/content/intuit-announces-2017-top-four-global-firms-of-the-future/

Click on the link below to book a meeting.
https://calendly.com/capexcpa/phone-call-with-jag

- Written by: Jag Bath

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Top 5 Benefits of Cloud Accounting

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Top 5 Benefits of Cloud Accounting

If you have an email account from Microsoft or Google, then Cloud based technology is not a new concept to you. The technology has finally hit the Accounting industry and is making a huge difference and changing the role of Accountants for years to come. The cloud provides great benefits that save time and money which is re-invested into your business.

Moving your accounting from "On-Premise" to "The-Cloud" can bring significant benefits. Not only is it cheaper, more secure but also accessible comparatively to the desktop counterpart. Below are the Top 5 reasons I think Cloud technology is the best thing after bread.

1.       Accessible anywhere providing the required flexibility - Cloud accounting software allows the user to access their information securely 24/7 from anywhere all that is needed is an internet connection. You no longer have to buy multiple licenses or carry your laptop everywhere. As small business owners are out and about and now have access to the engine room anywhere. That quick report to see how your business is doing. Done.

2.       Cloud Accounting is a time saver. This is taking the traditional method of Accounting and reversing it on it's head. Connecting your online banking to your cloud software package means the bank feeds from your credit card and bank card statements come directly through to the software system. The reconciliation process of accounting used to be a huge headache but with bank feeds your constantly synced to the bank so your reconciliation is never off. No data entry. More strategy.

3.       Build your customized cloud software. In the past building your own customized solution would have been extremely expensive with hiring IT consultants and other experts. Products like Xero and Quickbooks online have an ecosystem of apps to choose from which are called "add-ons". Some add-ons are free while others carry a fee of a few extra bucks monthly. Thinking of automating your Accounts Receivable collection process...Yup there's a app for that!

4.       Sharing and collaboration has been overhauled. In the old days the accountant would spend most of time "converting" a Simply Accounting file to a useable Quickbooks format. Once this conversion was completed the accountant would then move on to the actual year-end process. With the ability of sharing and collaboration the Accountant is now put in a position of having a conversation with clients during the year not just during the year-end. No more copying data to USB drives sharing is effortless.

5.       Improved security. A lot of people object to the security element of financial information in the cloud. Actually cloud-hosted software is more secure than software hosted locally on your desktop or your own server. The data is stored in high security storage facilities and your data is encrypted meaning it is unreadable to hackers. Additionally, your data is backed up multiple times in a day in many different locations to help protect your data. If your laptop is stolen well that's okay just buy a new one because your data is safe. If you are comfortable using online banking, you should be equally comfortable using Cloud technology.

Essentially with Cloud technology you have the ability to compete with bigger companies on a technological level but get to keep that small business owner mindset. I think this marriage of the two principals will help grow businesses. Most businesses see Accounting as a necessary tax compliance, it is but Accounting is the business language and if you know the language well you can really start to realize the benefits the information can provide. 

Click on the link below to book a meeting.
https://calendly.com/capexcpa/phone-call-with-jag

- Written by: Jag Bath

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