As online shopping continues to expand and become the main source for many to purchase products and services, online businesses need to track their sales and stay on top of their finances. Whether an online business is new or well-established, it’s important to understand the finances behind the business, the operating costs, taxes, and the benefits that hiring a professional accountant can bring to the table.
Why Accounting Is Important
Good accounting helps businesses understand and analyze their financial status. Accountants help communicate complex financial information to employees, business owners, investors, and anyone else who is involved in the business. Accounting is also important because it helps to document business transactions, financial statements, and future predictions which can help an online business continue to thrive and grow.
Understanding Sales & Profits Before Tax
Knowing how much money your business is bringing in is an important part in the accounting process. The first step to calculating a business’s gross profit is through logging into your online business’s e-commerce dashboard. From there you’ll want to export your sales data, almost all e-commerce platforms give business owners a list of all sales along with fees and returns. The sum of these sales will be your profits before taxes.
Planning For Tax Payments
With an online business, you’ll still follow the same rules for any small business. There are three types of taxes to be aware of:
- Estimated Taxes: Your business will pay estimated taxes unless you receive a salary and are withholding taxes for yourself. Check with your tax professional to see if you have to pay estimated taxes.
- Employment Taxes: These taxes include federal income taxes and state and local taxes. Employment taxes are withheld from employees’ total wages. If you are self-employed, you may need to pay “Self-Employment Tax. Check with your tax professional to verify.
- Sales Taxes: While estimated and employment taxes are the same for online and brick-and-mortar stores, sales taxes are different. Sales tax is different from state to state, while the customer pays the tax, the business is held accountable for collecting, depositing, and reporting this tax.
Get Help From A Professional
Running an online business is hard enough without having to deal with the ins and outs of a business’s finances. With support from the accounting team at Hylen, you can stop worrying about your finances and spend your time where it matters most… running your business.