What Does The Dropshipping Accountant Do For Your Ecommerce Business?

 

Dropshipping is an attractive business model because of its low barrier of entry in terms of both financial investment and the effort required. It's not a get-rich-quick strategy as many advertise, but it's worth considering the eCommerce business owners.

Dropshipping is the eCommerce business model where the drop shipper will accept the order but doesn't actually hold any stock. It's a trendy eCommerce business dealing with multiple couriers, suppliers, marketing, and customers. Also, this is the reason why the drop shippers can quickly lose track of accounts and tax obligations.

With the dropshipping business model, the business owner should develop the website, design the brand, and especially get an excellent dropshipping accountant for perfect accounting solutions. Many business owners choose Shopify or Oberlo to get started.

Benefits of dropshipping:

If you are a stirring entrepreneur, then dropshipping will be an excellent choice for you. It offers the freedom to experiment with novel business ideas. Learning about the market, identifying the products in demand, and making adjustments will reduce the risks in the business. Along with this, a dropshipping CPA can also guide you in all these processes.

1.    Requires a small amount of capital – Launching an eCommerce store is easier since you don't need to spend thousands of dollars. In the traditional method, you will have to invest a large amount of capital for purchasing inventory. With dropshipping, you only need to buy the products after making the sales and having already been paid by the customers. This means that you can start offering and sourcing products with less money and risk.

2.    Easy to start – Since you don't need any physical inventory to stock the things, you don't have to worry about having the employees, warehouse, and security. Also, you will not be responsible for packing and shipping the orders, nor will you deal with the returns and inbound shipments. You don't need to worry about maintaining the inventory since the fulfillment center will handle it.

3.    Flexible location and low overhead – The overhead will be low since you don't need to have an inventory or warehouse. Many dropshipping stores are mainly home-based businesses that rely on laptops and have limited recurring expenses like website maintenance and internet fees.

4.    Easy to test new products – Dropshipping makes it easier to launch a new store and see if customers want to purchase the products. The significant part is that you can sell the product before buying it.

5.    Easy to scale – Scaling the businesses is more accessible since, unlike traditional retail companies, you don't have to work more with dropshipping when your number of orders increases. The dropshipping suppliers will do all the processing, shipping, and packing tasks. It means you can grow the business without much pain.

Understanding dropshipping accounting solutions:

Deciding everything from the business structure to getting the finances in order will have a more significant impact on the ability to make more money with dropshipping. For this reason, it is essential to consult with a specialized dropshipping accountant.

An excellent dropshipping accounting requires you to keep the business and personal finances separate as much as possible. Also, understanding the tax laws is vital when learning how to make money with dropshipping. You must know when to collect the sales tax and how much you must collect based on the particular state. This will reduce the risk of under-collection of tax that results in paying the tax out of your pocket to cover it.

Need for automated accounting reconciliation:

Purchase order to invoice matching is the primary transaction reconciliation process that the retailers use to approve the payment to the supplier, wholesaler, or vendor following the completion of the order.

The process includes the customer's order, seller's purchase acknowledgment, seller's order change request, seller's invoice, advance ship notice or inventory receiving sheet, and other invoicing documents.

Without automation, the whole process will be time-consuming since you must manually analyze and compare these documents. More than that, some records may get lost in the shuffle, which means you will pay for the wrong price.

Automating invoice matching with EDI:

Electronic Data Interchange (EDI) allows you to exchange the transaction information digitally, so it's one of the best solutions when automating the purchase order to the reconciliation process. The vital documents will be standardized and match each client's requirement with the EDI development. The purchase orders, invoices, purchase order acknowledgments, and advanced ship notices everything can be sent digitally though you and your supplier use different systems and software.

You can just simplify the transaction reconciliation and invoice payment processes with the three-way match. This will automatically approve or set the documents aside for review. You can only review the document when there is any mismatch.

When using the EDI to transmit the essential documents, most of the invoices pass the matching process without any issues. You can use this saved time to focus on more valuable things that would save money, such as those related to the price, quantity, or payment terms.

Why should you use EDI solutions for your businesses?

EDI still remains the industry standard and a popular choice for retailers due to its reliability and robust security. However, APIs are also becoming popular due to their innovative functionality. The choice between the EDI and API technology will be based on the company's needs.

There are several ways to exchange information when utilizing the EDI, including peer-to-peer networks, serial links, and internet-based options. However, access to the EDI is only provided for the authorized, predefined users. The technology uses the audit trails and archives to track the uses, making it the best option for systems requiring a higher level of security.

With EDI, you can also send a large amount of data efficiently and conveniently. An EDI integration will help send a massive quantity of data in a single transfer, and another reason is that it will reduce the potential of inaccuracies. EDI also reduces human intervention.

The EDI implementation will show a massive improvement over the manual data transmission methods when it comes to the reliability of the data. It will remove the manual enter or reworks, which results in a faster and improved order management process.

Final words:

Whether you need annual accounts, VAT returns, tax advice, or any other accounting details, we at Free Cash Flow will help you cover it. We use the advanced tools to integrate with the store to the accounting system without entering anything manually. As the specialized dropshipping CPA, we offer the services such as:

•    Bookkeeping – We offer the best services for top quality accounting and advice for online businesses by bringing it directly to the computer which will suit you.
•    Cloud accounting – Whatever may be the tool you are integrating with, we will offer specific advice and cheaper packages.
•    Tax advice – When the dropshipping business grows, we will keep you on top of the complex tax rules and VAT requirements.

We understand the power and pace of the eCommerce dropshipping business. Primarily, we know that you will be busy, so your business grows; hence we offer the complete accountancy services for dropshippers for a seamless experience and to help you stay on top of the accounts quickly, easily, and everything online.