ARTICLE TABLE OF CONTENTS
What an eBay Seller Needs to Know Before Getting Started
As soon as you make a sale in your eBay business, it becomes necessary to start tracking transactions. Not only does this provide you with a simple way to know how much you are making over time, but it also is essential for later, when you need to report your taxes to the government.
There are various tools and options to use to do this. Some very small businesses may be able to use a paper ledger to gather and track information. Today, though, there are various accounting software products that make it much easier to manage the entire process. It’s always a good idea to compare several options to determine which option is best in your situation.
Here’s a look at a few common questions to consider.
Should I use accounting software for eBay?
What should I use eBay accounting software for?
There are various accounting options available, but there’s no limit to how you can or should use it. Track as much as you can and need to in order to operate your business. Some of the things you need to consider tracking with software include:
• Your inventory of product, including the various options you may carry
• The amount spent on shipping materials and handling charges
• Amounts paid to you buy buyers
• Marketing and advertising costs
• Fees paid to eBay (especially if they could be a business expense)
• Mileage of your vehicle if you are delivering parcels
• Expenses of running the business such as warehousing, employee wages, and office costs
The more information you put into accounting software, the more information it can provide to you. For example, if you track mileage for your business, a simple report can provide you with a way to reduce your taxes later. You can also compare business expenses from multiple shipping partners or determine if you should be marketing in one form over the other because of the leads produced. The more you input, the better.
How do you track income and expenses as an eBay seller?
When should I collect sales tax on my eBay business?
States set the rules on sales tax collection for all of their businesses. It’s important to work with your CPA or tax professional to get more insight into local rules (in some cases, the tax rate varies by jurisdiction or county.)
You may need to collect sales tax from the beginning with each transaction. That is not always the case, though. Most often, you will need to begin collecting taxes when you meet a specific threshold set by the state. This is generally around 200 transactions per year or $100,000 of sales in that year. Again, be sure to check with your state’s requirements as soon as possible.
What to Look for in eBay Accounting Software
Most often, as an eBay business gets larger, it becomes more important to invest in accounting software. There are numerous programs designed just for eBay sellers – and those tend to be some of the best options because they provide the most specialized fields and information related to selling on eBay. Still, you have ample options to think about here. It is often best to compare a few.
There are a few specific features and specs to take into consideration when choosing eBay accounting software. Remember, too, that it is more than just price. You need to know what the service can do for you. Here are some important features to seek out in any eBay accounting software you select.
Some of the best eBay accounting tools incorporate inventory management. Inventory is everything to an eBay business – without it, you cannot operate your business or generate an income. That said, as your company grows, you’ll need more access to what is available and what you do not have on hand. Inventory management often needs to go beyond the basic spreadsheet. Some of the best accounting tools integrate inventory management into the application, allowing you to easily track sales against inventory.
Seek out an accounting program that’s in the cloud. This allows you to use it wherever you are connected to the internet instead of being locked into one specific location or terminal. That can help later, especially as your business expands, leading to numerous team members using it. Keep an eye out for cloud management systems as they tend to be the most effective. Just ensure they offer outstanding security in place to protect your business.
Some of the best eBay accounting management tools go one step further by providing you with an automated design. What does automated mean? It varies from one company to the next in terms of what features are automated. However, many offer automation of purchases, sales tax, inventory, and other applications. That means you do not have to input all of these details at one time into the system. It’s super fast and convenient for most companies to use this.
Core Accounting Components
Of course, when purchasing eBay accounting software, you want to know it has reliable and complete accounting features. That means it needs to:
• Track income and sales
• Track all expenses
• Track all accounts payable – those that you owe money to, such as your vendors
• Track all accounts receivable – those that owe you money, such as buyers
It is also important to have profit and loss statements and other types of financial tracking in place. It should allow you to see where your company stands at any given time as well. For example, you should be able to compare sales from this month to last. You may want to see where your inventory figures stand year to year, too.
Easy Importing of Transactions
No one has the time to input hundreds of transactions (for a big business) into accounting software. Look for an accounting tool that automates this process and inputs all information into the system for you. You want the accounting software to automatically connect to your eBay account. Then, it should be able to post transactions directly to your company’s general ledger – a component of your accounting system. You also want it to be easy to manage, so you do not have to worry about double entry information.
Payment Portal Solutions
If you are like many others and use PayPal as a way to get paid on the site, then you need to ensure the accounting software allows for easy integration of this. That way, you can be sure all of your information is up to date and managed. It should post all of this information to your company’s general ledger and update it as it happens. This ensures a speedy process overall.
The sales tax process is typically complicated. As noted earlier, it is up to you to know the rules in your state and locality for what is collected and when. Your accounting software may help with this process. What you absolutely need it to do is to calculate the sales tax for each sale and organize that information. If you are paying per state – as many are, then you need a way to manage that information.
It can also help for your accounting software to provide you with easy ways to calculate your seller fees. This is based on the selling plan you have. And, there are plenty of fees to manage for those opening an eBay business, including:
• Closing fees
• Referral fees
• Per-item fees
• Shipping costs
With the took doing all of this for you, there is less frustration and more opportunity for you to ensure accuracy. You do not want a surprise bill later.
What Else to Look for in eBay Accounting Software
There are many factors to think about when buying accounting software for eBay. While features are important, you also want to be sure it is easy to do and reliable. Look for software that’s updated and fits the modern functions of the eBay seller – just as eBay changes and grows, you want to know that the software you are using to manage your business will do so. Find out if they offer updates.
It is also important to consider what you need. For example, some companies rely on tools that make it possible to accept online payments. If you want a simple invoice tool, your accounting software should offer that as well.
Also, if you are already using an accountant for your business, check with them about the type of software that is best for you to use to supplement your needs. It is always a good idea to have these resources at hand should you need them later.
Key Benefits of Using eBay Accounting Software
Are you unsure if this is the right investment for you? There are a few key things to remember here:
• Cloud-based programs allow you to access and manage your business’s funds anywhere. That allows you to work on your business remotely – and still maintain the safety of doing so.
• With accounting management software, you always know where your business stands. You can pull up your federal taxes at the end of the year and not have to worry about surprises because of a lack of oversight throughout the year.
• These types of programs are setup to directly integrate with your eBay sellers account. Some options are hosted by 3rd party marketplaces. That may allow you to connect with your other seller accounts, such as those on Etsy or Amazon. That can streamline the entire operation for you.
• It helps you know where you stand at any time when it comes to profit and loss. With a few simple clicks, the most advanced systems make it easy for you to manage your business. This includes knowing which accounts are behind or ensuring your marketing is working for you.
• It saves you time and hassle. While this software does not replace the need for an accountant, especially for larger companies, it does take away a lot of the frustration you may have when it comes to providing information to your accountant throughout the year. It can help you to save money from having to pay someone to manage the books for you, too.
There are many options available to you. It is always a good idea to consider a few. Look at the big names, such as QuickBooks or Xero but also the smaller accounting software products, including GoDaddy Online Bookkeeping . Be sure they specifically state they are available for eBay sellers. Then, you will be well on your way to better managing your company.
Disclaimer: Please keep in mind that the content of this post is not intended as tax, accounting or legal advice. The information presented here is for informational and educational purposes only. Before engaging in any transaction, be sure to discuss these matters with a trained, licensed professional.