HOW CAN ECOMMERCE BUSINESS PREPARE FOR THE END OF A TAX YEAR
eCommerce is rapidly evolving, continuously changing due to the variety of companies being established on a regular basis. Online businesses are also enjoying the massive growth period, especially due to the COVID-19 pandemic.
However, it is quite understandable that as an eCommerce business grows, its finance and sales also get more complicated.
Therefore, it is important for the business owners of eCommerce stores to prepare for the end of a tax year and have a proper accounting system in place to file taxes on time and claim the tax incentives in Malaysia.
In this post, you will get the top 5 tips to follow for the end of a tax year.
1. Maintain Comprehensive Financial Records
The most crucial component of accounting is to maintain track of all your company’s transactions. Any time money enters or leaves your organization, it is referred to as a transaction. These transactions are connected to sales in terms of accounting.
A transaction must be documented whenever a consumer purchases a product from your eCommerce website or application. Any time your organization buys anything it plans to sell online, it’s a transaction that must be documented.
If you are using the professional services of an accounting firm in Malaysia, you should have no issue maintaining comprehensive financial statements and records.
Generally, a company must create and maintain four types of financial statements: income statement, balance sheet, cash flow statement, and shareholder’s equity statement.
2. Inventory Management
It is important for both retail and eCommerce businesses to keep track of their inventory and monitor the items available in stock.
This facilitates the smooth working of the business and also allows you to recheck the financial statements in case of any discrepancies. Moreover, inventory management is also vital for budgeting purposes.
3. Categorize Transactions
The standard procedure in eCommerce accounting is transaction classification. Every transaction on your cash flow statement should be classified as either a cost or an income.
Most accounting software will sort the transactions for you, so all you have to do is evaluate them and assign the appropriate categories like sale returns and marketing.
Accounting firms in Malaysia have years of experience in dealing with various types of companies, including eCommerce businesses. Therefore, you should rely on such firms to make sure the best accounting standards are being implemented in your business.
4. Importance of Seasonal Budgeting
Bookkeeping is more of a day-to-day task, while accounting’s purpose is to increase your company’s long-term profitability. Cutting expenses is one of the most effective strategies to increase your company’s profitability.
Financial statements, particularly the income statement, are extremely useful in identifying areas where you can cut down costs to increase profitability. The bulk of your company’s costs, such as the cost of goods sold and operational expenses, will be included on your income statement.
Examine these records to see where the most money is being spent. Consider how you can cut these expenditures as much as possible. Can you find lower-cost items to sell? Is it possible to find a less-priced office space to rent?
You may not be able to drastically reduce your expenses, but cutting even a little amount of money in different parts of the business can help you save a huge amount in the long run.
5. Implement Latest Accounting Standards
You must ensure that your books are up to date to submit your taxes. A clean set of records provides a clear picture of your company’s revenue and spending. In the event of an audit, they’re also your first line of defense.
It is important to follow global accounting standards to ensure maximum compliance.
However, business owners already have a lot of responsibilities, so it is better to rely on an accounting firm in Malaysia that can keep up with the changing regulations and also help you claim tax incentives in Malaysia.
When it comes to keeping your accounts up to date, select the approach that works best for you depending on how much time you have to devote to accounting, your budget, and your level of confidence in maintaining your own records.
In a Nutshell
If you follow the tips and tricks discussed in this post, it will become easier for you to prepare for the end of a tax year, whether you have an eCommerce business or a traditional brick-and-mortar store.
If you think that you don’t have the time and energy to focus on these measures, hire the services of a professional accounting firm in Malaysia and let the experts handle the accounting procedures.