In our digital world, platforms like Amazon, Vinted, and eBay have empowered countless individuals to become entrepreneurs. But while the prospect of selling online is exciting, many sellers underestimate the importance of proper financial management. And many of those who do may not see the need to hire an accountant – but hiring one can be a game-changer. Here’s why.
The importance of financial management
Financial management is critical for any business owner, including online sellers. First, businesses need to remain fully compliant with their financial obligations. For sellers using platforms like eBay and Vinted, that means filing tax returns and paying the correct tax. Companies will also need to file statutory accounts. These tasks require proper financial data collection and management to avoid mistakes.
Financial management is also a crucial part of maintaining and then growing your business. In a competitive online marketplace, financial management will help sellers track cashflow, manage expenses, and optimise pricing strategies, while accurate financial forecasting allows sellers to anticipate market trends and adjust their offerings accordingly. All of this will give online sellers information that they can use to make informed decisions that ultimately aid the business.
How accounts can help online sellers
Different accountants will offer different services to help online sellers grow their business while staying compliant. Here are some of the services you can expect:
- Bookkeeping and financial management: Accountants will keep track of all financial transactions, including sales, returns, expenses, and fees from various platforms. This ensures your records are accurate and up to date.
- Tax planning and compliance: They can help you navigate complex tax laws, ensuring your business complies with VAT, corporation tax, and income tax regulations while minimising tax liabilities.
- VAT registration and management: If your sales exceed the VAT threshold, your accountant will help you register and ensure you apply the correct VAT rates on both domestic and international sales.
- Financial reporting: Regular financial reports, such as profit and loss statements and balance sheets, give you a clear understanding of your business’s financial health and performance.
- Profit margin analysis: An accountant will analyse your profit margins by calculating the true cost of your products, including marketplace fees, shipping, and taxes, to identify areas for improvement.
- Business growth and expansion: Many accountants provide strategic advice on growing your business, whether it’s hiring staff, investing in new technology, or expanding into new markets.
- Audit and HMRC support: If HMRC audits or investigates your business, your accountant may be able to represent you, handle paperwork, and ensure compliance with regulations, reducing stress and the risk of penalties.
Part-time vs full-time sellers
Whether you’re a part-time hobbyist or a full-time entrepreneur significantly impacts your financial needs. Part-time sellers may initially feel that hiring an accountant is unnecessary. However, even if your sales are modest, maintaining accurate records can help you scale up your business – or at the very least save you a lot of time with your tax work.
Full-time sellers, on the other hand, often face more complex financial situations, including higher sales volumes and potential staff costs. For these individuals, having a professional who understands the nuances of online selling will often be absolutely necessary. An accountant can assist in strategic planning, advising on reinvestment opportunities and tax-efficient structures while taking on the majority of your administrative work so you can focus on your products and customers.
FAQs
Do online sellers need to file tax returns?
Yes, online sellers must file tax returns if they earn income above the personal allowance (£12,570 for 2024/25 in the UK). Even part-time sellers using platforms like eBay or Vinted need to report their earnings to HMRC. Failing to do so can result in penalties.
At what point do I need to register for VAT?
You must register for VAT if your business’s taxable turnover exceeds £90,000 in a 12-month period. An accountant can help ensure you’re compliant and apply the correct VAT rates on domestic and international sales.
How can an accountant help me reduce my tax liability?
Accountants can offer tax planning strategies tailored to your business. They ensure you’re using all available deductions and reliefs, such as expenses, to minimise your tax liability. They can also advise on tax-efficient business structures.
Can I claim expenses if I’m selling online part-time?
Yes, part-time sellers can claim allowable business expenses, such as marketplace fees, shipping costs, and even a proportion of home office expenses. Keeping accurate records is essential, and an accountant can assist in maximising these claims.
What financial reports do online sellers need?
Online sellers need profit and loss statements, balance sheets, and cash flow reports. These provide a clear picture of financial health and performance. Accountants can produce these reports regularly to help you track profitability and manage growth.
Final thoughts
Whether you’re selling part-time on platforms like eBay or running a full-time online business, effective financial management is critical for staying compliant and growing sustainably. While many online sellers may not see the need for an accountant initially, expert guidance can be a game-changer in managing your finances, reducing tax liabilities, and ensuring long-term success. By partnering with a knowledgeable accountant, you’ll not only save time and avoid costly mistakes, but you’ll also gain a trusted adviser who can help you make informed decisions to scale your business confidently.
Now’s the time to take control of your financial future and invest in the right support. Contact Cottons today and see how we can help you.
