For most FBA sellers, no matter how data-fluent or math-minded, hiring an accountant to handle their business’ financials and tax situation is a question of when not if. As your business scales beyond just inputting an Amazon-issued 1099 into popular free tax software, it makes sense to bring in skilled support to ensure you’re reporting accurately, keeping current and balanced books, and capitalizing on all potential tax credits and deductions.
What’s the difference between a bookkeeper and an accountant?
Broadly, bookkeeping refers to the recording and management of all the day-to-day transactions that happen in the business, which means documenting debits and credits and making sure they balance. Accounting is the analysis and application of the data from those transactions to drive business decision-making, such as determining how much tax the business owes, producing annual financial statements, and forecasting the next quarter’s cash flow.
You could, as many early-stage entrepreneurs do, manage your own bookkeeping with software and simply work with an accountant during tax season, but for the purposes of this discussion, we’ll assume you want all of the day-to-day and year-end financial workload off your plate and you want one person or firm to handle both.
When should you hire an accountant?
Like with any other outsourced support, the timing of the decision to hire an accountant comes down to a cost-benefit analysis. Jeremiah Kouvacs, the CEO of MuseMinded, an accounting firm that exclusively serves FBA sellers, suggests there is a clear revenue threshold that indicates it’s time to call a CPA:
“For me, revenue is the big indicator. I’d say 95%+ of sellers either don’t want to do the bookkeeping or shouldn’t be doing it because of experience. For this reason, it’s mostly a matter of affording the service. My rule of thumb is sellers under $10,000 per month in revenue should avoid hiring agencies for this. Once you reach $25,000 – $30,000 per month in sales, the cost of hiring a pro becomes much more palatable.”
Should you opt for a generalist or someone who specializes in ecommerce clients?
Like choosing a hairstylist or a mechanic, by virtue of their education and training, any competent accountant should be capable of preparing and filing your taxes, regardless of your business structure. Like someone who has curly hair or owns an exotic vehicle, however, it may pay to work with a professional with domain-specific expertise, especially as it relates to areas like sales tax, allocation of FBA fees and shipping, and overall bookkeeping.
“Firstly, there are plenty of good accountants who are generalists and do not understand ecommerce,” says Richard Starkey, founder of CronosNow and an ecommerce entrepreneur himself. “The biggest risk from a sales tax perspective is that a generalist is not equipped to deal with a complex sales tax system selling across multiple states. They are generally not aware of how Amazon, for instance, deals with sales tax in Florida. From a tax perspective, a generalist may not be aware of some of the Amazon FBA aspects like how to handle refunds, etc. In our experience, the international non-USA resident who sets up an LLC or C Corp in the US to trade on Amazon in the US requires a specialist’s attention.”
Jeremiah agrees that sales tax and FBA bookkeeping call for ecommerce expertise, but he says general income tax preparation requires less niche knowledge.
“I’d go with an accountant who at least has good experience with inventory-based businesses. Besides that, there aren’t many other tax variables that are hyper-specific to ecommerce.”
What should you look for in an accountant?
While you might think what you want is the CPA equivalent of Better Call Saul’s titular lawyer, you shouldn’t actually seek out someone who will get “creative” with your bookkeeping or be inclined to take liberties to reduce your tax bill. The IRS doesn’t look kindly on mavericks.
Whether you go with an ecommerce-focused CPA or a well-rounded generalist, you want an accountant who is:
You shouldn’t see any coffee-stained piles of file folders threatening to tumble off his desk and engulf you. They need to have a clear, thorough, easy-to-follow process for onboarding new clients.
Experienced dealing with similar tax situations
Even if you aren’t working with someone who exclusively serves ecommerce sellers, you want a professional who has had comparable clients in the past. If he or she can’t provide specific examples, move on to another prospect.
Familiar with ecommerce-specific software
Whether it’s MarginDriver, Webgility, or A2X, you’ll want your accountant to handle your books with a tool that records and manages transactions at scale. This saves both time and money vs. manual journal entries or more generic accounting software, which is good news if you’re paying this pro an hourly rate.
Well-versed in accrual accounting
This means tracking income, platform fees, and cost of goods sold in the month the transactions occurred vs. the month when the cash was received or spent. According to Jeremiah, this is non-negotiable if you’re working toward having exit-ready financials.
A solid reputation and visible, professional footprint
Does your accountant have a website that looks like it’s been updated sometime in the 21st century? Do they have positive reviews on Google or Yelp? Are they happy to provide client references you can contact?
Both Jeremiah and Richard say basic customer service should also be a dealbreaker. If your accountant takes longer than 48 hours to return your calls or emails, especially as it relates to time-sensitive or high-impact inquiries, find another accountant who has more bandwidth for you.
Seek out a relationship to invest in–literally
As your FBA business grows, your finances and tax situation will likely only become more complex. This makes setting up clear, scalable accounting processes early and finding a trusted strategic partner to manage them as you grow or plan for an eventual exit a project worth taking seriously. In fact, hiring the right accountant might just be the smartest money you’ll spend.