How Do I Keep Track of Everything in My Business?
Using an Accountant Versus Accounting Software
Q: "I'm just starting an eBay business. Am I better off hiring a bookkeeper or accountant or using a software product such as QuickBooks?"
A: When you're in business, sooner or later everything boils down to numbers. As a dear friend of mine who taught college-level statistics used to tell me, "In business, if you can't quantify it, it's only a rumor."
One of the biggest mistakes eBay sellers make is not putting systems in place from the beginning to track their eBay listings, fees, gross merchandise sales, and profits. If you are beginning to sell regularly (i.e., more than a few times a year at odd intervals), the time is now to put a bookkeeping and accounting system in place.
You have two choices: You can buy a software package and learn to do it yourself, or you can hire an accountant to help you with your books and records.
Whichever way you decide, here are some tips to make sure you are on top of your numbers at all times:
• Take an evening course on basic accounting and bookkeeping at your local community college. Accounting is the language of business, and a basic understanding of accounting terminology and procedures will help you immensely whether you buy a software package or hire an accountant. A basic course should be all you need—you're not sitting for your state CPA exam, after all; you just want to learn the difference between accounts receivable and accounts payable.
• If you are using an accounting software package, such as QuickBooks Pro, learn to do as much of the data entry yourself as you can. There are two reasons for doing this. First, you will save a ton of money in accounting fees—roughly 8o to 90 percent of a typical bookkeeper's bill is for data entry and inputting services, and you can save that by learning to do much of the grunt work yourself. Second, by inputting your own data, you will see patterns, trends, and weird things that you wouldn't see if you used an outside accountant, and that the outside accountant wouldn't mention to you. Doing your own data entry enables you to spot problems and opportunities before they become overwhelming.
• If you are using an accounting software package, make sure it integrates with the eBay and PayPal systems, so that you don't have to manually upgrade your chart of accounts each time a listing on eBay closes.
• If you are using a live bookkeeper or accountant, keep in touch with them on a regular basis. Don't just send them your shoebox full of invoices in February with a note asking them to please prepare your tax returns by April 15. Ask them instead to prepare financial statements for you on at least a quarterly basis (every three months)—you should do this monthly once you hit PowerSeller status—then schedule a meeting with them to go over your financial statements and get feedback on how your business is running. Many accountants will not volunteer information, either because they're afraid of liability or because they're simply too busy, until you ask them for it.
• There are a lot of accountants and CPAs out there who only prepare tax returns. That's not the type of accountant you need for your eBay selling business. You need an accountant with business savvy and street smarts, who can not only prepare your tax returns each year but also:
• Do basic financial analysis to find out whether you're making money or not.
• Troubleshoot problems and alert you to them before they get out of hand.
• Communicate regularly with you in the English language.
If your accountant can't do any of these, forget about the beautiful framed diploma on the wall and the fact that he or she got a perfect score on the state CPA exam. Get yourself another accountant you can work with.
• If you're thinking about a live bookkeeper or accountant, find one who understands how eBay and PayPal work. Accountants who are also PowerSellers would be the ideal choice, provided they don't compete with you on eBay. If you visit their office and you see that there's no computer or laptop on the desk, they're still using Number 2 pencils, and they think eBay is Pig Latin for bee, run screaming from the room. With a little effort, you should be able to find an accountant in your city or town who understands what you're trying to accomplish on eBay.