Dec 6, 2017
The four pillars that add value to an internet business are:
- Risk
- Transfer-ability
- Growth Opportunities
- Documentation / Financials.
Documentation is completely under an entrepreneur’s control, and is arguably the most important of the four pillars for web based business owners. Having good documentation and clean financials will bring more value to an online business, instill more confidence in website buyers and help you get a better deal structure if and when you decide to sell.
Simply put, Excel is not accounting software and we’ve experienced buyer blow-back from multi-million dollar website listings that only use Excel for their accounting. If you want to have a good transaction for maximum value, with as few headaches as possible you have to have good financial records and documentation.
Getting there can be a challenge though, if accounting is not your forte. Expert bookkeeper Matt Remuzzi from CapForge is an eCommerce expert and manages the books for hundreds of online businesses.
In this podcast, Matt shares some tips to make your web based business bookkeeping easy, have your write-offs maximized without flagging an IRS audit, and have your 1099s from Amazon and other 3rd party platforms match your tax returns. He even shares tips on when to start collecting sales taxes and the right accounting method to bring maximum value if you ever decide to sell your online business.
Episode Highlights:
- Matt’s background. An MBA and entrepreneur himself, he now runs a bookkeeping firm focused on helping online business owners keep clean financials.
- Clients are FBA sellers, Multichannel sellers, and SaaS business owners. They look at each project and customize it and then put it into Quickbooks.
- You can hire a professional online bookkeeper for $100-$400 a month.
- Clean financials help you set the right source for your business.
- Tracking and measuring results help you adjust and pivot when required.
- Accounting software makes your website business value higher and you more flexible when required.
- Lenders such as the SBA require tax returns to tie out to P&Ls exported from Quickbooks. With improper accounting files good deals fall apart.
- Capforge can do 100% of the bookkeeping without the entrepreneur getting involved. They can take the admin task off of their plate. Plus it is done by professionals.
- New website business clients are brought on and records go back to the day the day the business launched. They want to work from the source material or statements to reconcile everything.
- Matt’s team makes sure there is a trail of expenses you claim in the event you are ever audited.
- The process starts with a simple client instruction sheets.
- The entrepreneur still owns the QB files / account and has 100% access to the files.
- Learn the correct way to log the Amazon income in Quickbooks so the tax returns matches your Amazon 1099 the IRS receives.
- Your Quickbooks financial statements should match what Amazon sends the IRS on the 1099s.
- Know the difference between cash and accrual accounting, and why it matters so much to total value when selling or buying an online business.
- Joe did a valuation on a cash based business and adjusted it to accrual and found $250,000 in value.
- Learn why accrual based accounting is the right way to manage the books and how it can bring more value when selling an online business.
- Capforge will do all of the bookkeeping for a web based business owner and allow them to focus on running the business. The cost is MUCH LOWER than hiring a bookkeeper in house.
- Regarding sales taxes, consider collecting in your home state until you are big enough to have it “makes sense” financially. And go with what you are comfortable with.
- Make sure the cost of sales tax compliance makes financial sense for your small business. If it is 10x what you are collecting/paying in sales tax, then it may not make sense to collect.
- Learn what you can write off and what write offs are red flags to the IRS.
- Meals and entertainment are not a big piece of an online business. Writing off multiple vehicles is a hard to swallow number. Matt’s team will go through every client and try to find deductions.
- A home office deduction is completely legitimate.
- CapForge takes on startups to large online businesses. They love to help people start out on the right foot.
- Fees can range from $100 to $400 a month. And all clients have 100% access to their account.