We’ve handled $100,000,000+ in transactions for DTC and Shopify brands, so we know a thing or two about what every early-stage DTC founder should know about accounting.

‍

Here are 9 of those things:

‍1. A common mistake when calculating the contribution margin‍

Not including “shipping out” and “merchant/processing fees” can lead you to miscalculate your contribution margin. These variable costs eat into your profit quickly.

‍

2. Choose your corporate structure wisely‍

There’s no “right” or “wrong” answer for which corporate structure you should choose, but we generally recommend an S corp for self-employment tax savings. Either way, plan with the end in mind - it could save you a ton of money and headache.

3. Ecommerce financing is different than a traditional loan

As opposed to taking out a traditional loan where you are given a fixed APR, ecommerce financing comes with no such option. Therefore, before you take on new ecommerce financing, you should carry out an APR comparison to understand the costs.

4. Don’t use a “standard” Chart of Accounts (COA)

Generic COAs are meant to work with a variety of businesses. Remember, what a doctor’s office needs to see is going to be totally different from what you need to see. So make sure to build and customize yours for what you need to see.

‍

{{promo-strip}}

5. 5 sections your COA needs the include

The following five sections should work for most brands well into the 7-figure range:

• Sales
• Costs of goods sold
• Operating expenses
• Other income & expenses
• Income and taxes

6. These inventory costs make up your COGS

• Sales tax
• Packaging
• Vendor fees
• Raw materials
• Finished products
• Manufacturing or production
• Shipping stock to your warehouse

‍

While these costs can be pretty tedious, accurately calculating them is critical to not going under.

7. Get help with sales taxes

Selling in multiple states gets really complicated as every state, and sometimes every county in a state has different sales tax regulations. We recommend using a tool like TaxJar to automate the compliance process.

8. Create an accountable plan

Paying a business expense out-of-pocket? With an accountable plan, once the business reimburses you, you get tax-free income while the business gets a tax deduction.

9. Get your bookkeeping in order before getting a fractional CFO

A fractional CFO is great for planning and analysis. But, they need a solid foundation to start with—accurate books. For that and AI accounting and AI bookkeeping, you can hit us up :)

TLDR

1) Understand your costs 

2) Automate so you can focus on growing

3) Build your financial picture so it reflects what you need to see

‍

About Finaloop

We are a technology company providing automated end-to-end accounting service to ecommerce businesses. Our system connects to your apps, syncs all your data and reconciles your books in real-time, replacing your bookkeeper, your accounting software, and your ecomm integrations. We offer reconciled books available 24/7, tax-saving insights, and a single place for all your financial data.

The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. Readers are advised to consult with their attorney or accountant with any questions or concerns.

‍