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How much should you spend on e-commerce bookkeeping?

How much should you spend on e-commerce bookkeeping?

Managing the budget for a new e-commerce business is a balancing act – you want to spend enough to get quality services, but you also want to come out of each month with a positive net profit. Since staying on top of your accounting should be a priority, we’re exploring exactly how much you should be spending on an e-commerce-focused bookkeeping service.

Why Care About Bookkeeping?

Accounting is an absolutely vital piece of the e-commerce puzzle, but with so many other moving parts to worry about, why should you care about your books?

First and foremost, as an entity registered in the US, you’re now on the IRS’s radar. That means they’ll want to know you’re contributing financially at the state and federal level by paying taxes. (You can find more info on hiring an accountant vs. a CPA in this post.) Better bookkeeping means maximizing returns and minimizing mistakes.

Aside from the obvious desire to not be fined by the IRS, you’ll want your books to be in order in case of a future sale. We’ve seen business owners lose out on cash due to messy bookkeeping, and the best way to make sure you’re maximizing your exit is to enter a sale with clean, accurate, and readable financials.

Much like it’s impossible to keep your car on the road if the windshield is covered in mud, it’s impossible to understand where your business is headed without accurate bookkeeping. Whether you’re prepping for a sale or want to be able to make informed CFO-level decisions, knowing where you currently stand in relation to where you want to go is made easier with investor-grade accounting.

Budgeting Based on Scale

So how much should you be paying to keep your accounting in check? It all depends on the size of your business.

In general, we recommend sellers keep their accounting budget below 3% of their total monthly sales. For example, a seller bringing in $20k per month in sales should budget around $600 for accounting. More precisely though, this amount will change slightly depending on the size of your business.

Small sellers, those who make less than $20k per month in sales, may find that they’re too small to hire out for accounting help. Most outsourced firms don’t offer services for much less than $600/month, so it’ll be hard to keep below the recommended 3% spend if they choose to outsource. For these sellers, we recommend a DIY approach, either by getting a team member to pull double duty and handle the books or taking a course to teach yourself the basics.

Mid-sized sellers, those who make between $20k and $50k, should be ready to hire an outsourced team to handle their books. An outsourced team will pull its budget weight by providing increased visibility while allowing business owners to spend less time worrying about finances. An outsourced team also allows sellers to receive quality assurance for their accounting without hiring or managing a part-time employee.

Slightly larger mid-sized sellers making between $50k and $1 million per month in sales are in the sweet spot for outsourced accounting. These services scale incredibly well since at those sales numbers, most firms will charge less than 3% of total revenue.

Enterprise sellers who bring in $1 million+ per month in sales are most likely ready to hire on their own in-house controller team. These sellers deal with a higher volume of sales each month, so while they need the attention of a team that understands their specific business, they’re also more likely to have the revenue to support salaried employees.

Work With Us

If you’re in the revenue sweet spot and looking for a trusted e-commerce accounting team to take over your books, contact us today for a free consultation. Got a different accounting question? Book a paid coaching call with one of our experts.

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