Need help with ecommerce accrual based accounting method

We use QuickBooks to keep up with all our businesses' accounts, finances and revenue. In years past we have done everything on a cash basis just because it is so much easier to keep track of. However, this year we will have passed the legal limit for the cash basis of accounting.

The problem is, we don't know how switch things over to an accrual method. No accountants we have consulted near us are familiar with our line of business. We have 10's of thousands of customers and the vast majority never come back for a 2nd purchase due to the nature of what we sell. As such, it would be extraneous to create an entry for each of them in QuickBooks. Instead we just made the batch settlements we get from the likes our credit card processor, American Express, Amazon.com, etc etc, as the only clients.

How can we move this over to an accrual method of accounting? Surely this isn't something others have faced but I don't know if anyone has taken the same approach at keeping it all manageable.

Any assistance would be greatly appreciated. Any questions, just ask and I will do my best to clarify.

Reply to
AsymF
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"AsymF" wrote

It sounds like keeping up with your payables is going to be much easier than tracking your receivables, true?

To the degree that you can record any purchase invoices into payables, record operating bills into payables, etc, you understand that part I trust.

The problem you're having is how to account for receivables.

So the questions I have is how do you currently track your orders? In other words, what do you do now in your order process to know that you've fulfilled your customers orders? In that existing process is where you'll find the current solution to your problem.

And, if you aren't already tracking inventory, then that becomes an issue too.

So what parts of accrual accounting is at issue, and what do you currently do, and we'll see if we can build from there.

Reply to
Paul Thomas, CPA

"AsymF" wrote

Well, if you have systems in place to reasonably assure that the products being shipped are being billed, I see no reason that shouldn't be acceptable as representative of your receivables. Is there a time lag in that process? Are items shipped before or after you see the information from authorize.net?

Reply to
Paul Thomas, CPA

"AsymF" wrote

For book purposes you can do almost whatever you want.

For tax purposes, Section 448 requires certain entities to use the accrual method. The limit is like $5 million in gross receipts.

Revenue Procedure 2002-28 allow certain businesses with up to $10 million in gross receipts to use the cash method of accounting.

If you guys are in that gross sales range, maybe consider hiring someone else as your accountant, you should be able to afford it.

My guess is the accountant is not comfortable with your financials just on a cash basis. If there are many sales and the volume is consistent, then it's not really going to change much of anything. Sales you make in late December get recorded in January, you'll have, in theory, the same amount of sales from the next December being tossed into the third year revenues......It would matter if sales are very fluid and ever changing in amount and timing, and if there is a long lag time in the fulfillment of the sale and the receipt of the cash.

Reply to
Paul Thomas, CPA

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