eCommerce Accounting Services

eCommerce Accounting Guide

Ecommerce accounting is all about tracking online sales and expenses. You need to record everything, product costs, shipping fees and refunds. Keep an eye on your stock levels and values.

Use software to automate tasks like invoice creation and payment tracking. Saves time and reduces errors. Always keep personal and business finances separate to avoid confusion.

Regular review of ecommerce business finances helps you see trends and make better decisions. Look at your sales data, profit margins and cash flow often. This helps you plan for growth and fix issues early.

Benefits of eCommerce Accounting Services

eCommerce accounting services can bring many benefits to your online business. By handing over financial tasks to an eCommerce accountant you can free up your time to focus on growth.

Free up your time to grow

As an eCommerce business owner you wear many hats. Managing finances is a time consuming task that takes away from other important parts of your business. Our eCommerce accounting services you can free up your time to focus on marketing, product development and customer service – all key to growth and revenue.

Financial data for better decision making

Financial data is key to making good decisions about your eCommerce business. A specialist eCommerce accountant can give you precise financial reports to help you identify areas to improve, optimise cash flow and make strategic decisions about investments and expansions.

Stay tax compliant and avoid fines

Tax compliance is a big part of eCommerce accounting. A specialist eCommerce accountant can help you navigate complex tax laws and regulations so you stay compliant and avoid penalties. With their expertise you can rest assured your business is meeting all tax obligations and free up your time to focus on growth.

Financial Transactions and Bookkeeping

Financial transactions and bookkeeping is important for eCommerce businesses. Having a healthy business bank account is essential as it allows your accounting team to provide full service and financial insights. These processes help you track income, expenses and overall financial health.

Sales and Purchase Orders

You need to record all sales transactions. This includes online orders, payments received and any refunds issued. Keep a record of each sale including date, product and payment method.

For purchase orders track all items you buy for your business. This includes inventory, supplies and equipment. Note the date, supplier, items purchased and cost.

Use a system to keep these records. Many eCommerce platforms have built in tools for this. You may also want to use accounting software for more complex needs.

Review your sales and purchase data regularly to identify trends and make good business decisions.

Accounts Payable and Receivable

Accounts payable is the money you owe suppliers. Keep a record of all bills and their due dates. Pay on time to keep good relationships and avoid late fees.

Accounts receivable is the money your customers owe you. This is less common in eCommerce where most sales are paid upfront. But if you offer credit to some customers, keep track of these outstanding invoices.

Set up a system to send reminders for overdue payments. This will ensure you get paid on time.

Reconcile your bank accounts regularly to catch any errors or discrepancies. This process compares your records with bank statements to make sure everything matches.

Inventory and COGS

Inventory management and cost of goods sold (COGS) is crucial for eCommerce success. These processes help you stay on top of stock levels and know your true profit.

Inventory Tracking

Inventory tracking is key for eCommerce businesses. It helps you avoid stockouts and overstocking. You can use Shopify, WooCommerce or inventory software to keep track of your stock.

Set up low stock alerts so you know when to reorder. This will prevent lost sales from out of stock items. Regular stock counts are also important. They help you identify discrepancies between your records and actual stock levels.

For ecommerce sellers including Amazon FBA sellers, Amazon handles most of the inventory tracking. But you still need to monitor stock levels and send in new stock when needed. Etsy sellers need to track their own inventory closely especially for handmade items.

Cost of Goods Sold (COGS)

COGS is the direct cost of the goods you sell. It includes material and labour costs. Accurate COGS is important for pricing your products and knowing your true profit margins.

To calculate COGS use this formula: COGS = Beginning Inventory + Purchases – Ending Inventory

Keep a record of all costs related to your products. This includes shipping fees, packaging and any labour costs. For handmade items on platforms like Etsy, track the time spent on each product.

Regular COGS analysis will help you identify trends in your costs. You can then adjust your pricing or find ways to cut costs. This will keep your business competitive and profitable.

Tax and VAT

Tax and VAT is a big area for eCommerce businesses. Proper handling of this will keep you on the right side of HMRC and avoid fines.

VAT Registration and Returns

You must register for VAT when your taxable turnover is over £85,000 in a 12 month period. Once registered you’ll need to submit VAT returns to HMRC every quarter. These returns will show your total sales and purchases and the VAT you owe.

For ecommerce businesses, tracking online sales is key for VAT reporting. Keep a record of all transactions including international sales. You can use accounting software to help manage this process.

Make sure you charge the correct VAT rate on your products. Most products have a 20% rate but some may be reduced or zero rated.

Ecommerce Sales Tax

Selling to customers online can trigger complex tax requirements. If you sell to EU consumers you may need to register for VAT in those countries. The rules vary depending on your sales volume and the type of product.

For sales outside the EU check each country’s tax laws. Some may require you to collect sales tax if you exceed certain thresholds. The US for example has different rules for each state.

Use tax compliance software to help you track your obligations in different markets. This will save you time and reduce errors in your tax filings.

Cloud Accounting for eCommerce Businesses

Cloud accounting has changed the way eCommerce businesses manage their finances. By using cloud accounting solutions you can streamline financial management, improve accuracy and collaboration.

Cloud accounting for eCommerce

Cloud accounting offers many benefits for eCommerce businesses including:

• Real time financial data: Cloud accounting gives you real time financial data so you can make informed decisions about your business.

• Automated tasks: Cloud accounting software automates tasks like invoicing, reconciliations and expense tracking so you can focus on growth.

• Collaboration: Cloud accounting software allows seamless collaboration between team members, accountants and bookkeepers so everyone is on the same page.

• Security: Cloud accounting software has robust security measures to protect your financial data from cyber threats and unauthorized access.

• Scalability: Cloud accounting software scales with your business so you can adapt to changing financial needs.

By using cloud accounting software you can streamline financial management, improve accuracy and collaboration – all of which is key to growth and revenue in your ecommerce business.

Accounting Software and Tools

Ecommerce businesses need accounting software to manage finances. The right tools will streamline bookkeeping and integrate with online sales platforms.

Choosing the Right Accounting Software

Xero, QuickBooks Online and Zoho Books are popular options for ecommerce accounting. Xero has user friendly interfaces and strong inventory management. QuickBooks Online has great reporting and tax preparation features. Zoho Books has affordable plans with multi currency support.

Think about your business size and needs when choosing software. Look for:

• Automated bank feeds

• Invoice creation and tracking

• Expense management

• Financial reporting

Try free trials to find the best fit. Make sure the software can handle your transaction volume and integrates with your payment gateways.

Integrating with Ecommerce Platforms

Connecting your accounting software to your ecommerce platform is key. This will give you real time data syncing and reduce manual entry errors.

Shopify, WooCommerce and Amazon FBA have integrations with major accounting tools. These connections will:

• Sync sales data

• Update inventory levels

• Record fees and expenses

• Generate financial reports

Check the compatibility between your ecommerce platform and accounting software. Some integrations may require third party apps or additional setup. Proper integration will save you time and improve financial accuracy for your online store.

Cash Flow and Financial Reporting

Cash flow and financial reporting is key to ecommerce success. These will help you track money movement and make smart business decisions.

Cash Flow Strategies

Monitor your cash flow. Track income and expenses daily. Use online tools to see your cash position in real time. Set up auto reminders for invoice payments to boost your income.

Pay bills on time but not too early. This will give you more cash in the bank. Look for ways to cut costs without hurting your business. Offer discounts to customers for early payments.

Build a cash buffer for slow periods or unexpected expenses. This will give you peace of mind and prevent cash flow crunches.

Financial Statements

Make sure your books are up to date. Enter all transactions promptly and accurately. Use accounting software to keep you organized and reduce errors.

Create monthly financial statements. These should include a balance sheet, income statement and cash flow statement. Review these reports and do a financial analysis to pick up on trends and issues early.

Check your inventory counts and values. For ecommerce, stock numbers are critical. Match your sales records with your bank deposits to catch any discrepancies.

Get an accountant to do the tricky stuff. They will ensure your statements are correct and compliant with UK accounting rules.

Revenue Streams and International Sales

Ecommerce businesses may use multiple platforms and sell globally so specialist ecommerce accountants can help to manage these challenges around income and different currencies.

Multiple Ecommerce Platforms

Selling on multiple platforms like Shopify, WooCommerce, Amazon FBA and Etsy will increase sales but complicate bookkeeping. Each platform has its own fees and payment schedules.

You’ll need to track revenue from each channel separately. This will help you see which are the most profitable. A good accounting system will pull in data from multiple sources automatically.

Get inventory management software. It will sync stock levels across platforms to prevent overselling.

Keep an eye on platform fees. They will eat into your profits if not monitored closely. Regular reviews will ensure you’re on the most cost effective plan for your sales volume.

International Transactions

Selling to customers abroad adds extra accounting tasks. Currency conversion is a big issue. Exchange rates fluctuate so your actual income will be affected.

Use a multi-currency accounting system. It will track sales in original currency and convert to pounds. This will give you a clearer picture of your true earnings.

Check the VAT rules for international sales. Different countries have different thresholds and rates. You may need to register for VAT in some markets.

Use a payment processor that handles multiple currencies. This will simplify transactions for you and your customers.

Keep a record of all international sales. This will help with tax reporting and identifying profitable markets.

Ecommerce Business Structures

When setting up an ecommerce business you have different legal structures to choose from. Each will have its own pros and cons for tax, liability and accounting.

Limited Company

A limited company is a common choice for ecommerce businesses. It’s a separate legal entity from its owners. This means your personal assets are protected if the company goes bust.

Limited companies have tax benefits. You can pay yourself through a mix of salary and dividends which can be more tax efficient.

Accounting for a limited company is more complex. You’ll need to file annual accounts and a corporation tax return. Accrual accounting is used where you record income when earned and expenses when incurred.

Setting up a limited company involves more paperwork. You need to register with Companies House and follow rules. But it will give your business more credibility with customers and suppliers.

Partnership

A partnership is when two or more people run a business together. It’s simpler to set up than a limited company. Each partner shares the profits and responsibilities.

In a partnership you’re personally liable for business debts. This means your personal assets could be at risk if the business fails.

Partnerships use accrual accounting too. You’ll need to keep track of income and expenses for each partner. This can be tricky if partners contribute different amounts or time.

Tax-wise each partner will pay income tax on their share of the profits. You’ll need to file a partnership tax return along with your personal one.

Partnerships are flexible. You can change how profits are shared easily. But it’s important to have a clear agreement to avoid disputes later on.

Payroll for Ecommerce Businesses

Payroll can be tricky for ecommerce businesses. You need to handle regular wages, overtime and benefits. Make sure you use good payroll software to track hours and pay. This will avoid mistakes and keep your staff happy.

Make sure you follow all UK tax rules for payroll. This includes PAYE and National Insurance contributions. You’ll need to report payroll info to HMRC each pay day.

For remote workers check if you need to pay payroll taxes in other countries. If you’re not sure get expert help.

Budgeting for Growth and Profitability

A good budget is key to ecommerce success. Start by looking at your past income and expenditure. Then set realistic goals for the future.

Include these in your budget:

• Product costs

• Shipping fees

• Marketing expenses

• Website hosting and maintenance

• Staff wages

Review your budget regularly. This will help you spot trends and make smart decisions. Be prepared to adjust your plans as your business grows.

Use tools like cash flow forecasts to plan ahead. This will help you avoid money problems and grab new opportunities to grow.

Tax Planning and Filing

Good tax planning will save you money and stress. Keep records of all income and expenses. This will make tax time much easier.

Know which taxes apply to your ecommerce business:

• VAT (if you’re over the threshold)

• Corporation Tax

• Income Tax (for sole traders)

Plan for tax payments throughout the year. This will prevent big bills from catching you out.

Check out tax reliefs for ecommerce businesses. You might be able to save on R&D costs or capital expenses. A good accountant will help you find legal ways to reduce your tax bill.

File your taxes on time to avoid penalties. Self Assessment deadlines are important for many ecommerce business owners. Make a note of these dates and start preparing early.