Not all bookkeeping software is going to be great for an eBay business. So in this guide I will go through the key features the software needs, which is the best accounting software along with the common mistakes we see when looking at eBay sellers books.
Key Features Needed from Ebay Bookkeeping Software:
Record eBay Sales, fees and Payouts
Your ebay sales are not the cash which get deposited into your account – that is your sales after your fees. Therefore you need to be able to split the ebay sales and fees and then recording them in your bookkeeping software.
There are two methods you can add ebay sales, one is by invoices and the other is by manual journal entries. Therefore you need to ensure the software you choose allows you the freedom to create accounts and make manual journals.
HMRC MTD VAT
The reason we do not recommend Excel or a very basic software is because you need to ensure your bookkeeping software can handle making tax digital VAT returns. HMRC want a digital link to your transactions, so they want you to submit your VAT returns by approved software.
Therefore you need to make sure the software has MTD VAT capability even if you are not VAT registered now. You do not want to be changing bookkeeping software later.
Reporting
After you have recorded your ebay sales and costs, you need to make sure the software you choose can use the bookkeeping transactions to create profit and loss reports. By having a decent reporting system within your accounting software you will be able to understand your ebay business.
What is the best ebay accounting software for ebay sellers
Quickbooks Online
For eBay sellers looking for reliable accounting software for ebay sellers, QuickBooks Online is a one of the best. It integrates smoothly with essential ebay integration tools like EComledger, Linkmybooks, and A2X, making it easy to manage VAT, track sales, and account for eBay fees. QuickBooks also offers excellent VAT reporting, with the ability to review and edit transactions easily. Its compatibility with most UK banks means reconciliation is a breeze, eliminating the need for manual uploads. The platform is also intuitive, making it especially user-friendly for eBay sellers who want straightforward insights into profitability and cash flow.
QuickBooks supports multicurrency transactions and has a built-in payroll feature, making it a solid all-in-one solution. While it’s priced competitively at £33 per month (with further discounts often available via accountants), it offers great value compared to alternatives like Xero. However, if you rely heavily on multicurrency PayPal accounts, QuickBooks can be cumbersome, requiring manual statement uploads and transaction matching. In such cases, Xero may be a better fit. But for the majority of eBay sellers, QuickBooks offers an efficient, cost-effective, and easy-to-use accounting solution.
Xero
If you’re an eBay seller managing international transactions or relying heavily on PayPal, Xero is an excellent choice for your accounting needs. Its standout feature is seamless PayPal integration, including full multicurrency support, which allows you to reconcile foreign currency transactions without the manual hassle. Xero also excels in VAT tracking and reporting, making it easy to manage VAT codes and understand your returns. As the “iPhone” of accounting software, Xero is often the first choice for third-party app developers, ensuring strong compatibility with key eBay tools like Ecomledger, Link My Books, and A2X. These integrations significantly reduce the time spent processing eBay sales, fees, and taxes.
Beyond eBay-specific features, Xero offers one of the best native payroll systems and supports a wide range of bank connections, making reconciliation fast and painless. It’s also a favourite among accountants, so collaborating with your bookkeeper or tax advisor is usually smooth. The main downsides are its steeper learning curve, especially if you’re new to accounting software, and a higher price point—although it’s now priced similarly to QuickBooks. Despite that, for eBay sellers dealing with global transactions and complex payment flows, Xero remains one of the most powerful and flexible accounting platforms available.
We have created an in depth article on the Best Accounting Software for eBay Sellers so check that out if you want more information
Is free accounting software worth it?
So there is free accounting software out there. The problem is its normally too much trouble than its worth as it had limited capability for an ebay business. The free options are:
- Excel
- Freeagent
- Zohobooks
- Pandle
All of these are too limited for you to do proper ebay accounting. The best option out of these is freeagent but this is only free if you have it with your bank and even then you will not get exactly what you need to perform the bookkeeping.
So if cost is your issue, start with excel and then move onto Quickbooks and Xero to avoid having to move your bookkeeping system later on.
What is the difference between bookkeeping vs accounting
So ebay accounting software and ebay bookkeeping software is an interchangable term. Bookkeeping is recording transactions from your business while accounting is then using that data to create reports and file taxes.
When people refer to ebay accounting, they generally mean ebay bookkeeping. The key is that you need to track ebay transactions and then use this data to create profit and loss reports and submit accounts to HMRC.
Avoiding Common Ecommerce accounting Mistakes: Misclassified expenses, missed deductions
- Payouts are not your sales. Payouts are ebay sales minus ebay fees. That means you need to split out your payout to Gross sales and ebay fees. This will allow you to monitor your VAT threshold of £90,000 properly. If you just use payouts then you may miss that threshold and HMRC will not be happy.
- Using ebay integration software but not matching the payments against the software. Some people use the integration but then still classify payouts on their bank to ebay sales. This double counts you revenue and you will overpay tax.
- Many people ignore their cost of goods sold and inventory. To calculate your profitability you need to know your cost of goods sold each month or your year end inventory to ensure that you know if you are making a return on investment.
When to Hire an Accountant
We recommend getting an accountant as soon as bookkeeping starts taking too long and you feel you are not doing it correctly. This normally comes when you hit £20,000 in sales a year. That’s when you want to look for an accounting who not only does accounting but will also give bookkeeping services. There is no point hiring an accountant for them to rely on your bookkeeping as too much can go wrong.
When you look for an accountant do not look for someone who does generic business accounting but someone who knows how to do ecommerce accounting. This means that they are experts when accounting ebay transactions. So make sure its a specialise ebay accountant.
