eCommerce accounting is a specialized form of accounting that manages the financial transactions made by an eCommerce business. It supports and handles the unique needs and demands of eCommerce stores and selling platforms. As a small business owner trading through platforms like Amazon, Shopify, eBay, Etsy, or any other online platform, it is important to consider working with a specialist eCommerce accountant to ensure that your business accounts are in order.
Reduce Ecommerce business owners workload
An expert eCommerce accountant will not only reduce your workload but will also ensure your online business is a growing success by providing e-commerce accounting and financial advice. Small business owners that work with eCommerce accountants can also benefit from saving money, avoiding fines, streamlined business processes, industry-leading software, and business growth.
When it comes to eCommerce accounting, one of the most important things to consider is bookkeeping. Ecommerce bookkeeping is the process of recording all financial transactions of a business, which includes sales, purchases, and expenses. It is a vital aspect of eCommerce accounting as it allows business owners to have a clear and accurate picture of their financial performance and make informed decisions about the future of their business.
An eCommerce expert can help you with ecommerce bookkeeping by setting up a system that is tailored to your business and ensuring that all transactions are recorded correctly and on time. They can also provide you with regular financial statements and financial reports, such as profit and loss statements, balance sheets, and cash flow statements, which will give you a clear understanding of your business’s financial position.
Understanding ecommerce tax for small ecommerce businesses
Another important aspect of eCommerce accounting is tax compliance. You and your business are subject to the same tax laws as traditional brick and mortar businesses, but there can be additional complexities due to the nature of online sales.
An eCommerce expert can ensure that your business is tax compliant and that you are taking advantage of all the tax benefits available to you. They can also help you navigate the complex tax laws that apply to eCommerce businesses and assist you with filing your tax returns with HMRC.
An eCommerce expert can help you save money on taxes by providing expert advice and guidance on tax compliance and taking advantage of tax benefits that apply to your business. As an eCommerce business, you are subject to the same tax laws as traditional brick and mortar businesses, but there can be additional complexities due to the nature of online sales. An eCommerce accountant can help you navigate these complexities and ensure that your business is tax compliant.
UK VAT, EU VAT and US Sales tax
One of the most complex tax rules for ecommerce business owners is determining the correct sales tax to charge customers. In the UK you would have to register for VAT but when selling overseas in the EU or US you will have to know when and where you need to register for Sales tax. Sales tax is determined by the location of the customer, not the location of the business, so yo must be aware of the sales tax laws in each state and local jurisdiction where they have customers. This can be particularly challenging for businesses that sell products online and have customers in multiple states.
Another complex tax rule for ecommerce companies is determining the correct tax to pay on sales. Ecommerce companies that sell products through platforms like Amazon, Shopify, and Etsy may be considered a marketplace facilitator, which means they are responsible for collecting and remitting sales tax on behalf of the seller. This can be a complex process and requires compliance with the rules and regulations of each state or EU country.
In addition to sales tax, ecommerce Companies may be subject to additional taxes such as value-added tax (VAT) and goods and services tax (GST) if they sell products to customers in other countries. These taxes can be complex and vary depending on the country, making it challenging for ecommerce businesses to comply with these rules.
Another way ecommerce accounting can help you with cashflow by providing expert advice and guidance on managing your financial transactions, and developing strategies to improve your cash flow. One of the key ways an ecommerce expert can help you with cashflow is by providing regular financial statements and reports, such as profit and loss statements, balance sheets, and cash flow statements. These reports can be run from your accounting software and will provide you with a clear understanding of your business’s financial position, and help you identify areas where you can improve your cashflow.
Cash flow forecasts
An expert at ecommerce accounting can also help you to develop a cash flow forecast, which is a projection of your expected cash inflows and outflows over a certain period of time. This can help you to identify potential cash flow shortages and surpluses, and take action to manage them. For example, if you anticipate a cash flow shortage, you can take measures such as arranging for a line of credit or negotiating better payment terms with suppliers.
Struggling with reinvesting profits
When purchasing stock cash can be tight, this is because even if you are making a profit you are reinvesting all your money into new stock for growth. It is key to understanding the difference between accrual accounting and your cash position. That is because your accrual accounting in your accounting software shows you are making a profit but when you look at your bank balance, it is very low. We can help you understand you cash cycle and ensure you are still making a return by providing the accrual accounting profit and loss statement.
An ecommerce expert can also assist you with budgeting and financial planning, which can help you to manage your cash flow and make informed financial decisions. By using the cloud accounting software, we can focus on cash flow management by providing advice on how to reduce costs, increase revenue, and manage your expenses. They can also help you to identify areas of your business that are not performing well, and provide guidance on how to turn them around.
Save on ecommerce taxes
One way an eCommerce accountant can help you save on taxes is with good tax management, by identifying and claiming all available tax allowable that apply to your business. For example, if you have a home office that is used exclusively for your business, you may be able to claim a use of home.
Additionally, if you purchase equipment or software for your business, there may be capital allowances available to you. An eCommerce expert can help you identify and claim these deductions, which can result in significant tax savings.
Another way an eCommerce expert can help you save on taxes is by providing expert advice on tax planning. By understanding your business’s financial position and goals, an eCommerce accountant can provide guidance on how to structure your business and make financial decisions that will minimize your tax liability.
For example, if your business is incorporated, an eCommerce accountant can provide advice on the best type of business entity for your business, such as an limited company or sole trader , which can result in significant tax savings.
Finally, an eCommerce expert can help you save on taxes by ensuring that your business is tax compliant and that you are filing your tax returns on time. This can prevent you from incurring penalties and interest for late or incorrect filings, which can be costly.
Running a payroll for an ecommerce business
Payroll is also a crucial aspect of eCommerce accounting. It can be a complex and time-consuming task, especially for small businesses. An eCommerce accountant can handle this task for you, ensuring that all your employees are paid correctly and on time. In addition, by using our accounting software we can determine the most tax efficient salary for you to be on as a business owner. This allows you to extract profit from the company in the most efficient way.
Tax efficiency is key part of ecommerce Accounting for a Small ecommerce business
How an accounting system can help ecommerce sellers
Ecommerce sellers can use accounting software like Xero or Quickbooks to manage their financial transactions and keep their accounts in order. These software programs provide a range of features that can help ecommerce entrepreneur streamline their accounting processes, make it easier to manage their finances and storing their financial data. You can connect your marketplace and your bank account via our software.
All your financial data in one place with an ecommerce accounting system
One of the key features of an ecommerce accounting system, like Xero and QuickBooks is bookkeeping. These programs allow ecommerce companies to record all financial transactions of a business, which includes sales, purchases, and expenses.
This makes it easy to keep track of the financial performance of your business, and generate financial statements such as profit and loss statements, balance sheets, and cash flow statements, which give you a clear understanding of your business’s financial position.
Another key feature of cloud accounting software like Xero and QuickBooks is invoicing and payments. These programs allow ecommerce companies to create and send invoices to customers, and track payments and outstanding balances. This can help businesses to manage their cash and ensure they are getting paid on time.
Integrate with marketplaces to make ecommerce bookkeeping easy
Additionally, cloud accounting software like Xero and QuickBooks can also be integrated with eCommerce platforms such as Shopify, Amazon, Etsy, and more, allowing businesses to seamlessly track sales and transactions, and manage their finances all in one place. We have created our own software which links into your marketplaces or ecommerce platform and publishes this to Xero or Quickbooks allowing you to run accurate financial reports and making ecommerce bookkeeping easy.
Finally, accounting software like Xero and QuickBooks provide a range of reporting and analysis tools that can help ecommerce sellers make informed decisions about their business. These include financial reports on sales, expenses, tax compliance, and more, which provide insights into the financial health of your business, and help you identify areas for improvement.
Key Financial Records
There are a few key statements for your to understand and investors or lenders want to see
Income Statement (accrual accounting)- an income statement is your profit and loss and shows your profit margins.
Balance Sheet (accrual accounting) – the balance sheet shows you your financial position. How much cash you have, how much customers owe you and how much you owe suppliers or lenders.
Cash flow statement (cash accounting) – this is different to the balance sheet as it just looks at cash movements in the business so you can understand the impact of a tax bill or inventory purchases.
You never know when you will need to show a supplier, lender or investor these statements and we ensure your financial records are up to date so we can produce these quickly.
We can help you get the right bank account
You may find that you need to deal with foreign currency transactions which are expensive for a normal business bank account. Whether you sell your products abroad, or you purchase products from suppliers in other countries, you will need to manage the foreign exchange (FX) risks that come with these transactions. One way to do this is by using a foreign exchange (FX) account.
A FX account is a type of bank account that allows you to hold and manage multiple currencies at the same time. This can be beneficial when you need to deal with foreign currency transactions, as it allows you to manage your currency risks and take advantage of currency fluctuations.
When you have a FX account, you can hold different currencies in the account, such as USD, EUR, GBP, and more, and use them to make payments or receive payments in those currencies. This can be helpful if you sell products to customers in other countries, as it allows them to receive payments in the customer’s local currency, which can save on currency conversion fees.
A FX account can also be helpful when you purchase products from suppliers in other countries. When you have a FX account, you can make payments to your suppliers in their local currency, which can save on currency conversion fees and reduce the risk of currency fluctuations.
Inventory management and cost of goods sold
Inventory management is a key part of ecommerce accounting to understand your cost of goods sold (COGS) in order to accurately calculate your profit margin and make informed decisions about your pricing strategy. cost of goods sold refers to the direct costs associated with producing and selling a product, such as the cost of materials, labor, and shipping.
To calculate your cost of goods sold, you will need to track the cost of all the goods you purchase for resale, as well as any direct labor costs associated with producing the product. This includes costs such as the cost of sales, labour, and shipping. It is important to note that COGS does not include indirect expenses such as marketing, rent, or salaries only your inventory purchases.
Knowing your COGS will help you to determine your profit margin and make informed decisions about your pricing strategy. For example, if your COGS are high, you may need to increase your prices in order to maintain a healthy profit margin. Conversely, if your COGS are low, you may be able to lower your prices and still maintain a healthy profit margin.
It’s also important to note that as your business grows, your COGS may change and fluctuate, so it’s important to track and review your COGS regularly to ensure that your pricing strategy is still accurate and profitable.
How we can help your ecommerce sellers
At Your Ecommerce Accountant, our expert team of eCommerce accountants work to support online businesses by helping to achieve accounting and tax compliance. Our accountants have experience working with small start-ups, family-run online businesses, and a variety of eCommerce brands, so no matter your eCommerce accounting requirements, we can help your business succeed.
Our team provides a range of services that small businesses and small business owners can benefit from including ecommerce bookkeeping, tax filing, payroll, and financial advice. We also provide industry-leading software that seamlessly integrates with eCommerce platforms including Shopify, Amazon, Etsy and more, so you can manage your finances and your business all in one place.
Contact us today to find how we can help your business
In conclusion, eCommerce accounting for a small business is an essential aspect of running a successful online business. By working with a specialist eCommerce accountant like Your Ecommerce Accountant, small business owners can save time, money, and avoid fines while also receiving expert advice and financial insights that can help them grow their business.
With our team of expert award winning eCommerce accountants and industry-leading software, we can provide all the support and services you need to take your eCommerce store to the next level. Book a free consultation today and talk to an expert.