How to do accounting for e-commerce?
E-commerce accounting gets complicated because sales flow through multiple platforms before reaching your bank account. Amazon takes fees, Shopify charges processing costs, and what you actually deposit looks nothing like what you sold. Understanding these differences is essential for accurate books and proper tax preparation.
The biggest mistake e-commerce sellers make is recording bank deposits as revenue. If you sell $10,000 on Amazon and $8,200 lands in your account, your revenue is still $10,000. The $1,800 difference is fees. Record gross sales as revenue and platform fees as expenses. Otherwise you’re understating both your sales and your costs, which makes it impossible to see your true margins.
Cost of goods sold needs proper inventory tracking. When you buy 500 units at $8 each and sell 300 units at $25 each, your COGS is $2,400 for the month, not $4,000. Recording inventory purchases as expenses when you buy them gives you wildly inaccurate monthly profit figures. Set up inventory tracking in your accounting software so costs match to actual sales.
Sales tax compliance is where e-commerce businesses face the most risk. Economic nexus laws require collecting and remitting sales tax in states where you exceed certain sales thresholds, even if you have no physical presence there. If you use Amazon FBA, inventory stored in warehouses across the country can trigger nexus in those states. Many sellers ignore this until they get a notice from a state tax authority, and by then penalties and back taxes have piled up.
Reconciliation across multiple channels requires discipline. Each platform has different settlement schedules and fee structures. Amazon’s settlement reports break down advertising costs, FBA fees, refunds, and commissions. Shopify separates payment processing fees from subscription costs. Pulling this data into your accounting software manually is tedious and error-prone. Integration tools like A2X or Link My Books automate the process and break down settlements into proper accounting entries.
If your books feel like a mess, the issue is usually one of these areas. Revenue recorded wrong, inventory not tracked, sales tax ignored, or reconciliation falling behind. Fixing these fundamentals gives you financial statements that actually show whether your business is profitable.
Utah bookkeeping services that understand online selling can set up your accounting system properly and handle the ongoing reconciliation. The time you spend fighting with spreadsheets and settlement reports is time not spent sourcing products and growing your business.
Utah's Trusted Bookkeeping Firm
First Step:
Start With a Call
Tell us what's going on and we'll let you know if we can help. We'll ask a few questions and give you a straightforward quote.
More Questions
How to do a cash flow projection for a small business?
Start with your current cash balance, list expected inflows and outflows by timing, and project forward weekly or monthly. The key is entering cash when it actually hits your bank, not when you earn it. Update regularly and compare projections to actuals.
Read answerHow much does an accountant cost for a startup?
Startups typically pay $300 to $3,000 per month for accounting services depending on complexity and stage. Pre-revenue companies need less, while funded startups require investor-ready reporting.
Read answerDoes My Startup Need a Bookkeeper or a Fractional CFO?
Bookkeeper first. CFO later. A bookkeeper keeps your records accurate. A CFO helps you make decisions with those records. You need the first before the second is useful.
Read answerHow to catch up on bookkeeping?
Start with bank reconciliations to establish a clean baseline, then work month by month from your oldest incomplete period forward. Gather all statements and documents before you begin so you're not hunting for records mid-process.
Read answerHow hard is it to get approved for an SBA loan?
SBA loans are harder to get than most business owners expect, but not impossible with the right preparation. Lenders typically want credit scores above 650, at least two years in business, and clean financial records. The paperwork requirements are substantial, which is where many applications stall.
Read answerHow do small businesses manage inventory?
Effective inventory management starts with consistent processes and software that connects to your books. Count regularly, track cost of goods sold accurately, and establish reorder points based on sales velocity.
Read answer