E-commerce in the UK has never been stronger. From independent Shopify stores to Amazon sellers and direct-to-consumer brands, more businesses than ever are selling online. But as sales accelerate, so does the complexity of the numbers behind them.
If your accounting doesn’t keep up with your e-commerce activity, your data quickly becomes unreliable — and that can lead to cash flow shocks, VAT errors, and poor decisions.
We take a look at the most common e-commerce accounting problems UK businesses face — and how to fix them before they hold you back.
The one thing you can be certain of is that the money that comes into your business bank account from your platform does NOT represent the full value of your sales.
You need to consider VAT, platform fees and any delay in the platform paying out. There might be foreign currencies to deal with as well.
So, don’t base your bookkeeping on the value of the payout, you have to dig deeper.
Download transaction reports from your platform for a period and work out:
Use this data to do the correct accounting for your sales. In an ideal world, the amount you can expect to receive in the bank will be the amount that’s paid in from the platform.
Check you’ve done it correctly and repeat the process for several more periods so you know what the right answer looks like in your accounting software.
And only then, and only if it is a better option, should you look to automate the accounting process.
Integration software, such as A2X, is worth looking at and there are others out there.
💡 Pro tip: Don’t import every individual transaction into your accounts. Post summarised data for a day, week etc. and drill into your platform to see individual transactions.
It’s great that you can sell to anyone in the world but the tax authorities around the world can see what you’re up to and may want their piece of the pie, usually as a sales tax such as VAT.
VAT starts to get complicated because of rules related to:
Get on top of the VAT rules that apply as soon as you can and bring in help where you need to.
⚠️ Don’t forget: the taxman can see what you’re up to (might even be a customer!)
For every sale there’s a cost of sale (as Isaac Newton almost once said).
If you sell a football online then you have the costs of:
Identify and take account of these costs as soon as you can and make sure you’re actually making a profit.
As usual, all roads lead back to good bookkeeping and a finance team that fully understands your business.
Revenue growth can look fantastic — but it means little if you don’t know which products are profitable.
It’s all too easy to lose visibility of cost of goods sold (COGS) once fees, shipping, and advertising spend are factored in. Make sure your e-commerce accounting includes all the related costs and is complete
➡️ The role of the Gross Profit Officer
Every business should monitor its cashflow and an e-commerce business is no different. Three of the biggest headaches are:
Set up and run a simple cashflow model and consider opening a second bank account to put money aside for tax and future stock purchases.
➡️ Why two bank accounts are better than one
You shouldn’t be short of information from your e-commerce platforms and, if you have the bookkeeping working well, you will have additional financial information from your accounting software.
Make sure the two sets of data are consistent with each other, as this is a good sanity check for your e-commerce accounting.
And make sure you can see clearly where you’re making a profit, where you’re not and take action to improve the profit margins of each item you’re selling online.
The reports from your e-commerce platform might not be everything you desire as they have to cater for users across the world and can be a bit generic. You might have discovered this at the bookkeeping stage!
Equally, the reports you get from your bookkeeping software will only be as good as your bookkeeping and how thoroughly you’ve set up the chart of accounts in your software.
➡️ Build a useful and future-proof chart of accounts in Xero
Business owners often try to manage it themselves, resulting in late reconciliations, inaccurate VAT returns, and reactive decision-making. Often a false and frustrating economy.
Get help early on from a bookkeeper or accountant who understands e-commerce systems and workflows.
Once the correct accounting framework is in place and you’re getting meaningful information about sales, profits and cashflows you have some choices around:
E-commerce accounting should become a routine process that works well and provides the financial information you need to grow your business and your profits.
Selling online to anyone in the world is a golden opportunity that’s available to any business.
But remember:
You’ll need a financial platform to sit beside your online platform.
We can help you with that.
At Blue Dot Consulting we help UK e-commerce businesses achieve up-to-date, complete and accurate bookkeeping, allied with robust financial reports and keep a steady eye on cashflow.
Get in touch to discuss how we can make your e-commerce accounting accurate, efficient and useful.
☎️ call Michael Austin on 020 7125 0270
📧 info@bluedotconsulting.co.uk
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Know your numbers and don’t get lost in the fog
Blue Dot Consulting provides accounting, e-commerce and business advisory services to clients across Central London, West London and South West London, with particular focus on Fulham, Hammersmith, Richmond, Putney, Wandsworth, Kensington and Chelsea. We help local business owners make better financial decisions and plan confidently for the future.
© Blue Dot Consulting Limited, Chartered Accountants, Bedford House, Fulham Green, London, SW6 3JW
We don’t believe in forms, we believe in talking to people, finding out your needs and tailor-making a solution just for you.
Give us a ring on 020 7125 0270 or email us at info@bluedotconsulting.co.uk
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