Running an ecommerce business? Accounting isn’t just taxes, it’s key to maximizing profit and maintaining cash flow. From inventory tracking to multi-platform reconciliation, strong accounting practices are a must.
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Key Ecommerce Accounting Best Practices
Track Inventory Accurately
Inventory is often the largest asset on an ecommerce company’s balance sheet. Track inventory using accounting software that integrates with your sales channels. Accurate inventory valuation directly impacts your cost of goods sold (COGS) and profit margins.
Separate Business and Personal Finances
Even if you're just starting out, set up a dedicated business bank account. It makes bookkeeping, tax preparation, and financial forecasting significantly easier (and protects your legal liability).
Understand Sales Tax Obligations
Each U.S. state has different ecommercesales taxrules. Use sales tax automation tools like Avalara, TaxJar, or your accounting system’s integrations to stay compliant. Missing sales tax filings can result in hefty penalties.
Reconcile Across All Sales Channels
If you sell on Shopify, Amazon, Etsy, and more, ensure all sales, fees, returns, and payouts are reconciled monthly. Don’t rely solely on platform dashboards—use your accounting system for clean financial reporting.
Use Accrual Accounting as You Scale
Whilecash-basis accountingis simpler, ecommerce businesses scaling past $1M in revenue often benefit from accrual accounting. It gives a more accurate picture of profitability, especially when inventory timing affects cash flow.
Forecast Cash Flow Regularly
Inventory purchases, platform fees, advertising spend, and seasonal sales spikes can create cash flow swings. Regular cash flow forecasting helps you plan inventory buys without risking liquidity problems.
FAQs
What is the best accounting method for ecommerce businesses?
Most growing ecommerce businesses benefit from switching to accrual accounting because it better matches inventory and revenue timing.
Do I need special accounting software for ecommerce?
Yes. Software like QuickBooks Commerce, Xero, or A2X syncs directly with platforms like Shopify, Amazon, and Etsy for clean reporting.
How often should I reconcile ecommerce sales data?
You should reconcile all sales, payouts, refunds, and fees at least monthly to keep financials accurate and prepare for tax season.
Is sales tax reporting different for ecommerce businesses?
Yes. Ecommerce sellers must often collect and remit sales tax across multiple states, depending on where customers are located, which is more complex than traditional businesses.
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Author: Kimi, Co-founder of Sam's List
Kimi writes about what she's learning while building Sam's List and shares honest takeaways from her conversations with accountants and financial advisors across the country. None of this is financial advice—just the stuff most people wish someone told them sooner.
