Ecommerce sales are expected to generate over $4 billion in revenue in 2021, and the industry is booming, especially because modern consumers now prefer to do a lot of their shopping online. The convenience of finding nearly everything you need with just a single online search is nearly unparalleled!
Although it is a good thing that online shops can now sell their products to a broader range of consumers, eCommerce business owners must also be able to keep up with the accounting requirements set by the government. Online sellers must be aware of the differences between eCommerce accounting and regular business accounting.
Here are the major areas that make eCommerce accounting more challenging than regular business accounting.
1. More Complicated Inventory Management
Online sellers usually have more than one channel where they post their items for sale. Because of this, each channel is allotted a certain number of stocks that varies differently across all of them depending on the buyer traffic. Furthermore, these stocks are divided into items in a shopping cart, items already checked out, items ready for shipping or about to be shipped to the buyer, and items in the returns pile. A third-party logistics company can help you manage stock inventory and shipping.
With the number of different items you have up for sale, divisions like these make accounting more complicated. This is why it is imperative to establish organised bookkeeping for Shopify and other platforms to ensure accurate financial data and prevent cash flow problems.
2. Increased Volume of Transactions
With multiple online shopping channels, you can expect the volume of transactions to increase significantly, directly proportional to the increase in financial data. Ecommerce businesses use cloud-based options, but analysing the data for each transaction can still get very complex. You need high-end software to keep track of all numbers related to your sales.
Your accountant must be familiar with these kinds of tools and software so you can be confident that they can do their jobs effectively using complete financial data.
3. More Complex Sales Tax Obligations
A small business accountant files for sales tax in the country where the products or services are sold and paid for. But because eCommerce businesses have no definitive locations and customers might be coming from several different areas, your sales tax obligations can also vary significantly. This can be a challenging task because failure to comply with sales tax obligations on time will lead to penalties, and unpaid sales tax from previous years have already accrued interest.
Accountants with knowledge of sales tax on an international level can significantly help your eCommerce business stay on top of your sales tax obligations and avoid costly fees and the possibility of facing lawsuits.
Conclusion
In this digital age, knowing the different eCommerce platforms is highly valuable in order to increase sales and profit and lead your business to greater heights. But managing your online shop is not entirely about sales and profit because you still have to abide by local taxation laws. Hiring a professional eCommerce accountant that understands the ins and outs of your business can help you maintain accurate financial data and fulfil all tax obligations on time.
The ECommerce Accountant can help you on your online entrepreneurship journey through our young and innovative online accountants in Australia. We aim to empower, excite and build confidence in businesses through clarity in your figures. Contact us if you want to minimise your tax and increase your profit as you pursue your passion in your eCommerce business!