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Bookkeeping for E-commerce: Managing Online Store Finances

Master e-commerce bookkeeping with this comprehensive guide. Learn how to handle payment processors, inventory, sales tax, marketplace fees, and the unique challenges of online selling.

KW
Kevin Wilson
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E-commerce bookkeeping looks simple on the surface—you sell stuff online, money comes in. But the reality is far more complex: multiple payment processors, marketplace fees, shipping costs, inventory tracking, and sales tax that varies by destination.

Get it wrong, and you’ll have a mess at tax time. Get it right, and you’ll have clear visibility into your true profitability.

This guide covers the unique bookkeeping challenges of online selling and how to manage them effectively.

Why E-commerce Bookkeeping Is Different

Online businesses face challenges that brick-and-mortar stores don’t:

Multiple Revenue Channels

You might sell through:

Each has its own fees, payment timing, and reporting format.

Complex Fee Structures

Every transaction gets chipped away by:

Understanding your true margin requires tracking all of these.

Sales Tax Complexity

Since the 2018 South Dakota v. Wayfair decision, you may owe sales tax in dozens of states based on:

Inventory Across Locations

Inventory might be:

Tracking accurately affects both your books and tax calculations.

Delayed and Batched Payments

Unlike immediate credit card payments at a physical store:

Cash flow timing is less predictable.

Setting Up Your E-commerce Books

Chart of Accounts

Your chart of accounts needs to support e-commerce analysis:

Revenue Accounts (by channel):

Cost of Goods Sold:

Sales and Marketing:

Operating Expenses:

Accounting Method

Accrual basis typically makes more sense for e-commerce:

Cash basis creates timing distortions:

Discuss with your accountant, but accrual usually provides better visibility.

Inventory Tracking

Perpetual inventory is essential:

Key inventory numbers:

Recording Sales

The Challenge

A $50 sale on Amazon might look like this:

ComponentAmount
Sale price$50.00
Shipping charged to customer$5.99
Gross payment$55.99
Amazon referral fee($7.50)
FBA fulfillment fee($5.80)
FBA storage fee (allocated)($0.30)
Net deposit$42.39

If you just record the $42.39 deposit as revenue, you understate both revenue and expenses, distorting your analysis.

The Right Approach

Record the full picture:

  1. Revenue: $55.99 (sale price + shipping)
  2. Amazon fees: $13.60 (referral + fulfillment + storage)
  3. Net: $42.39

This shows your true revenue and the true cost of selling on Amazon.

Handling Multiple Channels

Each channel needs separate tracking:

This reveals which channels are actually profitable and which eat your margins.

Settlement Reconciliation

Platforms pay in batches, not per-order. Reconcile by:

  1. Run settlement report from platform
  2. Match individual orders to the deposit
  3. Verify fees match expected rates
  4. Investigate discrepancies

Tools like A2X or Webgility can automate this reconciliation.

Payment Processor Management

Common Processors

You may receive funds through:

Recording Payment Fees

For each processor:

Example:

Record:

Holding Accounts

For PayPal and similar:

Inventory Accounting

The Foundation: COGS

Your gross profit depends on accurate COGS:

COGS per item = Product cost + Inbound freight + Packaging

Monthly COGS = Beginning inventory + Purchases - Ending inventory

Or calculate from: COGS = Units sold × Average cost per unit

Inventory Costing Methods

First-In, First-Out (FIFO):

Average Cost:

Specific Identification:

Multi-Location Tracking

If inventory is in multiple places:

Physical Counts

Regular counts are essential:

Shrinkage and Damage

Expect some loss:

Track and record as it happens. Don’t let write-offs pile up to year-end.

Sales Tax Management

Economic Nexus

You may owe sales tax where you have:

Each state has different thresholds and rules.

Marketplace Facilitator Laws

Most states require marketplaces to collect and remit:

But for your own website sales, collection is your responsibility.

Software Is Essential

Manual sales tax management is nearly impossible. Use:

These tools:

Recording Sales Tax

Sales tax collected is a liability, not income:

When you remit to the state:

Returns and Refunds

The Return Challenge

E-commerce has high return rates:

Recording Returns

When a return happens:

  1. Reduce revenue for the refund amount
  2. Record any restocking/return fees as expense
  3. Return inventory if resellable
  4. Write off inventory if damaged

Reserve for Returns

If returns are predictable, consider:

Tools for E-commerce Bookkeeping

Integration Platforms

These connect sales channels to accounting:

Benefits:

Inventory Management

Sales Tax Automation

Accounting Software

Monthly E-commerce Bookkeeping

Weekly Tasks

Monthly Tasks

Quarterly Tasks

Key Reports for E-commerce

Profit by Channel

Shows true margin after all fees:

ChannelRevenueCOGSFeesNet ProfitMargin
Website$50K$20K$2K$28K56%
Amazon$80K$35K$22K$23K29%
eBay$20K$8K$4K$8K40%

This tells you where to focus.

Inventory Turnover

Turnover = COGS / Average Inventory

Higher turnover = money not tied up in product.

Return Rate by Product

Identify problematic products before they kill margins.

Fee Analysis

Track fees as percentage of sales by channel over time.

Common E-commerce Mistakes

Mistake 1: Recording Net Deposits as Revenue

This understates both revenue and expenses. Record gross sales and fees separately.

Mistake 2: Ignoring Inventory

Cash-basis thinking makes large inventory purchases look like losses. Track inventory properly.

Mistake 3: Mixing Personal and Business

Especially common for home-based sellers. Keep strict separation.

Mistake 4: Ignoring Sales Tax

Nexus obligations don’t go away because you ignore them. States are actively pursuing online sellers.

Mistake 5: Not Reconciling Marketplaces

Amazon’s fees are complex. Without reconciliation, you’ll never catch errors.

Mistake 6: Manual Entry

High transaction volumes require automation. Manual entry creates errors and wastes time.

Getting Help

E-commerce bookkeeping complexity often justifies professional help:

When to get help:

What to look for:

Need help with your e-commerce bookkeeping? At Profit Path Books, we work with online sellers who need clean books, proper fee tracking, and clear channel profitability analysis. Book a consultation to discuss your situation.

KW

Kevin Wilson

Profit First Professional and QuickBooks ProAdvisor helping small business owners in Utah and beyond achieve financial clarity and consistent profitability.

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