Accounting for Ecommerce Business 📊💼

Learn essential e-commerce accounting basics for business success. Jordensky's guide simplifies financial management effortlessly.

Accounting for Ecommerce Business 📊💼
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While most online retailers do not launch their businesses with e-commerce accounting in mind, being financially aware is essential to running a healthy and successful business. Uneven pricing and cost structures, as well as problems with cash flow, are among the primary causes of e-commerce business failure. The following section covers the fundamentals of accounting for e-commerce, including the factors that contribute to its complexity, bookkeeping procedures, necessary financial reports, and KPIs to monitor for your company. Continue reading to find out more, find resources to learn more, and become your company's financial expert.

What is e-commerce Accounting?

Financial information about a company is gathered, categorized, evaluated, and presented as part of e-commerce accounting procedures. It entails carrying out various accounting duties for your online store. E-commerce is also crucial because it stores and arranges all of the financial data. Tax filing, future planning, and company health assessment are the three main focuses of e-commerce accounting. The first step in e-commerce accounting is to determine your type of business entity and select between accrual and cash accounting. 

Why are Bookkeeping and Accounting Essential for E-Commerce?

Have a reliable financial system whether you sell on Shopify, Etsy, or Amazon. Here are some of the key advantages of setting up a reliable eCommerce accounting system from the outset. 

It Helps You build a Stable Business Model

Accounting and bookkeeping uphold the financial integrity of your company. They offer a reliable system for handling all documentation and can offer insights without interfering with procedures such as tax audits and payroll. eCommerce accounting ensures that you remain current and ready for your company's logistical needs. 

It Helps You to Forecast Financially 

It is hard to forecast your company's future success without a solid understanding of your finances. Having an eCommerce accounting system in place gives you the confidence to plan ahead. 

It Ensures Proper Tax Compliance 

Managing all of your bookkeeping duties, including tax compliance, takes a lot of time and diverts attention from running your business as usual. Being an internet retailer, you cannot afford to have that interruption. Focusing on building your company sustainably is crucial, and using proper eCommerce bookkeeping procedures will help you stay in compliance with tax laws. 

How is Ecommerce Accounting Different?

Even though accounting for other types of businesses is similar in many ways, accounting for e-commerce businesses is different and gets more complex because e-commerce platforms like Amazon and Shopify impede the direct flow of money from customers to retailers. The following illustrates how e-commerce and traditional commerce differ:

Traditional commerce: A consumer enters a business, makes a purchase, and pays the business directly.

Traditional commerce

E-commerce: E-commerce: The retailer's payment gateway processes the transaction when a customer buys a product. Rather than depositing the remaining amount immediately into the retailer's bank account, the retailer retains the money and pays it in one lump sum after a delay. These lump sum payouts, which frequently occur days or weeks after the transactions, are frequently composed of proceeds from several different sales. You will not get specific information about what happened, such as sales, returns, fees, and shipping costs, by checking the bank account of an online retailer because all sales channel funds are deposited into a single account. You can find all of that information on Amazon, Shopify, or any other sales channel of your choosing. Accurately classifying and matching the various types of sales channel transactions with the bank account items requires specialized skills and knowledge.  


How to Handle Balance Sheet for an E-commerce Business

Maintaining the balance sheet of an online store requires careful money management. Making a list of every asset your company has, such as money, stock, and machinery, is the first step. After that, you keep an eye on the debts your company has, including loans and supplier payments. You can determine your working capital—which makes up a sizable portion of the business you actually own—by deducting debt from ownership. If you want to know the precise financial status of your company, you must keep this balance sheet accurate. The small details add up.


In conclusion, e-commerce refers to the buying and selling of goods online. Our company Jordensky helps companies get around this digital environment. We stress that an understanding of e-commerce accounting is necessary for online businesses to succeed. Maintaining your financial records with care and organization can be achieved by heeding our advice and implementing our suggestions. Your reliable partner is the team of knowledgeable accountants at Jordensky. You will be able to make wise decisions and your e-commerce business will expand as a result.

Frequently Asked Questions (FAQs) 

1. What is the importance of accounting for an ecommerce business?

Accounting is crucial for an ecommerce business as it helps track financial performance, manage cash flow, and make informed business decisions.

2. What are some common accounting challenges faced by ecommerce businesses?

Common challenges include tracking online sales accurately, managing inventory, handling refunds and returns, and navigating complex tax regulations.

3. How often should I reconcile my ecommerce business's financial records?

It is recommended to reconcile your financial records on a regular basis, such as monthly or quarterly, to ensure accuracy and identify any discrepancies promptly.

4. Do I need to hire an accountant for my ecommerce business, or can I manage it myself?

While managing your own accounting is possible, hiring a professional accountant with experience in ecommerce can help streamline processes, ensure compliance, and provide valuable financial insights.

5. What accounting software is best suited for an ecommerce business?

Popular accounting software options for ecommerce businesses include QuickBooks Online, Xero, and FreshBooks. These platforms offer features tailored to online businesses, such as integration with ecommerce platforms and automated transaction tracking.

Introducing Jordensky - your go-to solution for all things accounting in the world of ecommerce! We're experts in Bookkeeping & MIS, 📚 GST Prep and Filing 📑, and we offer an All-in-One Dashboard app for easy management. With our AI-Powered accounting team, tailored specifically for startups, we take the hassle out of invoicing and payments for growing Indian businesses. Let Jordensky handle your ecommerce accounting needs with our professional services. Ready to see how we can help streamline your finances? Click here for a product demo! 🚀

Akash Bagrecha

Co-Founder of Jordensky