Ecommerce accounting
Ecommerce accounting can get complicated quickly. Luckily, much of it can be optimized. Improve your cash flow, save time and eliminate human errors with the best bookkeeping software for online stores. Automate transactions, eliminate human errors and optimize your ecommerce business finances.
Cross-border ecommerce accounting
Your financial administration is the heart of a healthy business. Your ecommerce business can have towering sales, but if your marketing and operation costs are exceeding them, you are getting nowhere. A simple record of your incomes and expenses is a blueprint of your company’s financial health.
You need to keep record of your daily transactions, and manage returns. And if your online store sells on marketplaces or uses Google Ads, you are probably met with international tax rules. You can hire an accountant, but even then, online stores benefit a lot from smart bookkeeping software.
Your administration is the heart of a healthy business.
Ecommerce accounting software
Below we have listed accounting software companies that are geared towards European ecommerce businesses, or have tools to support online sellers.
Wherever you sell in Europe, Staxxer makes it easy and efficient with their solution. This European accounting company can connect with all your sales channels. It fully automates your bookkeeping, VAT & EPR compliance.
- built in support of EU OSS reporting
- automatic handling of refunds, returns and chargebacks
- real-time insight into revenue, VAT, margins and cashflow
- designed for cross-border ecommerce in Europe
Cloud software for VAT and sales tax automation. Suitable for businesses with growing ecommerce and cross-border trade. Calculates taxes in real time based on international rules and European compliance standards. Integrates with ERP and larger ecommerce platforms.
- built for cross border ecommerce
- compliance focused reporting tools
- multi-country tax registration, filings, and remittance
- myLearning platform with videos, tips and courses
- serves over 4,000 customers worldwide
- based in Pennsylvania, United States
FreeAgent is a European cloud-based accounting solution for small businesses owners. You can manage invoices, expenses, payroll, tax returns and other accounting tasks. It offers bank connections for transaction imports.
- accounting software for small businesses
- real-time cashflow, profit and tax overview
- supports multi-currency invoicing
- tracking profitability per channel
QuickBooks offers accounting software with integrated business tools and AI automation. It can integrate with most ecommerce platforms and other sales channels, making bookkeeping easier.
- inventory tracking and cost of goods sold reporting
- multichannel sales integration (Shopify, Amazon, etc)
- invoice and bill automation for vendors and freight
- customizable financial dashboards and reports
Benefits of ecommerce accounting software
Ecommerce accounting software automates your accounting for online sales. You automatically process orders from your online store, marketplaces and other selling points. It connect with your payment provider and books revenue, VAT and costs per country and sales channel.
Accounting software can generate VAT reports for OSS, the one stop shop VAT scheme of the European Union. It gives real-time insight into margin, profit and cashflow. Insights in returns, refunds and chargebacks are usually included, as well as inventory and cost price. If you keep up with your ecommerce accounting, you will be one step ahead of any problems that may arise, such as cash flow shortage or towering advertising bills.
Aside from staying on budget, you can see how each sales channel performs, the profit margin for products, what sells and what does not. Secondly, tax season will be less of a headache. By working with accounting software that is made especially for ecommerce businesses, you get the right financial reports and can maximize your tax benefits.
Administration of your online shop: mutations
When doing the administration for your online store, there are some things to look out for. First of all, part of it is probably automated already, such as invoices to customers. And if shoppers pay online in advance, managing debtors will be limited too. Even still, ecommerce accountancy can get complicated.
You might have to match invoices with the transactions.
For ecommerce sellers, each order has different types of expenses, from packaging to shipping. There is also the risk that the customer will return the order. Additionally, your invoices often do not match transactions at the bank. This can be due to deductions from payment service providers and exchange rates. Moreover, your payment service provider may couple multiple payments in one transaction per day.
To make sure your ecommerce administration is in order, you will have to match the mutations on your account. This means you have to couple the customer’s invoice to the payment they made, for example. Most cloud accounting software programs can help automate this process. You can also check if your payment service offers a downloadable file of all orders. You can import this file into your bookkeeping software.
International payments
Another aspect where finances of ecommerce businesses get tricky, is international payments. Most European shops are not limited to customers in their home country. And if you sell on marketplaces like Amazon or use Google services, you are already doing business internationally. In other countries, tax rules may differ.
Within the European Union, ecommerce sellers can register, file and pay VAT-taxes for multiple EU-countries via just one member state. This system is called One Stop Shop (OSS). For other countries, ecommerce companies may have to register for a foreign VAT-number and file separately.
On marketplaces you have international payments.
Stock financing
Another part that is unique to online sellers, is inventory management and stock finance. Buying and managing inventory can get expensive. From renting storage to inventory management software and of course buying products. For ecommerce business owners it can be difficult to get the right amount of inventory on hand without overstocking. And if your shop grows, you want your stock to grow with it.
If you are just building up your inventory or growing fast in a short amount of time, stock financing can help you keep up the momentum. With these loans, you maintain ownership of the products. The stock also serves as collateral, making it lower in risk.
Key numbers for your ecommerce businesses
When looking at your administration there are some numbers you should keep a close eye on. The first is your net margin per order and lifetime value. The net margin is the money an order brings in after you deduct costs of marketing, customer service, and logistics such as storage, packing or shipping.
Good accounting software will give you a clear idea of your cash flow. Lifetime value refers to repeat purchases. Often, a customer comes back a second time, making the value of your marketing expenses significantly higher. This means you can invest more in acquisition to grow your business, for example.
Performance of different sales channels
Additionally, look at the performance of your different sales channels. Are you overly dependent on one channel? Then consider investing more into other channels to minimize business risk. Is a channel performing badly? You may either have to change it or even say goodbye to it, freeing up resources for other purposes.
Additionally, look at your sales numbers. What is selling a lot and what is not? Are there moments during the year your sales are going up a lot? This firstly impacts your stock keeping. Maybe you want to expand your product range with successful categories. In addition, you will know what your peak moments are. You can play into this with marketing campaigns, for instance.
