Bookkeeping for e-commerce retailers is significantly more complex than for a traditional "brick-and-mortar" business. Bookkeeping Services in Cincinnati. It involves a high volume of daily transactions, specialized fees, and complex tax rules that require a specialized approach focused on integration and accurate inventory costing.
1. 🧩 The Core Challenge: The "Dirty Deposit"
In traditional retail, a daily bank deposit usually equals the sales for that day. In e-commerce, money comes from platforms like Shopify or Amazon in a single, large deposit. This is the "dirty deposit" because it represents not just sales, but a net payout after various amounts have already been subtracted.
Bookkeeping must break down every single component of this net deposit:
Gross Sales Revenue: The total amount the customer paid for the product.
Platform Fees/Commissions: The fee charged by Amazon, Etsy, or eBay.
Payment Processor Fees: The fee charged by PayPal, Stripe, or the platform's payment gateway (e.g., Shopify Payments).
Shipping Charged to Customer: The revenue collected for shipping.
Sales Tax Collected: The tax the platform may have collected and remitted on your behalf (or that you are liable for).
Refunds and Returns: Amounts subtracted for customer returns.
The key bookkeeping task is reconciliation, which is matching the platform's detailed payout report to the single deposit in your bank account, ensuring every line item is recorded to the correct account.
2. 📦 The Inventory Problem: Cost of Goods Sold (COGS)
Inventory management is the single biggest difference between e-commerce and traditional bookkeeping. Correctly tracking inventory is essential because you cannot determine your true profit margin without knowing your Cost of Goods Sold (COGS).
What is COGS? It’s the direct cost of getting a product ready for sale.
The Journal Entry: Unlike expenses, inventory purchases are initially recorded as an Asset on the Balance Sheet. They only become an Expense (COGS) on the Income Statement after the item is sold.
Landed Costs: E-commerce COGS must often include landed costs, which are all the expenses required to get the product to your warehouse/3PL, such as:
Freight and Shipping from the manufacturer.
Customs, Duties, and Tariffs.
Insurance during transit.
The Method: Bookkeepers often use accounting methods like FIFO (First-In, First-Out) or Weighted Average to correctly track the cost of items sold, especially when purchase prices fluctuate.
3. 🌐 Compliance and Multi-Channel Management
E-commerce businesses typically operate across multiple sales channels and jurisdictions, adding layers of complexity.
Comments