Running an ecommerce business can feel like being the ringmaster of a three-ring circus. Between juggling marketing strategies, inventory management, customer service, and logistics, accounting often ends up as the tightrope act nobody really wants to perform—but absolutely has to.
Let’s be real: if there’s one part of the business you really don’t want to mess up, it’s the books. Yet, e-commerce accounting is its own beast, far more complex than your traditional brick-and-mortar model. Why? Because online businesses operate in a borderless marketplace governed by ever-shifting rules, taxes, and tech tools.
Whether you’re selling handmade jewellery from your kitchen table or running a full-scale Shopify store with global reach, understanding the accounting world is critical.
1. Sales Tax Is a Nightmare
If you ask any e-commerce owner what makes them sick, they’ll say “sales tax.”
Online merchants often have to collect and pay taxes in more than one state or province, and occasionally even in more than one country. This is different from physical stores, which only have to deal with one local tax authority. Each one has its own filing deadlines, tax rates, and thresholds. It’s like going to a potluck where everyone brings a different set of rules.
For instance, in the U.S., “economic nexus” regulations say you could have to collect sales tax in states you’ve never been to. The GST/HST is the same for all of Canada, but the PST/QST is different based on where your consumers are.
Pro Tip: Find an accounting partner who knows a lot about taxes, like Multitaxservices Accountant London Ontario. They know a lot about e-commerce tax rules and can help you stay compliant without losing sleep (or your shirt).
2. Inventory Management
Not only is inventory putting material on shelves, it’s also money that isn’t being used. You can’t see how much money you’re making without keeping track of your inventory correctly. Even worse, you could get your taxes wrong.
Shopify and BigCommerce are examples of e-commerce platforms that keep track of SKUs, but that doesn’t mean that the entries in your accounting are correct. You need to make sure that your inventory levels meet your cost of goods sold (COGS) and your revenue sources.
Solution: Use inventory management systems that work with your accounting program. And sure, get advice from a professional to set up accrual accounting so that your COGS really shows what you sold, not just what you bought.
3. Reconciling Multiple Payment Gateways
You know how hard it is to keep track of payments between PayPal, Stripe, Amazon Pay, Shopify Payments, and Klarna if you like chaos. Not all of them use the same financial terminology, and each one has its own fees, schedules, and reports.
At the end of the month, you have to put together transactions like a forensic accountant in a true-crime show.
For example, if you sold something for $100 on Shopify but only got $89.25 after Stripe fees, currency conversion, and reimbursements, Not only is it annoying, but it can be a nightmare if you don’t keep track of those costs appropriately, especially during tax season.
Tip: Do as much as you can automatically. You may connect sales platforms straight to accounting systems. And once more, having an accountant from Multitaxservices in London, Ontario on your team can convert hours of reconciling into minutes of oversight.
4. Cash Flow vs. Profitability
You made $10,000 this month—good job! But wait, why do you have $473 in your bank account?
This isn’t a trick. On paper, e-commerce companies often look like they make money, but they actually lose money because of late payments, exorbitant advertising costs, returns that aren’t accounted for, or, as we said, too much inventory.
This disparity gets bigger when growth starts. You buy more product, spend more on advertising, and pay contractors or VAs up front, but it can take weeks for the money from clients to come in.
A business that is healthy isn’t merely making money. It’s wet. It is very important to know the difference.
Tip: Check your cash flow statement often, not just your income statement. If you’re not sure where to start, look for an accountant who can help you understand what the numbers imply. Multitaxservices is a good example because they use plain English instead of accounting jargon.
5. Returns, Refunds, and the Accounting Black Hole
E-commerce does well when it is flexible, which means that it has easy return procedures. But here’s the problem: returns make accounting more difficult.
When a customer sends back a product, you aren’t just canceling the sale. You might need to update your income, add back inventory (if it can be sold again), and even keep track of changes in the sales tax you collect. It gets increasingly harder to keep track of money if you give store credit.
And let’s be honest: most business owners don’t go back and change those statistics right away.
Why it matters: If your financial statements are based on returns that haven’t been adjusted or credits that are missing, you’re basically flying blind. This is very risky, especially when you’re searching for loans, investors, or even just peace of mind.
Fix it: Standardize your return workflows and make sure they sync with your accounting system. Regular audits by a professional can save you from end-of-year headaches and costly errors.
Wrapping Up
It’s not enough to just follow the rules when it comes to e-commerce accounting. Being clear helps you set better prices, make better investments, and sleep better at night.
The good news is? You don’t need to be a math genius to get your books in order. But you need to know when to ask for help. That’s where a smart partner like Multitaxservices accountant in London, Ontario can really help. If you have the appropriate financial partner, they can turn your business from a hustle to a well-oiled machine, no matter how big or little it is.
So the next time you’re knee-deep in spreadsheets and wondering why your “best month ever” left you broke, remember that the statistics aren’t lying; you simply need someone to help you understand what they’re saying.
