If you have begun operating an e-commerce business, making sure you know about your accounting responsibilities is hugely important – and luckily, this doesn’t have to be the minefield it can sometimes feel like. In line with this thought, we’ve outlined a few key things you should know about e-commerce accounting to help.
Why Do I Need Accounts For E-Commerce
Before we go any further, it’s first worthwhile that we clarify why accounts are so important for your e-commerce business. Indeed, keeping accurate accounts for your e-commerce business is essential for several reasons.
Firstly, it helps you track your business’s financial performance, including sales, expenses, and profits, allowing you to make informed decisions to grow your platform. This information is integral to help ensure your brand is taking the most appropriate steps for success.
In addition, maintaining proper accounts is a legal requirement, as businesses are obligated to file accurate financial records with HM Revenue & Customs (HMRC) for tax purposes. Failure to do so can result in penalties and fines, none of which are particularly welcome!
Ultimately, keeping accounts for your e-commerce business ensures transparency, accountability, and compliance with regulatory standards, while also providing valuable insights into your business’s financial health and growth trajectory.
What Should Your Accountants Cover?
Generally speaking, accounts for e-commerce businesses should cover sales revenue, expenses (including cost of goods sold, marketing, and operating expenses), taxes (such as VAT), profits or losses, cash flow, inventory management, and financial statements (such as balance sheet, income statement, and cash flow statement). This can vary from firm to firm, so be sure to ask a financial professional if you are unsure.
Can I Outsource My E-Commerce Accounting?
Accounting doesn’t have to be particularly hard, but it can be a source of frustration for many people. As such, outsourcing e-commerce accounting may prove a viable alternative option for UK businesses looking to streamline their financial processes and focus more on the core business activities instead.
Outsourcing allows you to leverage the expertise of professional accountants or accounting firms like us; what’s more, by hiring an external accountant, you can potentially benefit from cost savings compared to hiring and training in-house staff. It’s worth noting here that outsourcing your accounting can also provide access to advanced accounting software and technology, ensuring accuracy, efficiency, and compliance with HMRC’s guidelines.
Overall, outsourcing allows you to free up valuable time and resources, enabling you to focus on growing your e-commerce business and serving your customers effectively. However, in order to ensure the success of your accounting, it’s critical to choose a reputable accounting firm with experience in e-commerce accounting and a track record of delivering quality service like us here at Fresh Financials.
How Do I Pay Taxes For My E-Commerce Business
As we’ve briefly mentioned, keeping accurate accounts is highly important for tax purposes. The exact method for taxation will depend on the type of business you are operating; however, for most small e-commerce businesses, this will require you to complete self-assessment.
Firstly, you will need to register your e-commerce business with HMRC for tax purposes, which can typically be done online through the HMRC website. Once registered, you’ll be assigned with a Unique Taxpayer Reference (UTR) and a tax reference number, which you’ll use to file your taxes and communicate with HMRC.
Submitting your tax return can be somewhat time-consuming, in many cases; so, if you’re not quite sure where to start, consider seeking advice from a qualified accounting team to help with navigating the complexities of e-commerce taxation.
Get Professional Financial Support Today
With your financial information uploaded to the system, it’s now time to connect your payment accounts to ensure that the online accounting system or provider can monitor these during their bookkeeping work. This allows automatic bank feeds and enables real-time synchronisation of financial transactions, eliminating the need for manual data entry going forward