Ecommerce

UK eCommerce accounting tips for new businesses

Regarding retail, eCommerce is here to stay, and this trend will not change anytime soon. Data shows that the annual e-retail sales are worth $4.2 trillion worldwide, and the 2022 Worldpay Global Payments Report indicates that the UK eCommerce market will go up by 26% from 2021 to 2025 – which is fantastic!
 
Setting up an eCommerce business is relatively easy nowadays, and many are doing so after the pandemic in place of a job or as a side hustle.
 
As with any industry, eCommerce too has its specific accounting requirements that are better resolved in the hands of expert eCommerce accountants. So if you are planning to dip your toes into the online retail pond, here are six questions to ask yourself:

1. Do you have in-house eCommerce accounting expertise?

Transactions move much faster in eCommerce than in traditional retail, and you need to keep pace with that speed. There are also rapidly evolving service changes on marketplaces to comply with international tax liabilities. Depending on your business size, you may be equipped to handle this. Therefore, it is essential to consider your in-house expertise and hire an accountant to manage your finances.

2. Are you in touch with associated costs and tax laws?

Since eCommerce allows sellers from anywhere to sell to buyers anywhere, tracking whether sellers comply with local rules can be very tricky.
 
There are multiple tax laws and direct costs (such as packaging and shipping) they will have to navigate depending on when they are selling, which means you will have to stay on top of everything. To ensure your online retail business is running proficiently, from start to finish, you ought to know about the following:

a. Handling returns

Most eCommerce businesses let their customers return goods that arrive damaged, do not fit, or do not work for some reason. Do you have the processes in place to manage costs associated with handling returns?

b. Manual data entry

Every sale has several items to track: seller fees, shipping costs, local sales tax, inventory quantity sold, and more. Manual data entry can become a massive pain for you as your eCommerce business grows.

c. Sales tax liability

Ecommerce businesses have to remit taxes in almost every location where they make sales. Are you up-to-date with various sales tax liabilities? Or are these being handled by specialist eCommerce accountants?

d. Inventory management

No eCommerce business can be successful if they do not have a proper inventory management system. Keeping stock of goods is the backbone of your cash flow. Do you have that under control? With a real-time store performance tracker, you can see how quickly inventory is moving and which marketing channels are the most significant revenue drivers.

e. Tracking vendor charges

If you are sourcing products from external vendors, you are bound to give them a percentage of the sale or a flat fee, depending on the product category. This is a critical component to track, besides managing inventory.

If you struggle to control such components of your eCommerce business, it might be worth hiring an accountant who can guide you accordingly.

3. Do you have a grasp of supply chain management?

Any eCommerce business owner must know who the suppliers are, where they are located, who is fulfilling the orders in the customer’s location and what regulatory requirements must be met.
 
As mentioned previously, there are a variety of taxes and import duties to pay as well as shipping regulations to be met. Meeting each of these obligations is key to ensuring that orders can be fulfilled legally and on time.
 
Simultaneously, it is vital to understand how costs work and how the cost of logistics, transportation and customs duty can alter the final price for customers in different locations. This will help ensure profitable quarters and positive customer experiences.

4. Are you equipped to take care of VAT-related complications?

Based on the new guidelines that kicked in on 1st July 2022, VAT must be paid on all goods imported into the EU from British sellers. This also means that, in many cases, an intermediary will need to be appointed to serve the supplier and the authority. The checks and security measures will also be much stricter in the future. You need to know all these changes and rope in specialist eCommerce accountants for help.

5. Do you have the right tools in place for receiving payments?

Today’s shoppers expect to be able to pay online safely and quickly. Integrations with payment portals like Stripe or PayPal will thus become the norm. Ask your accountant if it is a good idea to take this one step forward and use a cloud-based platform to track all transactions and financial data. Many of these can also sync with other tools like sales management platforms to ensure that records are always up to date.

6. What type of marketplace is your online retail business a part of?

Most new sellers opt to sell through established marketplaces like Amazon, especially at first. Each will come with fees and taxes, requiring a plan to ensure consistent pricing across channels, locations and currencies.

Depending on what you are selling and your in-house expertise, you may also choose from other marketplaces such as eBay, Asos, Etsy, and Walmart.

The good thing is that most of these marketplaces have their front-end financial system to handle payments safely and accurately. So you will definitely get the adequate support you need to gain confidence and experience as an eCommerce business.
 
But if you want to an extra help, there are knowledgeable amazon accountants and eBay accountants that can help you keep your accounts sorted.
Over to you
In short, as a new online retailer, it may be worth your while to take eCommerce-specific accounting services if you do not already. The core aim should always be to ensure efficient practices that integrate all aspects of the eCommerce supply chain and are fully compliant. 
 
Automation is vital here (preferably through dedicated eCommerce accounting solutions), as is frequent communication. By working with your accountant as a partner, your business and professional relationship will flourish.
 
If you are looking to get a kickstart on your eCommerce business and want an expert accountant to get your fundamentals right, get in touch with us today!
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