Running an online shop is exciting, but the numbers still matter. Good ecommerce accounting keeps your cashflow steady, your stock moving, and your tax position tidy. It also gives you the visibility to make better decisions: which channels are profitable, when to reorder, where fees are eating into margin, and how discounts affect VAT. With online sales now accounting for 27.6% of all retail sales in Great Britain as of August 2025, the competition is intense and the detail counts (ONS, 2025).
This guide breaks down the essentials of ecommerce accounting for owner-managed businesses. We’ll cover the building blocks – from sales channels and payment gateways to VAT rules and stock – then outline simple steps to stay compliant and make smarter calls. If you’d like hands-on support, our team works with ecommerce brands across marketplaces and platforms. Learn more about how we work and the services we provide to growing online retailers.
What makes ecommerce accounting different
Selling online adds extra moving parts compared to a traditional shop. You’ll likely have multiple sales channels, rolling promotions, cross-border customers, and a mix of payment methods. Each piece needs to tie back to your accounting records so you can see true performance.
- Sales channels: Marketplaces and your own store all send orders in slightly different formats.
- Payment gateways: Payouts arrive net of fees and chargebacks, so you must reconcile gross sales to bank receipts.
- Shipping and fulfilment: Costs vary by weight, destination, and service level; you need to map these to the right cost codes.
- Returns and refunds: High return rates in some categories can distort revenue if not recognised correctly.
- Inventory: Stock valuation drives your profit and tax. Getting counts and costings right is essential.
Setting up your system the right way
The goal is clean, repeatable data flows. Start with your ecommerce platform and build outwards.
- Chart of accounts: Create sales codes by channel and country so you can compare performance.
- App integrations: Connect your store and marketplaces to your accounting software to post orders, fees, and VAT data automatically.
- Bank feeds: Use direct feeds for each settlement account so payouts and fees are captured promptly.
- Month-end routines: Establish a schedule to reconcile gateway reports, post fee journals, and count stock.
If you need a second pair of hands to design the workflow, our accounting and advisory support can set up and maintain the process for you.
VAT for ecommerce sellers: The big points to get right
UK registration threshold: If your rolling 12-month taxable turnover exceeds £90,000, you must register for VAT (HMRC, 2024). Keep a simple tracker so you’re not caught out.
Rates and treatments: Most products fall under the standard 20% VAT rate, but some categories are reduced or zero-rated. Check specific items and bundles before running promotions.
Marketplaces and OSS/IOSS: If you sell to customers in the EU, rules can differ depending on where goods are shipped from and whether a marketplace is deemed the supplier. Consider IOSS for low-value consignments to simplify customer experience.
Discounts and returns:
- Discounts: VAT is calculated on the discounted price.
- Refunds: Issue credit notes so VAT is adjusted correctly.
Shipping charges:
- Postage recharged to customers: Usually follows the VAT status of the goods in the parcel.
Payment gateways, fees, and reconciliations
Gateway payouts are rarely the same as the sales value because fees and refunds are netted off. To keep control:
- Daily summaries: Pull order and fee detail from each gateway’s reports.
- Fee journals: Post fees to a dedicated cost code so you can see the true cost of taking payment.
- Chargebacks: Record separately, then investigate patterns by product or channel.
- Settlement timing: Match batches to bank receipts to avoid miscoded transactions and suspense accounts.
When reconciled properly, you’ll know whether a 2.5% fee is acceptable for the conversion it delivers – and you can negotiate based on data.
Inventory and cost of sales
Accurate stock accounting underpins reliable margins.
- Stock valuation: Choose a consistent method such as FIFO and review landed costs so freight, duty, and packaging are included.
- Count frequency: Fast-moving lines benefit from cycle counts. A quarterly full count is a good baseline.
- Obsolete stock: Create a policy to write down slow-moving items promptly rather than carrying inflated values.
If you manufacture or assemble products, capture component costs and wastage so your product costing reflects reality.
Sales tax and company tax: Planning the year
For limited companies, Corporation Tax planning starts with forecasting profit. The main rate is 25%, with a small profits rate of 19% up to £50,000 and marginal relief up to £250,000 (HMRC, 2025). Build quarterly estimates so you can plan cash and avoid surprises.
Year-end checklist:
- Revenue cut-off: Ensure orders are recognised in the correct period.
- Stock: Count, value, and adjust.
- Accruals: Capture late courier invoices and marketplace fees.
- R&D or creative reliefs: If you develop proprietary tech or content, check eligibility.
Record keeping and Making Tax Digital
Keep robust records for tax and Companies House filings. Limited companies must keep accounting records for six years from the end of the last financial year they relate to (GOV.UK guidance).
Making Tax Digital for Income Tax (MTD ITSA) is being phased in. Sole traders and landlords with qualifying income over £30,000 will need to comply from 6 April 2027, with those over £50,000 starting from 6 April 2026. You’ll need compatible software and quarterly updates to HMRC (HMRC, 2025). Getting your ecommerce accounting workflow right now makes the transition far easier.
Practical steps for better ecommerce accounting
A clear, repeatable process beats ad-hoc fixes. Here’s a simple framework we set up for clients:
- Channel mapping: Set sales, fees, shipping income, and refunds to specific ledger codes by channel and country.
- Gateway reconciliation: Automate daily imports, then reconcile payouts to bank receipts.
- VAT review:
- Product VAT mapping: Confirm correct rates for each SKU.
- Threshold tracker: Monitor the £90,000 rolling turnover.
- Stock routine:
- Cycle counts: High-value or fast-moving SKUs monthly.
- Write-downs: Document reasons and approvals.
- Reporting pack: A monthly report with:
- Channel P&L: Revenue, fees, contribution by channel.
- Cohort returns: Refund/return rate by SKU or collection.
- Cash position: Next 13 weeks with VAT and Corporation Tax dates.
Bringing it all together
Ecommerce accounting isn’t about ticking boxes, it’s about running a tighter operation. Clean data shows where you’re making money, and where leakage happens through fees, returns, or freight. Tracking VAT properly prevents last-minute scrambles. Reconciling gateways means you trust your numbers and can scale with confidence. And when it comes to tax, forward planning keeps cash on side and decisions timely.
If your systems aren’t giving you that clarity, we can help. We work with Shopify, WooCommerce, Amazon, eBay, and bespoke builds, linking everything to smart, compliant accounting. Read more about our approach to owner-managed businesses and, if you’re exploring support, contact us for a practical chat.
Need a steady hand on your ecommerce accounting? Speak to us about a set-up review or ongoing support, and let’s get your numbers working for you.
