As an eCommerce business owner, you don’t have to restrict your business to the confines of the UK. You can think bigger, go further.
What are the downsides? Well, trading across borders can involve a lot of paperwork and tax calculations. Don’t let that put you off, though.
Our article will explain the best ways to navigate cross-border eCommerce accounting.
What is eCommerce accounting?
Accounting for your eCommerce business will share a lot of similarities with accounting for bricks and mortar establishments. But, while they may have some things in common, eCommerce involves a bit more legwork – especially when you’re trading internationally.
As you’ll be exporting goods outside of the country, you’ll have further taxes to pay as well as extra duties and the costs of shipping. These are the most important areas to consider.
Types of accounting
Before making a sale, you’ll first have to decide on which accounting method to adopt. The two commonly used methods are the cash basis method and the accrual basis method.
The cash basis method is only eligible for small self-employed businesses with an annual turnover under £150,000. This method is popular and straightforward.
The accrual basis is when you count income as yours as soon as you send an invoice. You’ll also class any bills you receive as an expense, even if you don’t have to pay for 30 days. This method provides a clearer picture of your business’s finances, but it’s a lot more work.
EU importing
Since Brexit, the rules of exporting from the UK to the EU have undergone drastic changes.
As an eCommerce business, you’ll need to ensure you stay compliant during every sale. In order to do so, you must register with the Import One Stop Shop (IOSS) or the One Stop Shop (OSS).
Both of these allow you to sell and ship goods to Northern Ireland and the EU and will involve you reporting your export VAT and taxes.
Once you’ve registered, you’ll file VAT returns at the end of your accounting periods. If you haven’t shipped any goods, you’ll still have to file a nil-return report.
When reporting the sale of goods or services exported into the EU, you’ll have to include the value and the VAT charge rate. But, as you’ll have to report in sterling, you’ll need to calculate currency conversion rates.
Track your costs
Due to the nature of cross-border eCommerce trade, you’ll have to keep a close eye on your extra costs. Inevitably, shipping goods outside of the country is going to cost more than shipping domestically.
Some of the costs you’ll have to consider include:
- export duties
- courier service
- cost of shipping
- currency exchange rates.
In order to maintain a healthy cashflow, you should consider incorporating these costs into your selling price. Charge extra for delivery and make tracked shipping for a slightly increased price.
Working with an expert bookkeeper will mean a constant review of your sales and tax payments, making your eCommerce business as efficient (and profitable) as possible.
Not only that, but it will take the burden of your tax compliance and reporting off your shoulders, meaning you can focus on your most important priority – your business.
Still confused?
Cross-border eCommerce accounting is a different beast in the world of business. Not only do you have to consider the extra duties and VAT charges on your sales, but also the cost of shipping your goods outside the country.
That’s why having an accounting firm with a wealth of experience in the eCommerce industry can prove invaluable.
Get in touch with our team today to discuss your eCommerce accounts.