The Complete Guide to Ecommerce Accounting for Sellers

Last verified: June 2026

Most ecommerce founders think their accounting is fine until their accountant shows them the actual margin — and it's half what they expected. The problem almost never starts with bad products or bad pricing. It starts with recording the £9,200 Amazon deposit as £9,200 of revenue, when the real gross sales figure was £13,400 and there were £2,800 of fees, £900 of refunds, and £500 held in reserve baked into that single number. This guide covers ecommerce accounting from first principles to advanced strategy, with worked examples throughout.

Foundations of ecommerce accounting

Ecommerce accounting is harder than traditional retail accounting because your financial data is scattered across platforms, payment processors, and fulfilment networks — each of which pools and delays funds differently. A high street retailer takes £50 at the till and records £50. You take £50 on Amazon on a Tuesday, and it might reach your bank account 14 days later as part of a bundled settlement that also includes sales from seven other days, minus fees, minus a refund from three weeks ago, minus a 3% reserve Amazon held back. Those are fundamentally different problems.

Errors compound across channels in ecommerce in a way they simply don't elsewhere. Get your Shopify books wrong and you've got one mess. Get Shopify, Amazon, eBay, and Etsy wrong simultaneously and you've got four messes that all feed into the same P&L. The foundations are worth getting right early — fixing them later, under time pressure, with a year's worth of tangled data, is genuinely miserable.

Cash vs. accrual accounting

The two primary accounting methods are cash and accrual. Cash basis records revenue when money arrives and expenses when money leaves — simple, but it distorts performance when you're holding inventory, running promotions, or carrying 60-day supplier terms. Accrual accounting records revenue when the sale is earned and expenses in the period they relate to, regardless of when cash moves.

For any ecommerce brand that holds physical inventory, accrual is the right choice. It matches your Cost of Goods Sold to the same accounting period as the sale that caused it — which means your gross profit figure actually reflects reality. Accrual accounting gives a true sense of profitability by pairing revenue with the costs that generated it. Cash basis can show you a profitable month simply because a supplier invoice hasn't landed yet.

A quick illustration. You sell 200 units in March at £40 each — £8,000 gross revenue. Your COGS per unit is £14, so £2,800 of cost belongs to March. Under accrual, March shows £5,200 gross profit. Under cash basis, if you bought that stock in February and paid for it then, March shows £8,000 gross profit — a 54% overstatement. Your pricing decisions, your reorder calculations, and your tax liability all depend on getting this right.

Chart of accounts for ecommerce

A generic chart of accounts built for a services business won't work for ecommerce. You need specific income accounts for each sales channel (Amazon FBA, Shopify, eBay), separate expense lines for platform fees, FBA fees, shipping costs, returns and refunds, and storage fees. COGS also needs its own section — distinct from operating expenses — so your gross profit calculation stays clean.

A working skeleton for a multi-channel seller:

• Income: Gross Sales — Amazon | Gross Sales — Shopify | Gross Sales — eBay | Gross Sales — Other
• COGS: Product Cost | Inbound Freight | FBA Inbound Prep
• Gross Profit: (auto-calculated)
• Operating Expenses: Amazon Seller Fees | FBA Fulfilment Fees | Shopify Subscription | Payment Processing Fees | Returns & Refunds | Advertising | Warehouse Costs | Shipping — DTC Orders
• Other: Storage Fees | EPR Compliance Costs | Software & Tools

If you're migrating from a bookkeeper who set you up on a generic template, rebuild the chart of accounts before you do anything else. Retrofitting it later is a project nobody wants.

Platform-specific accounting: Amazon and Shopify

Amazon and Shopify both pool funds before they pay you, but they do it in structurally different ways — and both will mislead you if you record the bank deposit as revenue.

Amazon settlement accounting

When Amazon deposits £10,000 into your bank account, that is not £10,000 in revenue. A typical Amazon settlement contains gross product sales, minus referral fees (usually 8–15% of sale price), minus FBA fulfilment fees, minus FBA storage fees, minus advertising charges, plus or minus refund adjustments, plus reimbursements, minus a reserve holdback. The deposit is the net of all of those. Recording it as a single revenue figure understates gross sales, understates fees as expenses, and produces a cost structure you can't actually manage.

The correct approach: parse every Amazon settlement flat file — which you can pull from Seller Central via the SP-API — and split it into its component transaction types before any of it touches your ledger. Every sale goes to Gross Sales — Amazon. Every referral fee goes to Amazon Seller Fees. Every FBA fulfilment charge goes to FBA Fulfilment Fees. Refunds get reversed out of revenue and COGS simultaneously.

Reserve accounting deserves special attention. Amazon withholds a percentage of funds as a rolling reserve, releasing it on the next settlement. Record reserves as a current liability on your balance sheet until Amazon releases them — at which point you debit cash and credit the liability, not revenue. Recognising reserve funds as income before they're released means you're booking money you don't yet have.

Shopify payout accounting

Shopify Payments pools daily orders into a payout, typically released 2–5 business days later. The settlement structure is simpler than Amazon's — gross sales minus Shopify Payments processing fees — but you're still not recording revenue at the order level if you're posting the bank deposit. The gap matters most at month-end cut-off: orders placed on 31 March but not paid out until 3 April belong in March under accrual accounting.

Worth knowing: Shopify does not act as a marketplace facilitator for sales on your own storefront. You are the seller of record. Sales tax collected through Shopify Payments is collected on your behalf, passed through to you, and your responsibility to remit. That's fundamentally different from Amazon, where Amazon collects and remits directly. Getting this wrong creates compliance exposure — more on that in the sales tax section.

If you're running both channels simultaneously, we wrote a detailed walkthrough of the Shopify and Amazon combined operation that covers the inventory side of this.

The three financial reports that run your business

All three. Reviewed together, every month. Most founders obsess over the P&L and ignore the other two until something goes wrong — which is usually the worst possible time to start reading a cash flow statement for the first time.

The profit and loss statement

Your P&L shows revenue, COGS, gross profit, operating expenses, and net profit for a given period. For ecommerce, gross profit margin is the single most important number — it tells you whether your product economics work before you've spent a pound on marketing or overhead. Most physical goods DTC brands should target 50%+ gross margin to survive CAC and fulfilment costs.

Say your P&L for Q1 shows: Gross Sales £180,000 | COGS £81,000 | Gross Profit £99,000 (55%) | Operating Expenses £72,000 | Net Profit £27,000 (15%). That looks reasonable. But if gross sales split £120,000 Amazon / £60,000 Shopify, you'd want channel-level P&Ls — because after Amazon fees (roughly 25–30% of Amazon revenue), your Amazon contribution margin might only be 28%, while Shopify at 15% payment processing plus shipping costs might be closer to 42%. You could be cross-subsidising a loss-making channel with a profitable one and not know it.

The balance sheet

Your balance sheet is a snapshot of what you own, what you owe, and the difference (equity) at a single point in time. For ecommerce, the two items that most often cause surprises are inventory (an asset that can become a liability overnight) and Amazon reserves (which most sellers misclassify as income).

Inventory valuation should reflect cost, not selling price. If you're carrying £80,000 of slow-moving stock — product that hasn't sold in 120+ days — that asset figure is probably overstated. Inventory impairment (writing down the value of stock that won't sell at full cost recovery) is an accounting requirement, not just a tax play.

The cash flow statement

This is the report most ecommerce founders ignore until there's a crisis. Cash flow from operations tells you whether your core business generates real cash — separate from financing activities (taking a loan) or investing activities (buying equipment). A profitable P&L alongside a negative cash flow statement is very common in ecommerce, particularly when you're growing fast and buying inventory ahead of demand.

And this is where seasonal businesses get caught. A brand doing £600,000/year with 60% of revenue in Q4 needs to fund 3–4 months of inventory purchases in Q2 and Q3. The cash flow statement shows you whether you have the cash to do that, or whether you'll need financing. Review it monthly — not just when the bank account looks thin. Our guide to multi-channel inventory forecasting covers the demand planning piece that feeds directly into cash flow projections.

Inventory accounting and COGS

COGS is calculated as: Beginning Inventory + Purchases − Ending Inventory = COGS. Simple formula, surprisingly hard to execute correctly when you're running multiple warehouses, multiple SKUs, and fulfilment centres you don't physically control.

Inventory valuation methods

Three methods dominate in ecommerce:

Most UK and EU ecommerce brands use FIFO or weighted average. FIFO produces the most defensible cost figures when you're selling trend-sensitive products — old stock at old prices.

FBA inventory accounting

FBA adds a layer of complexity because your inventory sits across multiple Amazon warehouses, with portions potentially in transit, reserved for pending orders, or held in unfulfillable status. When you ship a unit to an FBA warehouse, it moves from your "inventory at cost" asset account into "FBA inventory" — it hasn't sold yet, so no COGS is recognised. COGS is only recognised at the point of sale, when Amazon ships the unit to the customer.

Keeping stock levels accurate across channels is the operational prerequisite for accurate COGS. If your inventory records don't match what's actually in the warehouse, your COGS calculation is wrong before you start. An inventory management platform that syncs real-time stock levels across FBA, your 3PL, and your own warehouse removes the manual reconciliation that causes these discrepancies.

Landed cost: don't under-cost your products

One of the most pervasive mistakes in ecommerce COGS is treating product cost as only the ex-works supplier price. Landed cost includes the supplier invoice, inbound freight (ocean or air), import duties and tariffs, customs brokerage fees, drayage to your warehouse, and any inbound prep costs. For a product with a £10 ex-works cost, the true landed cost might be £13.80 once you add ocean freight, duties, and prep. Run your COGS on £10 and your margin looks artificially healthy — until the reorder lands and cash disappears faster than expected.

Build landed cost into every purchase order. Sorting it out at year end, under pressure, with incomplete freight invoices, is a reliable way to end up with COGS figures nobody trusts.

Sales tax and EPR compliance in 2026

Compliance is now a line item, not an afterthought. Two distinct regimes affect ecommerce sellers in 2026: sales tax (primarily a US challenge) and Extended Producer Responsibility (primarily a European challenge, though US state EPR is accelerating).

US sales tax: economic nexus in 2026

As of 2026, 46 US states have active economic nexus laws, with most thresholds set at $100,000 in annual sales or 200 transactions into that state. Cross both thresholds in Texas, for example, and you have nexus — meaning you must register, collect, and remit Texas sales tax on direct-to-consumer Shopify orders, regardless of whether you have any physical presence there.

Multi-channel sellers get some meaningful relief here: if you sell through Amazon or other major marketplaces, those platforms collect and remit tax in all states with marketplace facilitator laws — which now covers every state with a sales tax. Marketplace facilitator tax shifts collection and remittance responsibility from the third-party seller to the platform, so your Amazon sales are covered. Your Shopify storefront is not. That distinction matters enormously for compliance planning. We've written a detailed guide to US sales tax nexus if you want the full state-by-state breakdown.

The accounting implication: sales tax collected through Shopify is a liability, not income. When a customer pays £55 including £5 of tax, you record £50 revenue and £5 tax payable. A lot of smaller sellers record the full £55 as revenue and wonder why their bank account never matches their books when they remit.

UK Plastic Packaging Tax (PPT)

The UK Plastic Packaging Tax applies to businesses that manufacture or import 10 tonnes or more of plastic packaging in a 12-month period — and they must register with HMRC even if no tax is due at that point. From 1 April 2026, the rate is £228.82 per tonne for packaging with less than 30% recycled plastic content by weight. For a brand importing 15 tonnes of packaging annually, that's a tax exposure of over £3,400/year — not enormous, but real, and you need to be accounting for it.

EU EPR: Germany, France, and beyond

Extended Producer Responsibility regulations require producers and sellers to take financial and operational responsibility for the end-of-life management of their products and packaging. In practice, that means registering with a Producer Responsibility Organisation (PRO) and paying fees based on the weight and material type of packaging you place on the market.

In Germany, the VerpackG (Verpackungsgesetz — German Packaging Act) requires registration with the LUCID packaging register for any brand placing packaged goods on the German market — there is no minimum threshold. First unit in means you're obligated. Fines for non-compliance can reach €200,000. In France, CITEO is the primary PRO for household packaging EPR, and from July 2026 the obligation extends to industrial and commercial packaging.

These costs belong in your P&L under compliance expenses. And if you're selling into Germany or France and haven't registered, the liability is accumulating on your balance sheet whether you've accounted for it or not. Our EPR packaging compliance tool handles registration and reporting across UK PPT, LUCID, and CITEO from a single dashboard.

Fashion brands have an additional layer: France's Refashion scheme, the Netherlands UPV (Uitgebreide Producerverantwoordelijkheid — extended producer responsibility for textiles), and the EU's Digital Product Passport requirements. We covered those in depth in our EU Textile Digital Product Passport compliance guide.

Ecommerce accounting software and automation

Brands that still reconcile their Amazon settlements manually in spreadsheets aren't just slower — they're making more mistakes. A single Amazon settlement flat file can contain thousands of transaction lines across multiple transaction types. Manual categorisation introduces errors at scale; software running deterministic rules does not.

What automation actually needs to do

A proper ecommerce accounting automation layer needs to pull settlement data from each marketplace via API, parse every transaction type (sales, referral fees, FBA charges, refunds, reimbursements, reserves), assign each line to the correct nominal account, apply COGS per SKU at the point of sale, and post the resulting journal entries to your accounting ledger — all without you manually touching the data. If your current process involves downloading a CSV, opening it in Excel, and categorising rows by hand, you have room to improve.

The Google Sheets approach to Amazon payouts can work at low volume — we've written a guide to it — but it doesn't scale past a few hundred transactions a month without significant time investment and a higher error rate.

Inventory and accounting integration

Your inventory management system and your accounting system need to talk to each other. When inventory is purchased, that cost should flow into your accounting system as an asset (inventory on hand). When a unit is sold, the cost should move from inventory to COGS automatically. When stock is written off or returned, that adjustment should generate a corresponding accounting entry.

Without that integration, you're doing double-entry manually — once in your IMS for operational purposes and once in your accounting system. Two chances to make an error, zero automated reconciliation to catch it. Ceendesis IMS integrations connect channel-level stock data with the accounting layer downstream.

Advanced accounting strategies for scaling ecommerce brands

Once the foundations are solid, the accounting function shifts from record-keeping to decision-making. The brands that scale profitably track numbers their competitors don't bother with — and the difference tends to show up first in their ability to reinvest without guessing.

Channel-level contribution margin

Net profit by channel is the number most growing brands don't track. Calculate it as: Channel Gross Sales − Channel COGS − Channel-Specific Fees (FBA fees, referral fees, Shopify payment processing) − Channel-Specific Ad Spend − Channel-Specific Returns. What's left is the channel's contribution to covering shared overheads. If Amazon's contribution margin is 22% and Shopify's is 41%, you might rationally decide to invest more in DTC growth and let Amazon tick over rather than chasing Amazon revenue with aggressive PPC.

Cash flow management for seasonal brands

A brand doing 60% of annual revenue in Q4 has a structural cash flow problem from January to August. Inventory needs to be purchased and shipped from factories months before it sells. A line of credit helps, but it's not a plan on its own — build a 13-week cash flow forecast that maps outgoings (purchase orders, EPR fees, platform subscriptions, fulfilment costs) against projected inflows (payout settlement timelines, not gross sales). Amazon's typical 14-day settlement cycle means Q4 sales don't fully clear until early November. Model that gap explicitly rather than discovering it when a supplier invoice lands in October and the account looks thinner than expected.

Our guide to dynamic safety stock covers the inventory side of seasonal planning, which feeds directly into your Q3 cash flow model.

Key accounting KPIs for ecommerce

Beyond gross margin and net profit, these are the numbers worth tracking monthly:

• Gross Margin by SKU: which products actually make money after landed cost and fulfilment
• Inventory Turnover: Cost of Goods Sold ÷ Average Inventory Value. Lower than 4× annually in most categories suggests capital is tied up in slow stock.
• Days Sales of Inventory (DSI): (Ending Inventory ÷ COGS) × 365. Tells you how many days of sales you're carrying.
• Return Rate by Channel: returns hit both revenue and COGS; a 20% return rate on Amazon is economically different from 20% on DTC because of how FBA handles returned units.
• Accounts Payable Days: how long you're taking to pay suppliers. Extending payment terms is often the cheapest form of working capital financing available to small and mid-size businesses.

Multi-currency and international sales

If you sell into the US, EU, and UK simultaneously, you're holding receivables in multiple currencies. Under accrual accounting, you need to revalue those at month end using the closing exchange rate, and recognise foreign exchange gains or losses in your P&L. This is one of the most commonly mishandled areas in ecommerce accounting at the SME level — and it can produce meaningful P&L distortions when sterling moves 5–10% against the dollar in a quarter, as it has done repeatedly.

The practical fix: use your accounting software's built-in multi-currency module, set a consistent exchange rate source (typically your bank's mid-market rate or a central bank rate), and run the revaluation at period close as a standing task — not an annual surprise. For brands building out their international operations infrastructure, our International CPG Operations Stack covers the broader picture.

What to do next

If your current accounting workflow is: download settlement CSVs → manually categorise in spreadsheets → post a single journal entry per month → reconcile at year end with your accountant, then the single highest-return change you can make is automating the settlement parsing layer. Settlement reconciliation is where errors accumulate and where accountant hours get burned on work that shouldn't require a human at all.

Ceendesis Accounting connects to Amazon, Shopify, eBay, Etsy, Walmart, TikTok Shop, Square, and WooCommerce, parses every settlement into its component transaction types — sales, referral fees, refunds, reserves, and tax — tracks per-product COGS, and posts clean accrual-correct journal entries directly into Xero. It's built around Xero today (QuickBooks Online support is rolling out — no Sage yet), so check your accounting software before you go further. But if you're on Xero and running multiple channels, the time saved on manual reconciliation is real, and cleaner data going into month-end tends to mean shorter, cheaper accountant conversations.

For operations managers handling both inventory and finance, see how IMS and Accounting work together across a multi-channel operation.

Frequently asked questions

How do I handle accounting for my Shopify and Amazon store?

Record gross sales separately for each channel and parse each platform's payouts into their component transaction types — never record the net deposit as revenue. Amazon settlements require splitting out referral fees, FBA charges, and reserves as distinct line items, while Shopify payouts need to separate sales tax collected (a liability) from actual revenue. Running both channels into a single accounting system with channel-level nominal accounts gives you the visibility to manage each business independently.

What is the best way to track inventory and COGS for an ecommerce business?

Use the accrual method with a perpetual inventory system — one that updates stock levels and recognises COGS automatically at the point of sale, rather than calculating COGS in a single end-of-period batch. Build landed cost (supplier cost plus freight, duties, and prep) into every purchase order so your COGS reflects true product economics, not just the invoice price. Integrating your inventory management system with your accounting software removes the manual double-entry that causes discrepancies.

How do I manage sales tax for my online store in 2026?

Monitor economic nexus thresholds in every US state — most require collection once you exceed $100,000 in sales or 200 transactions annually. Amazon and other major marketplaces collect and remit tax on your behalf under marketplace facilitator laws in all sales-tax states, but your Shopify storefront is your own responsibility: you collect, you remit. For EU sales, VAT obligations depend on where your customers are located, and One Stop Shop (OSS) registration simplifies remittance across EU member states.

What are the most important financial reports for an ecommerce seller?

The three essential financial reports are the Profit & Loss statement (which shows gross margin by channel and net profitability), the Balance Sheet (which shows inventory value, reserves, and overall equity), and the Cash Flow statement (which shows whether your business actually generates cash, separate from accounting profit). Review all three monthly — not just the P&L — because cash flow crises in ecommerce almost always appear on the cash flow statement months before they hit the bank account.

What is the difference between cash and accrual accounting for ecommerce?

Cash accounting records income when payment is received and expenses when paid — simpler, but it distorts profitability when you hold inventory or carry supplier terms. Accrual accounting records revenue when it's earned and expenses in the period they relate to, which matches COGS to the sale that caused it and gives an accurate gross profit figure. Any ecommerce business holding physical inventory should use accrual accounting. Cash basis can make a genuinely unprofitable month look profitable simply because a supplier invoice hasn't arrived yet.

How does ecommerce accounting differ from regular accounting?

Revenue is fragmented across multiple platforms and payment processors, each of which bundles and delays payouts differently. Where a traditional retailer records a £50 sale at the point of transaction, an ecommerce seller receives a pooled settlement days or weeks later that contains sales, fees, refunds, reserves, and reimbursements all netted together. Ecommerce also introduces platform-specific complexity — FBA inventory accounting, marketplace facilitator tax obligations, and multi-currency receivables — that standard accounting frameworks don't address out of the box.