UK eCommerce Bookkeeping Guide 2025: Why Outsourcing Makes Sense

Online shopping has unquestionably risen to the top of the customer’s favourite method of purchase in almost every part of the world- even the great UK. With over 580,000 active eCommerce businesses, competition is fierce, with sellers opting to sell their products across multiple platforms – Amazon, eBay, Shopify, WooCommerce, etc. The journey of the sellers has evolved from listing their products to now handling complex parts of their finances, either on their own or by hiring a specialist bookkeeper.

Online start-ups need to consider all the important aspects of launching an eCommerce firm to gain an advantage over many other successful eCommerce sellers. One of which is Bookkeeping. Though it sounds simple, many fail to keep up-to-date, accurate records, attracting fines and penalties from HMRC. Only persistence and motivation in entrepreneurship are not enough; eCommerce finances and obligations need to be jotted down as well.

In this blog, we will cover the fundamentals, highlight common mistakes to avoid, and share best practices to keep the books in order. Let’s go through what you need to know in 2025 to grow your business.

What is eCommerce Bookkeeping?

Let’s get into its functional definition, which is -the procedure of documenting, preserving, and organising financial transactions that portray every sale, refund, fee, expense, tax, and inventory movement, whether in GBP or other currencies. In simple terms, it is keeping track of money coming in and moving out.

Let’s assume – Sarah, who has recently started her online store, is selling handmade candles through multiple platforms, and her own website. At first, she is happy with the steady stream of orders, but as the week goes by, she realises she’s losing track of what’s coming in and going out. Marketplace fees, packaging costs, and payment processing fees are eating into her profit, but she’s not sure how much. With all this hustling, she has forgotten to record a few of her funds and missed supplier invoices. She is devastated.

She then decides to streamline her eCommerce bookkeeping by outsourcing at a fraction of the cost. The result? Streamlined finance and an easy-to-understand eCom 360 dashboard that tells her order status, fee, other expenses, and finally the net profit – all at a glance.

She is now able to:

• Track all her income and expenses
• Prepare VAT returns
• Manage inventory across multiple channels
• Generate financial statements like P&L, Balance Sheet, and Cash Flow Report.
• Make informed decisions backed by data.

A question arises here- why did she need to outsource her eCommerce bookkeeping? Let’s look into it.

Why eCommerce Bookkeeping is Different

• Since the competition is high, sellers, even as a matter of fact, Sarah decided to sell on multiple platforms such as Amazon, Shopify, eBay, and WooCommerce. As a result, reconciling sales into one account becomes impossibly difficult – requiring experience and expertise for precise reconciliation.

• Then there is VAT, whose charging and reporting require a thorough understanding of the EU (OSS) and global transactions rules, which, by this time, you can relate to as the most challenging job.

• Selling internationally means recording sales in USD, EUR, etc., and converting at the correct exchange rate. Then there is accounting for marketplace fees, payment processor charges, and shipping costs – all of which vary widely. You need to be precise in your calculations with no room for errors; otherwise, you will receive an HMRC letter with potential penalties.

• We also have returns and refunds that require frequent adjustments to sales, inventory, and VAT records.

All these factors contribute to making eCommerce bookkeeping and finances complex, requiring professional expertise.

Common Mistakes and Challenges in Bookkeeping for eCommerce

Bookkeeping for eCommerce is very different from traditional accounting, making generalised accounting solutions ineffective. A few of the common mistakes eCommerce owners make are:

• Misclassifying Marketplace Payouts:
  Sellers often record the whole Amazon or eBay payout as revenue without deducting fees and refunds.

• Ignoring VAT Deadlines:
  VAT computation is difficult to start with. This, when paired with inconsistent and missed transaction recording, can lead to late VAT filing, draining your time and energy as you rectify the VAT records after fixing each missing entry.

• Manual Data Entry & Poor Accounting:
  Using spreadsheets for high-volume transactions often leads to errors and missed entries. There is a limit to your ability to manually track, reconcile, and verify every detail without mistakes creeping in. This is the reason why the majority of the sellers opt for eCommerce accounting software – pairing it with expertise from eCommerce accountants.

Talking about the challenges, a few of them are:

• Merchant fee tracking:

Since the majority of eCommerce companies use a variety of platforms to sell their good, the cost of the merchant fees varies, several times including additional complex charges such as currency conversion costs, cross-border transaction fees, etc. Without proper tracking, these costs can quickly curb your profits, making it difficult to understand your actual earnings. The same happened with Sarah, who was surprised to find her actual profit to be far lower than expected, as she forgot to count these varying fees.

• Choosing Bookkeeping Software:

No two companies are the same. You can be a sole trader or a limited firm seller. Choosing the right business type during incorporation, as well as selecting the best software choice, can make a difference. Either it can lead to streamlined, simplified finance or complex finance that invites fines.

Consider choosing Xero, QuickBooks, or Sage for your eCommerce accounting needs.

• Balancing Reconciliation for various sales channels:

Inventory and channel receivables fluctuate with each transaction; thus, it’s critical to promptly enter channel sales into your accounting program to ensure a proper balance reconciliation between what is receivable according to the sales channel and what is recorded in your books.

• Determining profitability of a business:

More sales don’t necessarily translate to a profitable business. To calculate profitability, one must keep track of sales and purchases, commissions or fees given to sellers, sales tax obligations, shipping costs, any applicable discounts, inventory, returns, and so on. Only when accurate records are maintained and reconciled can we determine the true profitability of a business.

VAT and Tax Compliance for UK eCommerce Sellers

Once Sarah has accurately reconciled her books, she now has to file her VAT with HMRC. For this, she needs to know:

• UK VAT Threshold for eCommerce, and whether her taxable income exceeds the current one.
• She has to correctly configure Amazon, Shopify, eBay, or WooCommerce to collect VAT where required.
• Consistently track her input and output VAT
• And, file VAT returns promptly via MTD compliant software.

She would also need a one-time or continuous service from an eCommerce tax accountant to get things sorted and streamlined.

Key Elements of eCommerce Bookkeeping

Cash Flow Statement:

The most important piece of information for online bookkeeping is this one. Every penny that a business spends is detailed in the cash flow statement. It contains details on the revenue stream, inventories, and rent. It also contain information on taxes and upkeep.

By reviewing their cash flow, eCommerce owners can clearly see how much money is coming in and going out. The statement also highlights opportunities for sellers to pay less tax in the UK while maintaining a healthy profit margin.

Balance Sheet:

A company’s assets and liabilities are listed on its balance sheet. It includes the owner’s equity as well. There are two columns in this statement. The company’s assets are listed in one column, and its liabilities are listed in the other.

Your eCommerce business’s assets consist of cash funds, merchandise, and equipment. Among the liabilities are unpaid business loans or mortgages.

Risk management:

Risk management in eCommerce bookkeeping entails identifying and reducing possible financial hazards that can have an influence on the company.

This entails evaluating the risks associated with market volatility, payment processing, fraud, and cybersecurity. The eCommerce industry’s long-term viability and financial integrity are safeguarded by effective risk management techniques.

Income Statement:

An income statement shows how much money a business makes over a given period of time. This could be a quarter, a year, or a month. Both operating and non-operating income will be displayed on the statement. Operating income is the money you make from regular business operations. This is derived from the sales of your inventory in an eCommerce retail enterprise. Non-operating income is the money you make from sources unrelated to your business. The profits from investing in stocks or real estate serve as an illustration.

Sales Reporting:

To learn more about the operation of the eCommerce company, sales reporting entails monitoring and evaluating sales data. Sales reporting in eCommerce bookkeeping is creating reports that offer comprehensive data on sales patterns, consumer behaviour, product performance, and income from various sales channels. Business owners can make well-informed decisions about pricing, inventory control, and marketing tactics with the use of sales reports.

The Best Ways to Keep your Books Organised

• Any eCommerce company must maintain an orderly bookkeeping system. Establishing a routine is the first step. Make time every week to go over and update your financial records.

• Use distinct categories for every transaction. This facilitates easy inventory, expense, and sales tracking. Think about labelling or color-coding files for easy access.

• Use technology to make things easier. Numerous processes can be automated using cloud-based bookkeeping software, which saves time and minimises human mistake.

• Reconcile accounts and bank statements on a regular basis. By doing this, accuracy is guaranteed and inconsistencies are brought to light before they become serious problems.

• Don’t overlook the paperwork! Store digital invoices and receipts in a central location. Having everything easily accessible will significantly reduce the stress of tax season.

• Examine your finances once a month to spot patterns or areas that require immediate action. Being proactive improves decision-making skills and prevents surprises.

The Future of eCommerce Bookkeeping: Trends to Watch

In the future, the field of eCommerce bookkeeping is expected to undergo major change. More efficient and streamlined procedures are being made possible by technology. An increasingly important role is being played by artificial intelligence, which automates tedious procedures and offers insights previously only available to highly skilled eCommerce accountants.

Cloud-based solutions are also growing in popularity among eCommerce companies. They provide business owners with real-time access to financial data from any location, making it simpler than ever to manage their accounts. It will also be possible to track sales across several channels with ease thanks to the integration of different systems.

The growth of subscription-based accounting services designed especially for internet shops is another trend that is gaining popularity. In addition to standard bookkeeping, these services include financial projections and strategic counsel tailored to your particular business plan.

Conclusion:

eCommerce bookkeeping, though simple in its functional operations, requires expertise and seasoned assistance to deal with its contextual and compliance needs that grow as the business grows. DIY bookkeeping is good, but for earlier days. As your store expands, the complexities within its accounting function become increasingly complex, making it difficult for you to keep up. You must have the assistance of a professional bookkeeper to simplify and streamline your eCommerce finances.

Remember, bookkeeping is the base that forms the foundation for VAT reporting, financial statement preparation, and budgeting and forecasting. Consider outsourcing your eCommerce needs to E2E, which guarantees compliance-driven growth at a fraction of cost.

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