No matter how big or small your ecommerce store, if you want your business to succeed, you’ve got to master the bookkeeping basics. 

And for ecommerce sellers in the UK, getting your bookkeeping right isn't just about staying efficient and tracking your profits. It’s also key to avoiding problems when it’s time to file your Self Assessment tax return.

What you need to track as an Ecommerce seller:

Let’s dive into what you need to track to keep your business running smoothly - and stay in HMRC’s good books:

1. Track your sales revenue

First things first, let’s talk about your bread and butter: sales revenue. This is the total income your ecommerce business generates from selling products or services. Tracking sales revenue is essential because it gives you a clear picture of how much money is coming in.

• What to track: Record every sale you make, whether it’s through your Shopify website, via marketplaces like Amazon or Etsy, or through social platforms like Instagram or Facebook. Make sure to track the date, amount and the payment method your customer used.
• Why it’s important: Tracking sales revenue helps you measure your business’s performance over time, see trends in your income and ensure that your books match your bank statements. It also provides the foundation for calculating your profits and tax obligations.

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2. Cost of Goods Sold (COGS)

Now that you’re tracking your sales, it’s time to look at what it costs to make those sales happen. Cost of Goods Sold (COGS) refers to the direct costs involved in producing or purchasing the products you sell. This includes manufacturing costs, wholesale prices, materials and shipping fees related to getting your products to your customers.

• What to track: Keep a detailed record of how much you pay for the products you sell, as well as any associated costs like packaging, shipping from your supplier or manufacturing expenses.
• Why it’s important: COGS is essential for calculating your gross profit (as Sales Revenue - COGS = Gross Profit). Without accurately tracking this, you won’t know how much profit you’re really making on each sale, and you may end up underpricing your products.

3. Operating expenses

Running an ecommerce business involves more than just buying and selling products. You’ve also got plenty of operational costs to consider, from where you host your website to how you market it. These ecommerce website costs - known as operating expenses - are all the costs involved in running your business that aren’t directly tied to producing or buying products.

• What to track: Common operating expenses include things like
  • Website hosting fees
  • Ecommerce platform subscriptions (e.g. Shopify or BigCommerce)
  • Software or apps (such as your CMS)
  • Advertising (through Google Ads, Facebook Ads and so on)
  • Office supplies and equipment
  • Shipping supplies
  • Important professional services such as accountants and virtual assistants
• Why it’s important: Accurately tracking your operating expenses ensures you know how much it costs to run your business on a day-to-day basis. It also allows you to deduct eligible business expenses from your taxable income, meaning you potentially have to pay HMRC less tax at the end of the year.

4. Inventory

For ecommerce sellers, inventory is one of your biggest assets - and one of the trickiest to manage. Tracking inventory means keeping tabs on how much stock you have, what’s been sold and what needs to be restocked. Poor inventory management can lead to missed sales (if you run out of stock) or money tied up in unsold products (if you overstock).

• What to track: We recommend recording the following inventory details:
  • Quantity of each product on hand
  • Cost of each product
  • Date purchased
  • Date sold (to know how long it’s been in stock)
• Why it’s important: Knowing how much inventory you have on hand helps you avoid overstocking or stockouts. Properly tracking inventory will help you calculate your COGS and make sure your financial statements are correct. If you're looking for tips, tools, and best practices for managing your inventory then be sure to check out our ecommerce inventory management guide.

5. Returns and refunds

No one loves dealing with returns, but they’re a part of running any ecommerce business. It’s important to track returns and refunds to ensure your books reflect your actual income, not just your sales.

• What to track: Record the date, amount and reason for any returns or refunds. If the product is returned in sellable condition, add it back to your inventory.
• Why it’s important: Failing to track returns and refunds can inflate your sales numbers and give you an inaccurate picture of your revenue. Proper tracking ensures your financial records are accurate and helps you identify patterns in product returns that may signal issues with quality or customer satisfaction.

6. Accounts receivable and payable

You may have situations where customers owe you money (accounts receivable) or where you owe money to suppliers (accounts payable). Keeping track of these is important for maintaining a healthy cash flow.

• What to track:
  • Accounts Receivable: Record any sales where the customer hasn’t paid yet (like wholesale orders).
  • Accounts Payable: Record any bills or invoices from suppliers, contractors or service providers that you need to pay.
• Why it’s important: Tracking receivables ensures you’re not missing out on money you’re owed, while tracking payables helps you stay on top of bills and prevents late fees or strained relationships with suppliers.

7. Income tax

As a sole trader, freelance or limited company, you’ll have to pay income tax on all your ecommerce profits. So, as a business owner, it’s crucial to track your taxable income throughout the year and set aside money for tax payments.

• What to track: Keep track of your total income and expenses (including deductions) so you can accurately report your profits and calculate how much tax you owe. We recommend using accounting software to help with tax planning and filing, or asking one of our expert accountants to get help with calculating your business’ income tax. 
• Why it’s important: Income tax is a legal requirement, so failing to stay on top of it will mean penalties. By keeping accurate records and setting aside money for taxes, you can avoid any nasty surprises when you come to file your Self Assessment tax return. 

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8. Shipping costs

Shipping is a big part of ecommerce, and it’s essential to track the costs associated with getting your products to your customers. This includes everything from postage fees to packaging materials.

• What to track: Record the shipping fees for each order, including any additional costs like insurance or customs fees for international shipments. If you offer free shipping, track how much you’re spending on it.
• Why it’s important: Shipping costs can add up quickly and eat into your profit margins if you’re not careful. By tracking these costs, you can better calculate your overall profitability and even make adjustments to your pricing or shipping policies if necessary.

Bookkeeping for ecommerce doesn’t have to be difficult

If you’re unsure about any of the above, or feel you need some help with bookkeeping for your ecommerce business, it’s always worth speaking to a professional accountant or tax advisor. 

A tax professional - like our friendly chartered accountants at Crunch - can lift the burden of filing a Self Assessment tax return off your shoulders, help you take control of your business finances, and answer any questions you may have that are unique to your ecommerce business. 

But regardless of whether you’re handling the books yourself or working with a trusted accountant, great ecommerce bookkeeping practices will set your ecommerce business up for long-term success. Good luck and happy bookkeeping! 

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