Top Accounting and Bookkeeping Challenges Faced by E-Commerce Businesses

Accounting for e-commerce businesses, due to their heavy reliance on digital transactions, poses various accounting and bookkeeping challenges. As these transactions span multiple geographical areas, multiple currencies used and tax rates applicable make your accounting challenging.

In addition to attracting the right kind of customer, fulfilling their expectations to create a loyal customer base, and ensuring financial and data security, you have to do some extra work to streamline the accounting for your e-commerce business.

Implementing a robust and reliable accounting system early, probably right in the beginning, enables you to eliminate, neutralise, or limit the severity of a few of these challenges.

Accounting and Bookkeeping Challenges for E-Commerce Businesses

Bookkeeping and accounting challenges faced by traditional and e-commerce businesses differ. It is a lot tougher for the e-commerce businesses. You should be prepared to deal with the following challenges while executing the accounting tasks for your business. You will be better off by hiring an experienced accounting and bookkeeping services firm.

Outsourcing your e-commerce accounting will free up your time and enable you to focus on developing new strategies and evaluating new product lines to incorporate into your business.

Selecting the Right Accounting Software

E-commerce accounting is complicated. However, you can automate it using the right accounting software. Look for one that can handle traditional and e-commerce accounting.

There are various e-commerce accounting software available for you to choose from. Investing in a system specially designed to handle the accounting of your e-commerce business will be the right choice.

Trusting an accounting software made for the accounting of traditional businesses may not work for you. Remember that your choice can adversely affect your workflow and overburden your staff.

Tracking of Merchant Fee

Your e-commerce platform provides you with space to sell products and services online. You have to pay a flat monthly merchant fee for the privilege. You may also have to pay additional charges if there are any.

These fees complicate the accounting for your e-commerce business. Accommodating these into your calculations is one of the accounting and bookkeeping challenges. As fees charged vary from platform to platform, it becomes difficult to calculate your profits.

Inventory Management for Multiple Channels

Tracking and reconciling the inventory of your e-commerce business is a matter of life and death. You need the latest inventory status to know the trending items and if there is a need to restock them. Inventory management for one e-commerce platform is relatively easy.

The problem arises when selling on multiple platforms. These platforms share the latest sales info with you. However, they do not share it, leading to inaccurate inventory. If you are using multiple warehouses, it adds complexity to the problem.

This is one of the back-breaking accounting and bookkeeping challenges. To master it, you must use an accounting system that provides integrated inventory tracking functionality. It gives you accurate inventory status and enables you to make purchase decisions.

Reconciling Balance for Multiple Sales Channels

Every time someone purchases from you, you must update your books to reflect the new inventory and receivable status. If you have multiple sales channels, reconciliation is complicated.

A single error can cause a big problem for you. You will need a lot of time to track it and update the books to reflect your true status.

Tracking & Applying Correct GST Rates to Sales Transactions

If you are a Singaporean GST-registered e-commerce business, you must collect 9% of GST from your local customers. You must use the appropriate GST rates corresponding to the sales transactions for outside purchases. You must also register each of your warehouses abroad with the local tax authorities and track its GST separately.

Ensuring GST and Company Income Tax Compliance

Whether you run a small or big e-commerce business, its tax compliance will strain your resources. It is one of the accounting and bookkeeping challenges that you must take extra care to deal with, and failing to do so can expose you to scrutiny by the local tax authorities.

Your accounting services provider can help you with it. Their experts have updated tax knowledge, deductions, reliefs, incentives and schemes. They also know how to apply it to minimise your GST and income tax amounts.

Avoid Manual Accounting

You must regularly account for your e-commerce business to avoid serious issues. Otherwise, you will end up with misleading or inaccurate financial information. Most importantly, if there is any fraud, you cannot detect it.

Manual accounting can delay your tax and annual filing and increase stress levels. Accounting software will help accurately digitise and store your financial transactions safely.

Suppose there are any time or resource-related constraints. In that case, you will be better off outsourcing a part or whole task to a reliable accounting and bookkeeping services firm.

Analyse Sales Data to Find Insights for Decision-Making

Provided that your latest sales data is accurate, you can analyse it to understand the customer trends. It will help you isolate products that are in demand or out of favour with your customers.

These valuable insights help you make data-driven purchase decisions and avoid locking your cash in non-moving stock. You can also use this data to reveal the preferred mode of payment on a particular e-commerce platform and take appropriate steps.

Running an e-commerce business means overcoming accounting and bookkeeping challenges before they drag you down. However, accounting and bookkeeping are your business’ non-core activities. They generate no revenue for you.

Every small or big e-commerce or traditional business faces accounting challenges. The key to overcoming these problems lies in finding answers to questions about your key responsibilities as a business owner. It helps you understand what you are doing and what you should do to grow your business.

The questions you must answer are, “How much time do you want, can, or ought to spend on these?” and “Should you minimise your involvement and use the saved time to grow your business?” Contact us at info@sbsgroup.com.sg for customised solutions to your e-commerce accounting and bookkeeping challenges.

Also Read: Why Outsourcing Your Bookkeeping Services in Singapore is a Game Changer