Online stores move fast. Orders, returns, fees, and shipping charges change every day. If your books do not follow a simple method, margin looks wrong and cash planning suffers. This guide explains core ecommerce accounting steps. You will learn how to track inventory, how to compute COGS, how to handle sales tax nexus, and how an offshore team can keep files current.
What ecommerce accounting must track
Your records need three views. Orders show what the customer bought. Payouts show what the processor or marketplace sent after fees. Bank shows real cash. A good process ties these three views each month. When they match, you can trust revenue, fees, and cash.
Inventory basics for online stores
Build a clean SKU master
Give every product a unique SKU, a clear name, a unit of measure, and a cost field. Keep variants such as size or color as separate SKUs. Use the same SKUs in the cart, warehouse, and ledger so reports line up.
Record landed cost
Product cost is more than the vendor invoice. Add freight, duty, and any prep that ships with the item. When these costs arrive at the shipment level, allocate them to items by a simple driver such as weight, units, or item cost. Use the same driver every time.
Choose a valuation method
Most stores use FIFO or weighted average. FIFO is good when costs change often. Weighted average is simple for large catalogs. Pick one method and keep it. Switching methods without a plan makes results uneven.
Count and adjust
Run cycle counts during the month or a full count each quarter. Record write downs for damage or loss. If you skip counts, ending inventory drifts and COGS is wrong.
COGS methods for ecommerce
Decide on perpetual or periodic
Perpetual COGS posts at the time of sale from your inventory subledger. Periodic COGS uses the formula beginning inventory plus purchases minus ending inventory. Use perpetual when possible. It gives a clear margin by SKU and by day. If you use periodic, make sure counts are on time and include landed cost in ending inventory.
Handle kits and bundles
For a kit with fixed parts, reduce each part at sale and sum their costs to COGS. For a prebuilt bundle with its own SKU, treat it like any other item with its own cost. Keep the rule the same across the catalog.
Treat shipping materials the right way
If branded boxes or inserts ship with the product and you can track usage per unit, include them in COGS. If you cannot track per unit usage, record them in fulfillment expense. Write the rule down so the team books them the same way every month.
Record returns and exchanges
When an item comes back in saleable form, reverse COGS and add the item to inventory at current cost. If it is not saleable, record a write off. Tie each refund to the original order so margin reports stay true.
Sales tax nexus compliance guide
Understand nexus types
Physical nexus comes from people or inventory in a state, even if the inventory sits in a third party warehouse. Economic nexus comes from sales volume into a state. Many states use a revenue threshold, some use transaction counts. Marketplace rules can shift collection to the marketplace on their orders, but you may still need to register.
Confirm product taxability
Not every item is taxed in the same way. Some states treat clothing, food, or digital goods differently. Shipping may be taxable in some places. Set product tax codes in your cart and keep a table that shows SKU, code, and state rules. Review codes each quarter and at new product launch.
Configure your store and marketplaces
Turn on tax for states where you register. Set ship-from locations. Follow each state’s rule on destination or origin sourcing. In marketplaces, confirm marketplace collection is on where it applies. Make a small test order per state to confirm the rate and invoice look right.
Reconcile and file on a schedule
At month-end, export sales and tax by state, export marketplace tax collected, and tie to payouts and bank. File returns on the state schedule. Save copies of returns and payment confirmations in a dated folder. A steady cadence prevents notices and late fees.
Offshore ecommerce bookkeeping
Define roles and segregation
Keep client ownership onshore. Place repeatable tasks offshore. Offshore preparers post orders, fees, shipping, and inventory moves. Offshore reviewers check reconciliations and run exception reports. Onshore approvers sign journals and handle tax registrations and filings. Separate who sets vendors and who pays them.
Run a simple month-end workflow
Early in the week, offshore teams post cash, payouts, and fees. Midweek, they post inventory receipts and landed cost. Late week, they complete reconciliations and draft margin reports. Onshore teams review, add notes, and approve. Use one shared tracker so both sides see status.
Keep evidence easy to find
Use the same folder tree for every month. Keep folders for Orders, Payouts, Bank, Inventory, Fees, Shipping, Tax, and Reports. Inside each, save exports with dates and filters used. Store carrier invoices, customs entries, and duty bills with the receiving record. A clean trail shortens reviews and audits.
Protect access and data
Use unique logins and multi-factor authentication. Limit who can see TINs and bank details. Remove access when staff leave a client. Move files through a secure portal, not by email, when possible.
Channel specifics
Own store with a payment gateway
Book revenue at gross order value. Book discounts in a discount account. Book gateway fees to merchant fees. Book shipping you charge as shipping income and carrier invoices as shipping expense. Tie the cart orders to the gateway payout and then to bank. Differences usually come from timing or fees.
Marketplace settlements
Book sales at the amounts charged to the buyer. Book marketplace commissions and fulfillment fees as expenses. Confirm if the marketplace collected sales tax. Reconcile settlement reports to bank. Keep a clearing account for timing items.
International sales and currency
If the store sells in more than one currency, record revenue and fees in the ledger currency with a clear FX rate. Record FX gains or losses in their own account so they do not hide in fees or COGS. For cross-border tax, track the ship-to country and keep invoices that show VAT or GST where needed.
Reporting and operating metrics
Contribution margin by channel
Show revenue, discounts, COGS, merchant fees, shipping income, shipping cost, and pick and pack. The result is contribution margin. Review by channel and by top SKUs. This view guides pricing, free shipping rules, and ad spend.
Inventory health
Watch days on hand, aged inventory, and gross margin return on investment. Use these views to plan buys and discounts. Slow items consume storage and lower cash.
Tax exposure view
Keep a simple nexus map. Mark states where you collect, states to monitor, and states not in scope. Update when sales jump or when inventory moves to a new warehouse.
Common mistakes and simple fixes
Booking net deposits as revenue
Fix by recording gross sales, fees, and shipping as separate lines. Net payouts then match bank while reports stay clear.
Missing landed cost
Fix by recording freight and duty with receipts and allocating them to items. Without this, heavy or imported items look more profitable than they are.
No link between orders, payouts, and bank
Fix by running a three-way tie every month. When differences appear, list them with dates and clear them the next month.
Late or wrong sales tax settings
Fix by registering before collection, testing one order per state, and reconciling marketplace collected tax each month.
Conclusion
Ecommerce accounting is manageable when methods are simple and steady. Keep a clean SKU master, include landed cost, and choose a single valuation method. Record COGS in a way that matches real product flow. Confirm where you have sales tax nexus, set product tax codes, and reconcile tax totals to returns. Use an offshore team for daily posting, reconciliations, and draft reports, with onshore approval for filings and policy. With this structure, your margin is clear, your tax risk is controlled, and your month-end close is calm even as order volume grows.
