Ecommerce Bookkeeping: A Step-by-Step Guide for Small Businesses

Key Takeaways

1. Ecommerce bookkeeping is more complex than traditional accounting – Unlike brick-and-mortar businesses, every deposit from Shopify or Amazon reflects more than just revenue; it includes refunds, merchant fees, and sales tax. Understanding these nuances is essential for accurate financial tracking.
2. Profitability in Ecommerce extends beyond product costs – Merchant fees, shipping expenses, and multi-channel inventory management all play a critical role in determining true profit margins. Each sale comes with hidden costs that require a more sophisticated approach to financial analysis.
3. Automation and specialization are the future of Ecommerce bookkeeping – AI-powered tools like Finaloop are redefining financial management by integrating directly with Ecommerce platforms. These systems handle multi-channel sales, tax compliance, and platform-specific details that traditional bookkeeping methods struggle to keep up with.

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As an Ecommerce owner, whether you’re selling on Shopify or on Amazon, it’s important to really understand the nuances and complexities of your ecommerce bookkeeping — what makes it different from any other bookkeeping process?

The short answer is … a lot.

Understanding the differences and how to account for them will help you get the most value and insights from your financials and prevent major issues down the line.

More importantly, it will give you the tools to review the quality and relevance of your current books to make sure you aren’t paying a lot for bookkeeping that is essentially irrelevant for your business.

Let’s dive in.

What is Ecommerce bookkeeping?

Ecommerce bookkeeping is the practice of recording, tracking, and managing financial data in order to fuel your ecommerce bookkeeping accurately.

86% of Ecommerce owners polled by Finaloop list the lack of Ecommerce-specific accounting knowledge as one of the main reasons they are looking to replace their current bookkeeping service.

This begs us to ask the question, “Is Ecommerce bookkeeping really that different?”

The basic structure of all bookkeeping is generally the same. You’ve got your assets, liabilities, equity, income, and expenses.

But, the breakdown of each category, the specific issues important for you to understand for your business, and the technology needed to properly record all transaction details are dramatically different from your brick & mortar or service business counterparts.

Many DTC owners and bookkeepers alike take the standard Quickbooks or Xero bookkeeping process, add an Intuit Ecommerce service or third-party integration with their online store, point-of-sale systems, fulfillment, and other Ecommerce platforms … then, consider this Ecommerce bookkeeping.

Adding Ecommerce integrations is only one piece of the puzzle in making your books Ecommerce-friendly. There are many real differences between regular bookkeeping and Ecommerce bookkeeping that also need to be taken into account (yup, pun intended).

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Why is Ecommerce Bookkeeping Important?

Stay on Top of Your Finances in a Fast-Paced Industry

The Ecommerce industry moves quickly, with high transaction volumes, fluctuating inventory, and multi-channel sales (Shopify, Amazon etc), creating financial complexity and difficulty to keep on top of things. Without proper accounting, it’s easy to lose track of cash flow, miscalculate profits, or overlook tax obligations, which can lead to you taking a high interest loan, charging too little for your SKUs or being penalized for not paying proper tax. Accurate Ecommerce accounting ensures you have a clear financial picture, helping you manage inventory efficiently, reconcile payments from various sales channels, and anticipate seasonal trends (because Black Friday sales do not equal sales in the middle of April).

Avoid Costly Errors and Stay Compliant

From platform fees to refunds and chargebacks, online sales come with financial nuances that traditional accounting methods may not capture (and each platform unfortunately works differently). An Ecommerce accountant understands these details and can set up systems that prevent errors, optimize compliance, and provide insights that drive profitability. This is the way to go.

Leverage Tech

Modern Ecommerce accounting goes beyond bookkeeping—it integrates with cloud-based tools, sales platforms, and payment processors to streamline operations. Automated systems sync sales data, track real-time inventory, and provide accurate cost of goods sold (COGS) calculations. With the right technology in place, you can access up-to-date financial insights, allowing you to make informed business decisions and scale with confidence. Otherwise, you may be discounting yourself to death.

Hiring an Ecommerce Bookkeeper vs. DIY

When DIY Might Work

If your business is small, operates on a single platform (that's how we all started out), and has straightforward transactions that don't keep you up at night, you might be able to manage your bookkeeping yourself—especially with the help of accounting software. DIY bookkeeping can work if:

• You only sell on one platform (for example just on Shopify or Amazon) and don’t deal with multiple payment processors.
• Your sales volume is low, and transactions are easy to track. It definitely also helps if. you only have a couple of SKUs.
• You have basic tax obligations and don’t sell across multiple jurisdictions (especially if you are selling on.a platform that takes care of a lot of your sales tax obligations).
• You’re comfortable learning and managing accounting software on your own, and you have the bandwidth to do this.

While managing your books independently can save costs in the short term, it also comes with risks—especially as your business grows. Errors in recording revenue, sales tax, or expenses can lead to costly mistakes down the road. And, it could be hazardous to your health.

When to Hire a Bookkeeper

As your business scales, financial complexity increases, making DIY bookkeeping more time-consuming and error-prone. Hiring a bookkeeper becomes essential when:

• You sell on multiple platforms. Each marketplace (Shopify, Amazon, Etsy, etc.) has different fee structures, refund policies, and payout processes. A bookkeeper ensures accurate reconciliation. But make sure this is an Ecommerce bookkeeper, who really gets it.
• You operate in multiple tax jurisdictions. Sales tax compliance can be overwhelming, and missing filings can lead to penalties. A professional can help navigate tax regulations.
• You're seeking funding. Investors and lenders require clean financial statements. A bookkeeper ensures your financials are accurate and audit-ready. Otherwise, the deal can fall through, or you may get worse terms (as the loan, for example, is higher risk if the lender doesn't understand your financials).
• You struggle with accounting software. Setting up and maintaining accounting software correctly is crucial for accurate records. A bookkeeper streamlines this process and integrates it with your sales channels. As your business grows, this can get pretty complicated.
• Your payouts don’t balance. If your sales payouts don’t match your financial records, it can distort your profitability and make one heck of a mess. A bookkeeper ensures proper reconciliation and accurate reporting.

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Essential Ecommerce Bookkeeping Tasks

Your Ecommerce bookkeeper has their work cut out for them, and their tasks include the following:

Recording Daily Transactions

This includes:

Tracking Inventory Costs

This includes:

• Validating purchase orders (POs), credit memos, and vendor attachments.
• Reviewing inventory-related costs, including indirect costs like shipping and handling.
• Updating inventory counts and tracking lost, damaged, or returned inventory.
• Ensuring accurate cost of goods sold (COGS) adjustments.
• Providing updated SKU costs and inbound inventory data for financial tracking.

Managing Accounts Payable and Receivable

This includes:

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Reconciling Bank Statements

This includes:

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Common Ecommerce Bookkeeping Mistakes

Here we’ll share the top 6 bookkeeping differences between eCommerce businesses and physical stores that should be considered by you or any bookkeeping service you choose so you can maintain your books accurately.

These are the 6 most common mistakes we see done by non-eCommerce bookkeepers.

1. No big picture view of your real income
2. Gross margin is calculated differently
3. Inventory management is multi-faceted
4. Ecommerce financing has different rules
5. Sales tax is exponentially more complicated
6. Chart of accounts is not ’one size fits all

1. No big picture view of your real income

For non-Ecommerce businesses, you see a deposit in your bank of $220, you record income of $220. It’s not rocket science.

For Ecommerce, it’s not quite so simple.

A deposit of $220 from Shopify, Amazon, or Walmart, is not $220 of income. It could mean, $300 of income, $60 of returns, and $20 of merchant fees. It could also mean that of the $220, $15 is actually sales tax you owe to the tax authorities of a specific state.

In other words, just like your relationship status, it’s complicated.

Using technology such as AI accounting and AI bookkeeping to integrate with your online stores (like Shopify), marketplaces (like Amazon), payment processors (like Paypal, Afterpay, or Stripe), or your other apps, can significantly reduce your errors, give you a full big picture view into your revenue and save you time on bookkeeping.

Harnessing the power of automation here allows you to pull the data directly from your platforms into your books on a real-time basis.

You can automate the full bookkeeping process start-to-finish using an automated bookkeeping service like Finaloop, which uses its own proprietary integrations to Ecommerce platforms like Shopify, Amazon, Walmart, Etsy, Paypal, Stripe, AfterPay, etc. to pull your data and complete your bookkeeping process on a real-time basis.

Using an integration also allows you to track your undeposited funds, i.e., the remaining balances in your Shopify, Amazon, Paypal, or any other store or payment gateway, that has not yet been deposited into your bank account. This is important to track for both accounting and tax purposes and to give you a better view of your expected cash flow.

2. Gross margin is calculated differently

Everyone will agree that for a retail business, online or not, understanding your gross profit is a key metric in measuring the health of your business, determining your breakeven point, and forecasting your future profit.

But, not everyone knows that the components of this calculation are different for Ecommerce businesses.

Mind blown, right?

Gross margin is meant to be a calculation of the profit you are left with after a sale. For brick & mortar businesses, the gross margin is essentially revenue minus cost of goods sold, better known as COGS.

For Ecommerce stores, variable costs directly associated with making a sale should also be taken into account — specifically, merchant fees and costs for shipping to customers — because without these costs, the sale wouldn’t be able to happen.

Merchant fees or transaction processing fees are fees charged by a merchant service for processing transactions and payment gateway services (such as Paypal, Stripe, AmazonPay, ShopPay, etc.).

It’s best practice to treat these expenses as part of COGS in determining the gross margin (although they are generally expenses immediately, and are not part of your inventory), rather than an operating expense since they are directly related to the cost of sales.

Shipping-out or freight-out expenses are the costs related to shipping a product to a customer. For the businesses of yesteryear (i.e., brick & mortar stores), shipping out was not considered a key selling expense and was often recognized as an operating expense.

This expense is a necessary cost of sales that increases with each additional sale. Accordingly, this too should be treated as part of COGS (but again, non product COGS).

To get a better understanding of your gross profit (and to determine if you are pricing your products correctly as an Ecommerce business), check out our free Ecommerce profit margin calculator.

3. Inventory management is multifaceted

Let’s say you own a shoe store and have 50 pairs of shoes in your backroom. If you sell 10 pairs, you know you have 40 left to sell. It’s easy to plan when to order more.

If, instead, you sell shoes online through multiple sales channels, such as your Shopify store and on Amazon, it becomes increasingly more difficult to track how many shoes you have left in stock and when it’s time to order more.

Correctly accounting for your inventory costs and balances is something any good Ecommerce accountant must understand.

Based on our findings, it’s one of the major pains of all Ecommerce brands and an area that tends to be very prone to human error when using a traditional bookkeeper to track inventory and COGS.

For more details about accounting for inventory costs correctly for Ecommerce, check out Fundamentals of Inventory Management: How to Track Your Ecommerce Inventory.

4. Ecommerce financing has different rules

There are many Ecommerce financing options out there … Shopify Capital, Stripe Capital, ClearCo, Ondeck, Ampla, Wayflyer, and the list goes on.

The way these financing instruments work are different than standard loans and can often impact the accounting and tax treatment. The same is true for credit cards (particularly those with generous net-payment terms for accounts payable).

For example, a merchant cash advance received from Shopify Capital should be treated differently than a traditional loan. It’s important to find a bookkeeping solution that understands these nuances or you will likely lose out on potential tax deductions.

To learn more about Ecommerce financing options and understand the real costs for your business, check out our free ecommerce loan calculator.

5. Sales tax is exponentially more complicated

One of the most complex issues Ecommerce sellers need to deal with is sales tax. Sales tax can arise from physical presence in a state - an office, warehouse, employees, or from ’economic nexus’ - selling a certain amount in a specific state.

For Ecommerce businesses selling all over the U.S., sales tax can be a real headache.

Make sure your bookkeeper or accountant understands the complexities of sales tax nexus and how to manage the compliance requirements. We recommend using an automated service like Taxjar to help you with the compliance requirements and make sure your sales tax is set up correctly in Shopify to ensure you are collecting required amounts from customers.

6. Chart of accounts is not ‘one size fits all’

A chart of accounts (CoA) is essentially the breakdown and structure of your financials. It shapes how you view and think about your finances.

A well-defined CoA improves your ability to monitor and analyze the financial performance of your business through meaningful reports and can directly impact your decision-making process.

As Ecommerce accountants, we strongly believe that best practice CoAs vary significantly across different industries. The CoA for a doctor’s office, for example, should look different from the CoA for CPG & DTC brands.

Here are some examples of how to optimize your CoA for Ecommerce:

Marketing and advertising expenses

A standard CoA may have some general marketing accounts but generally does not have sufficient breakdown necessary for you to manage the marketing spend for an Ecommerce brand.

A CoA for Ecommerce should breaks down marketing & advertising expenses into more granular details to give you better insights into your expenses, such as …

• In-house vs contractors
• Software & subscriptions
• Influencer expenses
• Trade shows & events
• Content creation & design
• Facebook: Advertising
• Amazon: Advertising
• Google: Advertising

Cost of goods sold

While each CoA is a bit different, for Ecommerce-specific CoAs, both merchant fees and shipping-out should be part of COGS and taken into account in determining your gross profit.

An Ecommerce CoA should track both merchant fees (per payment gateway), shipping-out expenses, Warehouse costs, and fulfillment fees as separate sub-accounts of COGS. This enables you to analyze these costs on a standalone basis and provides a more accurate gross profit for purposes of understanding your business’s financial health.

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Best Tools for Ecommerce Bookkeeping

Managing finances in Ecommerce is more than just tracking sales and expenses—it's about having the right tools to handle complex transactions, multi-channel sales, and tax compliance. Unlike traditional accounting software, Ecommerce bookkeeping tools are built to address these unique challenges, integrating directly with platforms like Shopify, Amazon, and Etsy. If you have the right software, it will be automating your inventory tracking, reconciling your sales data, and providing you with real-time financial insights, allowing business owners to focus on growth instead of manual bookkeeping (which, as noted, is a headache). Additionally, specialized Ecommerce accounting software helps prevent costly errors, such as misclassified revenue or inaccurate tax filings, which will give you much more granularity into your business and allow you to price properly, and in general- to be compliant.

The best bookkeeping tools for Ecommerce go beyond simple record-keeping—they streamline financial workflows, sync real-time data from various sales channels (like Shopify, Amazon, Ebay etc), and automate tasks like COGS calculations. Some solutions, like Finaloop, provide full bookkeeping services with built-in integrations, while others, like QuickBooks or Xero, offer accounting software that requires third-party add-ons in addition to paying a bookkeeper. Choosing the right tool depends on business needs, transaction volume, and the level of automation required.

For a detailed comparison of top accounting software tailored for ecommerce businesses, explore our comprehensive guide on the best ecommerce accounting software in 2025.

Best Practices for Ecommerce Bookkeeping

There are quite a few best practices to make sure your Ecommerce Bookkeeping is in tip top shape. We will elaborate on.a couple of them below.

Keep Personal and Business Finances Separate

We've seen so many businesses that mix credit cards, either from one company for another, personal credit cards for company use and vice versa. This is a constant cause of a major headache and mess, creating intercompanies, possible tax exposures galore. Just do your bookkeeper (and yourself) a favor, separate your expenses and use the business credit card for the business only. And no, your personal yacht (lucky you) does not belong on your balance sheet. Make sure to only include business related items in your financials. You'll thank me later.

Regularly Update Your Books

In order to be able to make on-time and real-time financial decisions, like pricing your SKUs and determining discounts during holiday seasons, managing your cash flow and deciding when you need a loan, and being on top of. your inventory, your books need to be constantly updated. When you are processing hundreds, or thousands of transactions a month, the only way to do this is to use automation. And if you don't have updated books, your pricing will be off, and you will be driving blind. And in general, implementing specialized Shopify accounting strategies can significantly improve financial accuracy.

Use Cloud-Based Tools

Cloud-based accounting isn’t just a convenience—it’s a necessity for eCommerce brands. Unlike clunky, outdated systems that require manual data entry and constant reconciliations, cloud-based solutions pull data directly from your sales channels (again, think Shopify or Amazon, or both), payment processors, and banks, giving you real-time accuracy. That means no more scrambling to match payouts, manually tracking COGS, or second-guessing your numbers- which is a recipe for failure. With automated transaction syncing, categorization based on AI (with human oversight, in Companies like Finaloop), cloud bookkeeping tools give you a live view of profitability, cash flow, and financial performance—so you can actually make decisions based on real data, not gut feelings.

Plan for Tax Season Early

Nobody likes taxes. As Ben Franklin famously said, two things are certain in life, death and taxes, and I am not certain about the former. In any event, being on top of your taxes- federal, state, and especially sales tax is.a recipe for success. Make sure to work with a tax CPA and to use good sales tax software that can automate a lot of your processes. And don't wait until your process is broken to fix it. Get set up from the onset.

Conclusion: Simplify Ecommerce Bookkeeping to Focus on Growth

Ecommerce bookkeeping isn’t just about tracking sales—it’s about understanding the financial complexities unique to online businesses and using the right systems to stay profitable and compliant. Every deposit from Shopify or Amazon includes more than just revenue; it factors in refunds, merchant fees, and could include taxes, making accurate bookkeeping essential for financial clarity, and a total headache for all involved.

Profitability goes beyond product costs, with shipping, platform fees, and multi-channel sales adding layers of complexity that require automation and expertise. That’s why modern eCommerce brands are turning to AI-driven bookkeeping solutions with human oversight, that integrate directly with sales channels, automate reconciliations, and provide real-time financial insights. Instead of spending hours manually categorizing transactions or fixing errors, founders can focus on growth, scaling, and making informed decisions based on accurate, up-to-date data. By embracing specialized bookkeeping tools and best practices, eCommerce businesses can eliminate financial blind spots, avoid costly mistakes, and build a solid foundation for long-term success. Let's go!