Whether you’re running your own small business through a 3rd party platform (such as Amazon, eBay, Etsy, etc), or have your own website with payment portal – managing your business accounts and handling the day-to-day running of your business can often see a lot of small things put off until later (or forgotten entirely), and then cause panic at the end of the year, when the returns and records for HMRC are due.
To help you manage your eCommerce accounting, here are 5 top tips for things you need to be doing that will make your business life easier and run smoother.
Find an Accounting Software that Works for You
Rather than trying to handle everything on paper, or creating spreadsheets that then need to be broken down and the data re-entered into HMRC compatible software at the end of the year, it’s a good idea to find an accountancy software that meets the needs of your company, is simple to use, and complies with the Making Tax Digital (MTD) obligations that will soon be required of all self-employed individuals.
There are lots of different types of software out there, so it’s important to determine what you actually need, how it integrates and works with your existing systems, and whether your eCommerce platform has the ability to connect to the software (because if it does, that can save you huge amounts of time – especially if you just need to import the data!)
Track Your Cash Flow and Know Your Payment Systems
Not all businesses have a separate account for their income, and although this is good idea – it’s not always practical to set up. Monitoring what you’ve got coming in, and what’s going out (including hosting fees, listing fees, relisting fees, shipping fees and taxes, etc) can help you work out what you’re actually earning – and whether a particular line of products is worth the time and effort.
It’s also important to know your dates – if your online payment system takes 5-7 days for the funds to clear into your account, then you need to plan your accounting, spending, and bills around these dates.
When you know what to expect, it’s easier to manage your business and its growth.
Monitor Your Inventory and Know When to Reorder
Your stock is a business expense, so it’s important to know how much you’ve got, what you’ve paid for it, and whether you’ve claimed the costs on your tax return.
By working out how much stock you have, you can clearly update your listings (this is especially important if you’re selling on multiple platforms), and determine what your prices are based on how much you’ve spent, and what your profit margin is.
Carefully timing your reorders is also important – you might want to reorder sooner than usual if prices are increasing, or if there’s a sale on, or if you’re looking to reduce your tax bill and want to claim the extra stock as an allowable expense.
Carefully Calculate Your Expenses
Whilst we’re on the topic of allowable expenses, it’s important that you know exactly what you’re paying out (and why), and whether these costs are deductible as expenses.
Examples of taxable deductions for your eCommerce business may include:
– Phone and Internet costs
– Office supplies and packing materials
– Delivery costs and charges
– Website expenses (such as infrastructure, plugins, themes, apps, software, etc)
You’re going to need to carefully list your operating expenses (those related to the main activities of your business – such as the cost of the goods, admin fees, rent, etc), and non-operating expenses (those that aren’t directly related to your core operations); because at the end of the year (depending on how much you earn), you may need to provide this information on your self-assessment tax return.
Work Out Your Sales and Prepare for Your Tax Bill
Unless you’re earning less than your personal allowance (currently £12,570), you’re going to need to pay tax and National Insurance Contributions (NICs) on your business earnings; and you’re not likely going to want to wait to the end of the year to find out how much you owe.
By keeping track of your sales, and how much you need to sell at what price to break even, you can determine whether you’re actually making a profit, and start working out how much you should be putting aside, ready for the end of the tax year.
eCommerce can be tricky, especially with all the different listing fees, application fees, and costs that come with operating your own website – so it’s important to be fully aware of what you’re eligible to claim for, and how to go about managing your accounts.
Our expert team have years of qualified experience in handling eCommerce – in fact, it’s one of our specialities! Get in touch today, and we’ll help you manage your accounts, so you’re getting the most for your money.
