Running an ecommerce business can generate hundreds or thousands of financial transactions every month. Sales may arrive through your website, Amazon, eBay, Etsy or social media, while payments are processed through several different providers. You may also need to account for refunds, marketplace fees, delivery charges, stock movements and overseas transactions.
This volume can make your bookkeeping more complicated than the bookkeeping for a traditional business. The amount deposited into your bank account will rarely match the value of an individual sale because payment providers and marketplaces often deduct fees, refunds or other charges before transferring the balance.
Working with experienced chartered accountants Manchester ecommerce businesses can rely on can help you create a bookkeeping system that records each part of these transactions correctly. Accurate records give you a clearer view of sales, profit margins, stock levels, tax liabilities and available cash.
Online sales now represent a substantial part of UK retail activity. According to the Office for National Statistics, 28.8% of retail sales were completed online in May 2026, compared with 28.1% in April 2026. Online sales values were also 12.2% higher than in May 2025.
Use the following checklist to make sure your ecommerce bookkeeping provides reliable information as your business grows.
Record gross sales rather than bank deposits
Do not record the net amount received from a marketplace or payment processor as your total sales income.
For example, suppose customers place orders worth £12,000 during the month. Your payment provider deducts £360 in transaction fees and transfers £11,640 to your bank account. Your bookkeeping should normally show:
- Gross sales of £12,000
- Payment processing fees of £360
- A bank receipt of £11,640
Recording only the £11,640 deposit would understate both your turnover and business expenses. This can distort your gross profit margin and make it harder to monitor the VAT registration threshold.
Reconcile marketplace settlement reports with your accounting software rather than relying only on the bank feed. Each settlement may include sales, refunds, commissions, advertising fees, delivery charges and other adjustments.
Separate each sales channel
Create a clear method for identifying sales from each platform. You may operate through:
- Your own ecommerce website
- Amazon
- eBay
- Etsy
- TikTok Shop
- Wholesale portals
- Social media orders
- Physical events or pop-up shops
Separating channels allows you to see where revenue is coming from and whether each platform is profitable.
A marketplace generating £100,000 in annual sales may appear successful, but its commissions, advertising costs, fulfilment fees and returns could make it less profitable than a smaller channel. Your bookkeeping should make these costs visible.
Reconcile payment processor accounts
Treat payment platforms such as Stripe, PayPal and Shopify Payments like separate bank accounts within your bookkeeping system.
At least once a month, check that:
- All customer receipts have been recorded
- Processor fees have been entered
- Refunds have been allocated correctly
- Chargebacks have been identified
- Transfers agree with your bank statement
- The closing platform balance matches your records
Investigate differences promptly. A gap may be caused by a settlement still in transit, a reserve held by the provider or a transaction recorded twice.
Leaving unreconciled balances for several months can make it difficult to establish whether money is missing or simply awaiting transfer.
Record marketplace and transaction fees separately
Do not combine every platform deduction under a general expense category. Where practical, distinguish between:
- Sales commission
- Payment processing fees
- Marketplace subscriptions
- Advertising charges
- Fulfilment fees
- Storage fees
- Currency conversion charges
- Refund administration fees
This detail helps you calculate the true cost of using each platform. It can also support pricing decisions.
If you sell a product for £50 but pay £7 in marketplace charges, £5 for delivery and £18 for the product itself, your margin is significantly lower than the sales figure alone suggests.
Create a reliable process for refunds and returns
Returns are a normal part of ecommerce, but they can create accounting errors when sales and refunds fall in different months.
Your process should record:
- The original sale
- The amount refunded to the customer
- Any delivery charge refunded
- Marketplace or processor fees returned
- Goods placed back into stock
- Damaged goods that cannot be resold
Do not simply delete the original transaction. Keeping the sale and refund visible creates a complete audit trail and allows you to measure your return rate.
Track returns by product or category. A high return rate could indicate inaccurate product descriptions, sizing problems, damage in transit or quality concerns.
Keep accurate stock records
The amount you spend buying stock is not always the same as the cost recognised in your profit calculation for that period. Unsold products normally remain an asset until they are sold or written down.
Maintain records showing:
- Quantities purchased
- Purchase cost per item
- Import duties and freight costs
- Units sold
- Customer returns
- Damaged or missing items
- Stock held by fulfilment providers
- Closing quantities and values
Carry out physical stock counts and compare them with your system. Differences may be caused by damaged products, theft, fulfilment errors or incorrect product codes.
Review slow-moving and obsolete stock. Items originally purchased for £20,000 may not remain worth £20,000 if they are outdated or can only be sold at a substantial discount.
Monitor your VAT position
You must monitor taxable turnover across all relevant sales channels. The compulsory UK VAT registration threshold is currently £90,000 of taxable turnover, measured over a rolling 12-month period rather than by calendar or accounting year.
Your VAT records should distinguish between:
- Standard-rated sales
- Reduced-rated sales
- Zero-rated sales
- Exempt transactions
- UK and overseas customers
- Business and consumer sales
The correct treatment can depend on what you sell, where the goods are located, where the customer is based and whether a marketplace is responsible for accounting for VAT.
All VAT-registered businesses must generally maintain specified records digitally and submit VAT Returns using compatible software unless an exemption applies.
Do not assume your ecommerce platform has applied VAT correctly. Review its settings whenever you add a new product, enter a market or change your fulfilment arrangements.
Record delivery income and costs correctly
Keep delivery charges paid by customers separate from courier and postage costs where your reporting system permits.
This allows you to see whether delivery is:
- Generating a margin
- Recovering the full courier cost
- Being subsidised by product profits
- Creating losses on low-value orders
Include packaging materials, fulfilment charges, insurance and surcharges when assessing the full cost of delivering an order.
A “free delivery” offer may support sales, but it is not free to your business. The cost should be included when you calculate product and customer profitability.
Check overseas sales and currency transactions
International sales may involve foreign currencies, import duties, overseas taxes and marketplace-specific VAT arrangements.
Record the sterling value of each transaction using an appropriate exchange rate and account separately for currency gains, losses and conversion fees.
Keep evidence supporting:
- The customer’s location
- Where goods were held
- Where goods were delivered
- Export and shipping documentation
- Import VAT and customs charges
- VAT collected by a marketplace
HMRC has separate VAT rules for overseas goods sold directly to UK customers and goods sold through online marketplaces. The responsibility for accounting for VAT can change depending on the value and location of the goods.
Obtain professional advice before expanding into another country rather than correcting the VAT treatment after substantial sales have already been made.
Keep invoices and supporting documents
Store copies of supplier invoices, marketplace statements, payment processor reports, receipts, customs documents and customer credit notes.
Your records should support every material amount entered into your bookkeeping system. Use consistent file names and connect documents to the corresponding transaction where your software allows.
VAT records must generally be kept for at least six years. Limited companies must also normally retain their accounting and company records for six years from the end of the relevant financial year, with longer periods applying in certain circumstances.
Back up important data rather than assuming that a marketplace will give you permanent access to historic reports.
Review your figures every month
Complete a monthly review that includes:
- Reconciling all banks and payment platforms
- Checking marketplace settlements
- Reviewing refunds and chargebacks
- Updating stock quantities and values
- Checking VAT coding
- Reviewing sales by channel
- Calculating gross profit by product
- Checking supplier balances
- Updating your cash flow forecast
- Setting aside money for tax
Do not measure performance using turnover alone. A business can generate £500,000 in sales and still experience cash flow problems if margins are low, stock is over-purchased or marketplaces delay settlements.
U&W Chartered Accountants can help you organise your ecommerce bookkeeping, integrate your sales platforms and produce reports that show where your business is making money. Contact U&W today to arrange a bookkeeping review and build a clearer financial system for your growing ecommerce business.