Ecommerce Accounting 101: A-Z Guide for Business Owners in 2024

Ecommerce has exploded into a trillion-dollar global industry.

By 2025:

Ecommerce is projected to generate over $6.3 trillion in sales.

Driven by the convenience of online shopping and the limitless reach of digital storefronts, of course.

Entrepreneurs worldwide are seizing the opportunity, with over 20 million new ecommerce businesses launched globally each year, spanning everything from boutique products to major retail chains.

Now, with this growth comes a complex need for precise financial management. For businesses large and small, mastering ecommerce accounting is vital for:

• Sustaining momentum

• Optimizing profits

• Ensuring compliance

Here’s where doola Bookkeeping can be a game-changer.

With specialized services designed for ecommerce, doola streamlines financial processes to reduce manual tasks, improve accuracy, and help you stay compliant across borders.

In this guide, we’ll break down the essentials of ecommerce accounting and explain how doola Bookkeeping can help streamline your financial processes, allowing you to focus on growing your business.

What Is Ecommerce Accounting?

Ecommerce accounting is the financial backbone of online businesses. It involves the management of sales, expenses, taxes, and inventory to give a comprehensive view of a business’s financial health.

While traditional accounting focuses on simple income and expenses, ecommerce accounting requires a more nuanced approach to handle the unique demands of online sales.

Key Differences Between Traditional and Ecommerce Accounting

Understanding the complete “traditional vs. ecommerce accounting” dynamic is crucial for small business owners.

✅ Multi-Channel Sales:

Unlike brick-and-mortar stores, ecommerce businesses often sell across multiple platforms like Shopify, Amazon, and Etsy.

This requires integrating sales data seamlessly across all channels to maintain accurate financial records.

✅ Multi-Currency Transactions:

With global customers, ecommerce businesses often handle transactions in various currencies, making accurate currency conversion and revenue tracking essential.

✅ Inventory Tracking:

In ecommerce, inventory must be monitored in real-time across multiple sales channels to ensure accurate reporting of the Cost of Goods Sold (COGS) and inventory values.

doola Bookkeeping simplifies these processes with features that are tailored specifically for ecommerce businesses.

From managing multi-currency transactions to real-time insights, doola ensures that your financial records stay accurate and up-to-date across all platforms, letting you focus on scaling your business.

What Does Ecommerce Accounting Include?

Ecommerce accounting covers a range of tasks, all designed to keep your financial operations in check:

1. Recording Sales

Tracking revenue across all sales channels, including adjustments for returns and refunds.

2. Expense Management

Actively monitoring business expenses such as marketing, shipping, and platform fees to maintain healthy profit margins.

3. Inventory Management

Tracking stock levels, purchase costs, and sales to accurately assess profitability and avoid stockouts.

4. Tax Compliance

Ensuring sales tax is correctly collected, reported, and remitted for each jurisdiction where your business operates.

5. Financial Reporting

Preparing key financial reports — income statements, balance sheets, and cash flow statements — to evaluate performance and make informed decisions.

By keeping accurate and detailed records, you can make data-driven decisions that lead to growth and profitability.

What Ecommerce Business Owners Need to Keep Track Of

To effectively manage your ecommerce business’s finances, there are several key metrics and records you need to stay on top of:

1. Sales Data

Track your revenue across platforms to understand which products and channels perform best.

2. Operating Expenses

To maintain a healthy cash flow, keep monitoring expenses related to:

• Advertising

• Shipping

• Tools and technology

3. Inventory Levels

Regularly update stock levels to avoid costly stockouts or overstocking, both of which impact cash flow and overall profitability.

4. Tax Obligations

Stay compliant by managing sales tax responsibilities, especially if you’re selling across multiple states or countries with varying tax rules.

5. Profit Margins

Factor in all costs — product, shipping, marketing — when setting prices to maximize profitability and ensure long-term sustainability.

Tracking these metrics allows for strategic decision-making and helps pave the way for scalable growth in the competitive ecommerce space.

Best Accounting Software for Ecommerce

Choosing the right accounting software is key to simplifying your ecommerce bookkeeping process.

Let’s look at the top options — starting with doola Bookkeeping, the standout choice for ecommerce business owners.

Here’s a quick snapshot of how doola Bookkeeping stacks up against the other accounting software.

Feature	doola Bookkeeping	QuickBooks Online	Xero	FreshBooks
Multi-Currency Management	✅	❌	❌	❌
Ecommerce Platform Integration	✅	✅	✅	✅
Automated Transaction Tracking	✅	✅	❌	❌
Sales Tax Management	✅	✅	❌	❌
Customizable Financial Reporting	✅	✅	✅	❌
Dedicated Ecommerce Bookkeeping Support	✅	❌	❌	❌

doola Bookkeeping vs. Other Accounting Software

1. doola Bookkeeping | Starts at $25/month

With doola’s affordable Bookkeeping, you’re not just getting a software — you’re gaining a financial partner dedicated to simplifying your books and maximizing your profitability.

Features:

• Full-service ecommerce bookkeeping tailored to online businesses

• Advanced multi-currency management for international sales

• Seamless integration with platforms like Shopify, Amazon, and Etsy

• Automated transaction tracking and real-time updates

• Robust sales tax management for multiple jurisdictions

• Customizable financial reporting for clear, actionable insights

• Payroll services with Gusto (a doola affiliate partner)

2. QuickBooks Online | Starts at $35/month

QuickBooks offers essential features for small to mid-sized ecommerce operations, though it lacks the specialized support doola provides.

Features:

• Basic invoicing and expense tracking

• Inventory management features for product-based businesses

• Integrates with major ecommerce platforms

3. Xero | Starts at $13/month

Xero is a solid choice for businesses that want flexible integrations, though it may not match doola’s depth for ecommerce-focused accounting.

Features:

• Bank reconciliation and basic sales tracking

• Expense tracking for daily transactions

• Integrates with over 800 apps, including popular ecommerce platforms

4. FreshBooks | Starts at $15/month

FreshBooks offers straightforward invoicing and expense tracking. But its capabilities are limited compared to doola’s comprehensive features.

Features:

• Simple invoicing and expense tracking

• Time tracking ideal for service-based ecommerce

• Integrates with multiple payment gateways

✅ doola Bookkeeping Covers All Areas of Ecommerce Accounting

doola’s all-in-one bookkeeping solution simplifies financial management for online businesses, especially compared to the limited or partial offerings from other software.

How to Choose the Best Ecommerce Accounting Software

When selecting the best accounting software for your ecommerce business, try finding a solution that suits your unique needs.

Consider the following factors:

1. Sales Channel Integration

Ensure the software integrates smoothly with your ecommerce platforms like Shopify or Amazon so you can skip manual data entry and keep everything in sync.

2. Automation Features

Opt for software that automates repetitive tasks such as:

• Transaction tracking

• Sales tax calculations

• Report generation

Thus, saving you time and reducing errors.

3. Scalability

As your business grows and you add new sales channels or go global, your software should scale seamlessly alongside you.

4. Ease of Use

The best accounting tools are easy to navigate, even if you’re new to accounting. A clear, intuitive interface can make financial management much easier.

So make sure the platform is user-friendly, especially if you’re not an accounting expert.

Choosing the right software can simplify your accounting, helping you focus on what matters — growing your business!

Ecommerce Accounting Methods: Cash vs. Accrual

There’s no shortage of accounting options for ecommerce businesses, from high-tech software platforms to your classic neighborhood accounting firms.

But before you sign up with any vendor, there’s a key decision to make: choosing your accounting method.

The two primary methods are cash accounting and accrual accounting.

You can pick either for your ecommerce business, you must stick to one at a time. If you ever want to switch, you need to fill out the necessary paperwork for the IRS.

Let’s now take a look at both the methods.

✅ Cash Basis Accounting

Cash accounting is a simple method that measures the transfer of cash. 

With this straightforward approach, revenue and expenses are recorded only when money actually changes hands.

Is Cash Accounting Suitable for All Businesses?

Cash basis accounting is usually easy to manage and often suits smaller businesses that want simplicity.

How Does Cash Basis Accounting Work?

Here’s an example of how cash basis accounting works:

Date	Transaction	Cash Received	Cash Paid	Net Cash Flow
Jan 1	Begin operations with $8,500	$8,500		$8,500
Jan 4	Pay rent for January ($1,800)		$1,800	$6,700
Jan 8	Provide services, billed $4,500	$4,500		$11,200
Jan 12	Pay for office supplies ($70)		$70	$11,130
Jan 20	Receive payment for services	$4,500		$15,630
Jan 28	Pay employees ($5,500)		$5,500	$10,130

Under the cash basis accounting method, let’s say you receive an order for a $900 custom bookshelf.

You build and ship the bookshelf to the customer, but you only record the income when the payment actually arrives in your account — not when the order is placed or shipped.

The same rule applies to expenses.

Say you’ve hired a photographer for $8,000 to shoot your new product line, with the work scheduled for early Q3.

Since that $8,000 is still in your bank account at the end of Q2, it’s considered part of your taxable income for Q2.

For accounting purposes, this expense only counts:

When you actually pay the photographer and the cash leaves your account.

✅ Accrual Accounting

Accrual accounting, unlike cash accounting, records revenue when it’s earned and expenses when they’re incurred — regardless of when the actual cash flows in or out.

Is Accrual Accounting Suitable for All Businesses?

This method is favored by larger companies because it provides a more accurate view of financial health, but it requires a bit more expertise and active management than cash basis accounting.

While more complex, accrual accounting aligns with generally accepted accounting principles (GAAP) and is essential for providing a complete financial picture.

How Does Accrual Accounting Work?

Here’s an example of how accrual accounting works:

Date	Transaction	Revenue	Expenses	Net Income
Jan 1	Begin operations with $12,000	$12,000		$12,000
Jan 5	Pay rent for January ($2,500)		$2,500	$9,500
Jan 10	Provide services, billed $6,500	$6,500		$16,000
Jan 15	Pay for office supplies ($75)		$75	$15,925
Jan 25	Receive payment for services	$6,500		$15,925
Jan 30	Pay employees ($7,000)		$7,000	$8,925

🚩 What Are the Limitations of Accrual Accounting for Ecommerce Companies?

Accrual accounting method can sometimes give business owners a misleading impression of their current cash flow situation.

✔️ Let’s Take an Example:

Take, for instance, a custom jewelry maker Sarah who completes a necklace for a $1,200 order.

According to accrual accounting, Sarah would record that $1,200 as “earned” revenue as soon as the necklace is completed — even if the payment hasn’t hit her bank account yet.

So, while her financial reports show increased revenue, her bank balance might still be sitting at zero.

So Here’s Your Takeaway:

The timing difference in recognizing revenue and actual cash flow is a key characteristic of accrual accounting.

It highlights why it’s so helpful for understanding profitability, even though it may require careful cash management to avoid surprises.

Most ecommerce businesses opt for accrual accounting due to its comprehensive view of finances.

Best Practices for Ecommerce Accounting

Accounting rules and tax regulations vary by country and state, so it’s essential to stay informed to ensure your success.

Even if accounting isn’t your forte, there are simple steps you can take to keep your ecommerce business running smoothly.

Whether it’s your first online store or your tenth, here are six accounting best practices every ecommerce business owner should follow:

Separate Personal and Business Finances

Open a dedicated business account to keep things organized and ensure a clean separation.

Automate All You Can

With user-focused software like doola Bookkeeping, you can automate tasks such as:

• Tracking sales

• Calculating taxes

• Sending invoices

This minimizes human error and frees up your time to focus on growing your business.

Reconcile Accounts Regularly:

Make it a habit to match your bank and credit card statements with your accounting records to maintain accuracy.

Track Inventory Continuously:

Keep a close eye on stock levels to prevent both stockouts and overstocking — key to maintaining healthy cash flow.

Know what’s in stock, what’s selling, and what’s not.

Monitor Your Cash Flow:

Keep a close eye on your cash flow — how much money is coming in and going out.

Positive cash flow indicates financial health, while negative cash flow means it’s time to make adjustments before it impacts your business.

Get a Grip on Sales Tax:

Sales tax can get complicated, especially when you’re selling across states or countries.

Make sure you understand your tax obligations and collect and remit the correct amount to stay compliant.

Ecommerce Bookkeeping Checklist

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📌 7 Must-Do Accounting and Tax Tasks

✔️ Reconcile Banks, Cards, Loans and Equity Accounts ✔️ Reconcile Sales, Returns, Shipping Income, and Chargebacks ✔️ Reconcile COGS, Inventory & Inventory in Transit ✔️ Prepare Balance Sheet, Income Statement & Cashflow Statement ✔️ Prepare Sales Tax Reports and file them as per your state guidelines ✔️ Review numbers for accuracy and make decisions out of data ✔️ File Quarterly Estimated Taxes, Annual 1099s forms, Company Income Tax

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Need help with these tasks? Book a demo with doola today.

What Tasks Can an Accountant Help With for My Ecommerce Business?

An accountant can be a valuable partner in managing your ecommerce finances by assisting with:

1. Tax Preparation and Filing:

Ensure you stay compliant with both local and international tax regulations, while maximizing deductions to minimize your tax burden.

2. Financial Reporting:

Get accurate, detailed financial reports that provide insights to make smarter business decisions and track your company’s performance.

3. Budgeting and Forecasting:

Work closely with your accountant to create realistic budgets and financial forecasts, giving you a roadmap for future growth and expansion.

4. Cash Flow Management:

Receive expert advice on strategies to optimize cash flow, ensuring your business stays financially healthy and liquid.

Benefits of Accounting and Bookkeeping for an Ecommerce Business

Effective accounting and bookkeeping provide a range of advantages that can propel your ecommerce business forward:

1. Enhanced Financial Clarity:

With precise financial records, you gain a clear picture of your business’s financial health, enabling better planning and decision-making.

2. Tax Compliance:

Stay on top of your tax obligations and reduce liabilities by ensuring all records are accurate and up to date.

3. Data-Backed Decision Making:

Leverage data-driven insights to make smarter decisions about:

• Pricing

• Marketing strategies

• Inventory management.

4. Time Efficiency:

Outsource your bookkeeping to top-rated services like doola, freeing up your time to focus on scaling your business without getting bogged down by financial tasks.

Ecommerce Accounting FAQs

1. How do I get started with doola for my ecommerce business?

Visit doola’s website, choose the bookkeeping package that fits your needs, and book a demo to get started.

2. What are the most common ecommerce transactions?

The most common transactions include product sales, refunds, returns, shipping costs, and payment processing fees.

3. Why is accounting and bookkeeping important for ecommerce businesses?

Accounting and bookkeeping are essential for tracking your revenue, managing expenses, ensuring tax compliance, and making informed, data-driven decisions to fuel your business growth.

4. Is there a difference between bookkeeping and accounting?

Yes. Bookkeeping focuses on recording transactions, while accounting involves analyzing financial data and providing insights.

5. Which accounting method is best for small businesses?

The accrual method is often the best choice for ecommerce businesses. It offers a more comprehensive and accurate view of your financial health, allowing you to make better business decisions.

Get Started with doola Bookkeeping Today!

Ready to take control of your ecommerce accounting?

With doola’s expert bookkeeping services, you can streamline your financial processes, stay tax-compliant, and focus on scaling your business.

Book a demo with doola today to see how we can help your ecommerce business thrive!