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Ecommerce Expense Tracking: A Step-by-Step Guide

Google defines expense tracking as the process of recording, categorizing, and analyzing all of your financial transactions.
Ecommerce expense tracking, while similar, specifically addresses platform fees, shipping costs, inventory, and the sales tax complexities unique to online businesses.
But that’s not all. There are several other factors that make ecommerce expense tracking a crucial part of running your online business. And doola Bookkeeping helps you with that!
Let’s walk you through the complete process of ecommerce expense tracking.
Why Expense Tracking Matters for Ecommerce Businesses
Well, imagine trying to grow your business without knowing how much you’re spending on shipping, ads, or inventory. It’s chaos waiting to happen.
Expense tracking helps you:
✅ Understand Your Cash Flow: Know exactly where your money is going and make smarter financial decisions.
✅ Simplify Tax Prep: When tax season rolls around, having a clear record of deductible expenses can save you money and headaches.
✅ Spot Inefficiencies: Identify areas where you’re overspending and adjust your strategy to maximize profits.
✅ Boost Profitability: Clear insights into your spending help you trim unnecessary costs and improve margins.
Tools for Ecommerce Expense Tracking
Here are some of the best options to ecommerce expense tracking:
1. doola Bookkeeping
doola Bookkeeping is built to handle the unique challenges ecommerce business owners face. The platform offers capabilities to track platform fees, inventory costs, sales taxes, and payouts, along with expert support to simplify your financial management at any stage of growth.
What Makes doola Bookkeeping Different:
👉 Seamless Ecommerce Integration: Sync your sales, expenses, and taxes automatically with your ecommerce store for an up-to-date view of your finances.
👉 Expense Tracking Made Easy: You can quickly sort expenses like marketing, shipping, and inventory to see exactly where your money goes.
👉 Sales Tax Simplified: Our platform automatically calculates and tracks sales tax for you, handling compliance requirements across multiple states and countries effortlessly.
👉 Dedicated Human Support: Get a personalized account manager who knows the ins and outs of ecommerce bookkeeping and is always ready to help.
👉 U.S. Business Bank Account Setup: If you’re selling from abroad, doola helps set up a U.S. business bank account to simplify financial management.
👉 Custom Reports: Access profit-and-loss statements, cash flow insights, and financial forecasts that keep you in control of your business.
With a 4.6-star rating on Trustpilot and backing from industry giants like Y Combinator, doola is a trusted partner for ecommerce business owners, who want to simplify their bookkeeping.
2. Xero
Xero is a cloud-based accounting software designed to meet the needs of ecommerce businesses as they grow. With its intuitive interface and robust features, it’s an excellent choice for online sellers managing increasing sales, inventory, and financial complexities.
Key Features
👉 Inventory Tracking: Keep a close eye on your stock levels and costs directly from Xero’s dashboard, making it easier to manage inventory fluctuations and avoid stockouts.
👉 Expense Management: Quickly capture and categorize receipts to stay organized and gain better control over ecommerce-related spending, from shipping fees to marketing costs.
👉 Bank Reconciliation: Save time and reduce errors by automatically matching transactions with bank feeds, ensuring your ecommerce financial records stay accurate.
👉 Multi-Currency Support: Xero tracks foreign transactions and converts currencies automatically, simplifying global operations.
3. QuickBooks Online
Just like doola, QuickBooks Online is a trusted accounting software used by millions of ecommerce businesses.
With its advanced features and seamless integrations, it’s ideal for established ecommerce sellers looking for detailed financial management.
Key Features
👉 Detailed Reporting: Get a clear picture of your online store’s financial health with customizable reports that track sales, expenses, and profits.
👉 Sales Tax Tracking: Automatically calculate and manage sales tax for multiple regions, ensuring compliance without added hassle.
👉 Payroll Management: Easily handle employee wages, overtime, and taxes, all in one platform — great for scaling ecommerce businesses with growing teams.
👉 Third-Party Integrations: Connect seamlessly with Shopify, Stripe, PayPal, and other ecommerce platforms for smoother financial operations and consolidated data.
Step-by-Step Guide to Ecommerce Expense Tracking
Handling your ecommerce expenses doesn’t have to be a daunting task. With these straightforward steps, even if you’re just starting out, you’ll set up an easy-to-manage system that keeps everything under control.
Let’s get started.
Step 1: Categorize Your Expenses
The first and most crucial step of ecommerce expense tracking is to separate your personal and business expenses. Mixing the two can lead to confusion, multiple errors, and even tax complications.
Here’s what you should do:
✅ Set up a dedicated business bank account. This will ensure that all your business-related income and expenses stay separate from personal finances.
Need a place to start? Check out Mercury Banking, which offers easy business banking solutions tailored for ecommerce sellers.
✅ Define broad categories for your business expenses. Examples include inventory, marketing, shipping, and software subscriptions. This makes it easier to track where your money is going.
Step 2: Choose the Right Expense Tracking Tool
The right ecommerce expense tracking software should make expense monitoring seamless for your ecommerce business.
Look for tools that:
🎯 Sync directly with your Shopify store.
🎯 Allow easy categorization of expenses.
🎯 Generate detailed reports for tax preparation and decision-making.
Step 3: Set Up Expense Categories in Your Tool
Once you’ve chosen your expense tracking software, it’s time to organize your expenses into clear categories. This will make tracking and reporting much easier.
Here’s what you need to do:
✅ Open the settings or dashboard of your expense tracking tool.
✅ Create categories like inventory purchases, marketing and ads, shipping costs, and Shopify fees.
✅ Assign every transaction to a category as you go. This ensures your data is always organized and ready for analysis.
Step 4: Automate Data Entry Where Possible
Manually entering expenses is a time sink and opens the door to errors. Automation is your ally when it comes to tracking expenses efficiently and accurately. Most ecommerce bookkeeping tools offer automation features that make this process seamless.
Here’s how you can automate data entry:
✅ Sync Your Shopify Store: Choose an expense tracking tool that integrates directly with Shopify. Once connected, it automatically pulls in transaction details like sales, fees, and taxes. No more manual uploads or worrying about missed entries.
✅ Link Your Business Bank Account: Connect your business bank account or credit card to your tracking tool. This way, all payments and expenses — whether it’s for inventory, shipping, or marketing — flow into the system automatically.
✅ Enable Receipt Scanning: Many ecommerce expense tracking tools let you upload receipts via a mobile app or scan them directly. The software extracts the key details (like amount and date) and categorizes the expense for you.
Step 5: Regularly Review and Reconcile Transactions
Even with automation, it’s essential to double-check your records. Here’s how to review and reconcile your transactions:
✅ Set a Schedule: Make it a habit to review your transactions weekly or monthly. Pick a time when you can focus without distractions.
✅ Cross-Check Transactions: Compare the data in your expense tracking or bookkeeping tool to your Shopify payouts and business bank account statements. This helps you verify that everything matches up.
✅ Resolve Discrepancies: If you notice any mismatches — like a missing expense or a duplicated transaction — correct them immediately. Most tools let you add or edit entries for accuracy.
✅ Categorize Unsorted Expenses: Sometimes, automation can’t categorize everything perfectly. Review any “uncategorized” expenses and assign them to the right category, like marketing, shipping, or inventory.
✅ Generate a Reconciliation Report: Some tools offer reconciliation reports that summarize your financial activity. Use these reports to identify gaps, errors, or trends.
Step 6: Monitor Trends and Generate Reports
This step transforms your raw data into actionable insights. Regularly reviewing expense trends can help you make smarter business decisions.
What to focus on:
✅ Use the reporting features in your expense tracking tool to identify patterns in your spending.
✅ Monitor trends, such as increased marketing costs during holiday seasons or fluctuations in shipping expenses.
✅ Generate profit-and-loss statements to ensure your business remains profitable and sustainable.
Common Mistakes to Avoid in Ecommerce Expense Tracking
Expense tracking isn’t rocket science, but there are some common pitfalls to watch out for:
❌ Combining Personal and Business Finances: Blurring these lines can create unnecessary headaches and make tax time a nightmare. Use a separate business bank account for your business transactions.
❌ Overlooking Small Costs: Those $10 subscriptions or small one-off expenses might seem insignificant, but they add up quickly and can skew your financial picture if ignored.
❌ Skipping Regular Reviews: Letting months pass without reviewing your records leaves room for unnoticed errors to stack up. Consistent reviews ensure your data stays accurate.
❌ Not Backing Up Your Records: Relying on a single source for your financial data is risky. Always maintain a secure backup to protect against loss or system failures.
Simplify Your Ecommerce Expense Tracking With doola Bookkeeping
Managing your ecommerce expenses doesn’t have to be a monthly panic. As mentioned earlier, doola Bookkeeping is built for ecommerce sellers who want clarity and simplicity in their finances.
- Sync your ecommerce sales, expenses, and fees automatically — no manual toil.
- Categorize costs like inventory and marketing without overthinking it.
- Get tax-ready with clean, organized records that make compliance a breeze.
See for yourself 👉 book a demo today and let doola handle all the grunt work for you.
FAQs
What are the best tools for ecommerce expense tracking?
doola Bookkeeping, QuickBooks Online, and Xero are excellent choices, depending on your business needs.
How often should I review my ecommerce expenses?
At least once a week or month. Regular reviews help you catch errors early and stay on top of your finances.
What expenses are tax-deductible for ecommerce businesses?
Common deductions include shipping costs, software subscriptions, advertising expenses, and inventory costs.
Can I automate all aspects of expense tracking?
While you can automate most of it, you’ll still need to review and reconcile transactions manually to ensure accuracy.
How can I track inventory-related expenses effectively?
Use bookkeeping software with inventory management features to track costs accurately.