The Major Limitations of E-Commerce Accounting (And How to Fix Them)
Monday, April 21, 2025
At J&S Accounting, we manage books for a wide range of industries—from local service providers to multi-platform e-commerce brands. And if there’s one thing we’ve learned, it’s that e-commerce accounting comes with its own unique set of challenges.
Selling online offers tremendous growth potential—but behind the scenes, the bookkeeping can quickly get messy if the right systems aren’t in place. Here’s a look at the major limitations of e-commerce accounting, and how smart business owners (with the right support) can overcome them.
1. Sales Channel Overload
The Problem:
Most e-commerce businesses don’t just sell on one platform. Between Shopify, Amazon, Etsy, and wholesale or POS sales, your revenue streams can get tangled fas
The Challenge:
Each platform reports revenue differently, and not all data syncs cleanly into accounting software. This can lead to duplicated income, missing fees, or misclassified transactions.
The Fix:
- Reconcile sales deposits to summary-level data (not every individual transaction).
- Keep a separate clearing account for each major platform to track activity clearly.
2. Sales Tax Complexity
The Problem:
With e-commerce, sales tax liability isn’t limited to your home state—especially if you sell across the U.S. or internationally. Nexus laws vary, and platforms don’t always collect sales tax on your behalf correctly.
The Challenge:
Incorrectly calculating or reporting sales tax can result in penalties and back taxes owed. Many businesses don’t realize they have nexus in new states until it's too late.
The Fix:
- Use tools like Davo or Avalara to automate and monitor sales tax collection across states
- Do a mid-year review if your sales volume or shipping locations have changed
- Don’t rely solely on your selling platform for compliance—double-check what’s being collected.
3. Inventory Accounting Confusion
The Problem:
Inventory management is at the heart of e-commerce—but many sellers don’t account for cost of goods sold (COGS) properly, especially when inventory moves across platforms or warehouses.
The Challenge:
Without accurate COGS, your profit margins will be skewed. Worse, you may overstate income and underpay taxes.
The Fix:
- Use inventory management software like Cin7, DEAR Systems, or QuickBooks Commerce to track real-time inventory and sync with accounting.
- Record COGS on an accrual basis to match expenses with revenue.
- Periodically perform inventory audits to catch discrepancies early.
4. Fees, Refunds, and Chargebacks Are Often Missed
The Problem:
Selling online comes with a maze of hidden fees—payment processor charges, marketplace fees, shipping costs, refunds, and chargebacks.
The Challenge:
These can add up quickly and distort your books if not tracked properly. A sales deposit doesn’t equal total revenue—it’s net of all these deductions.
The Fix:
- Break down your sales reports to separate gross revenue, fees, and net payouts.
- Use platform integrations or manually import detailed reports monthly to track true profitability.
- Create accounts in your chart of accounts for key categories: “Marketplace Fees,” “Refunds,” “Shipping Income,” etc.
5. Cash Flow Surprises
The Problem:
Because payouts from Amazon or other platforms are delayed (often weekly or biweekly), and COGS is usually paid upfront, e-commerce businesses frequently face cash flow gaps.
The Challenge:
You may be profitable on paper but still short on cash when you need to reorder inventory.
The Fix:
- Build a cash flow forecast that considers delayed payouts and lead times on inventory.
- Use rolling 13-week projections to spot tight spots in advance.
- Consider financing tools designed for e-commerce, like Shopify Capital or Payability, if used responsibly.
Final Thought: E-Commerce Needs Specialized Accounting
E-commerce may be fast-moving and exciting—but without the right accounting systems, it can quickly spiral into chaos. At J&S Accounting, we understand the unique challenges that e-commerce businesses face and help our clients navigate them with clarity and confidence.
Whether you're selling on one platform or five, we can help you:
- Set up clean, accurate integrations
- Track sales tax and inventory properly
- Understand your true profitability
- Keep your books tax-ready year-round
Need help cleaning up your e-commerce books or choosing the right tools? Let’s talk. Your numbers should work as hard as you do.
About J&S Accounting
At J&S Accounting, we provide expert bookkeeping services tailored to the unique needs of small businesses and nonprofits. We recognize the challenges that come with maintaining accurate financial records and how vital this is for the smooth operation and growth of your business. As a woman and minority-owned firm, we’re proud to offer our expertise to businesses in Savannah, GA, and across the nation, helping them navigate financial complexities and achieve better financial management.
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Disclaimer:This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.
© 2023 J&S Accounting. All Rights Reserved.
Disclaimer
This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.