Common E-Commerce Accounting Errors
Reading time: 3 minutes
The holiday season is here - Thanksgiving, Black Friday, and Cyber Monday are just around the corner. It’s the busiest time of year for e-commerce businesses, and while you’re focused on skyrocketing sales and delivering for your customers, it’s easy for accounting issues to creep in. From tracking gift cards to reconciling promotional discounts, these small errors can snowball into big problems that affect your bottom line.
As we gear up for the holiday rush, here are the most common e-commerce accounting challenges to watch out for and how they might impact your financial health:
Missed Input Tax Credits (ITCs) on Amazon Fees
Many e-commerce tools and Amazon reports combine sales tax with charges, making it easy to overlook ITCs. This often results in missed tax credits.
Improper or Missing Reconciliation of Shopify Gift Cards
Gift cards are liabilities and should be accurately recorded on the balance sheet. When unrecorded, sales figures are overstated.
Inconsistent and Inaccurate Cost of Goods Sold (COGS)
Errors in COGS or inventory entries can lead to inconsistent gross margin calculations from month to month.
Failure to Record Deferred Revenue for Unfulfilled Orders
Revenue from orders placed but not yet shipped should be deferred, as the revenue has not been earned. Skipping this process inflates sales figures.
Omission of Fees from Alternative Payment Gateways
Fees from providers like PayBright or Klarna are often missed, leading to understated processing expenses.
Unreconciled Clearing Accounts
Growing balances in clearing accounts can indicate unresolved transactions, resulting in inaccurate sales allocations.
Failure to Reconcile Accounting Systems with E-Commerce Platforms
Inconsistent balancing between accounting systems and sales platforms can lead to reporting inaccuracies.
Not Reviewing Sales Tax Collection Settings
It’s crucial to review sales tax settings to ensure compliance, such as avoiding the collection of PST in non-registered provinces or jurisdictions. Mismanagement can lead to over-collection or non-compliance.
Inaccurately Monitoring Promotional Orders or Issued Gift Cards
Free gift cards, promotional products, or samples provided for advertising purposes are often incorrectly classified as sales rather than promotional expenses. Tags can be used to track and record these items accurately.
Don’t Let These Accounting Errors Cost You This Holiday Season
Every missed tax credit, unreconciled fee, or unrecorded liability adds up, impacting your bottom line and creating unnecessary stress during the busiest time of year. With the right systems and expertise in place, these errors can be avoided entirely.
At ConnectCPA, we don’t just clean up your books; we help you create a solid foundation for growth and success. Whether you’re processing record-breaking sales this Black Friday or planning for year-end, we’re here to optimize your financial processes so you can focus on what matters most: growing your business.
Contact us today to make this holiday season your most profitable one yet!
