Running an e-commerce business can be exciting. It is relatively easier to set up than a physical store and you can start accepting orders much quicker, too. However, managing the accounting side of things may be a little different as there are factors unique to an e-commerce business that may affect the way you manage your books. Outsourcing your accounting for-ecommerce business to an external firm can help you navigate these changes.
What is E-Commerce Accounting?
Accounting for an e-commerce business involves looking at gathering financial information, maintaining the books, and reporting the resulting data. This will determine how a business is performing, along with helping in calculating and paying corporate taxes. E-commerce can also provide insights that can inform a company’s overall business strategy.
Challenges in E-Commerce Accounting
Accounting for e-commerce businesses can be a minefield to navigate, especially if you’re a newbie. These are some common challenges that you may face:
1. Handling a High Volume of Transactions
E-commerce businesses face a large number of transactions everyday. Without a proper system in place, it can make sales data very challenging to track. This is further amplified when you have to deal with multiple payment methods. Hiring an accounting firm in Dubai who specializes in handling e-commerce transactions can be a game changer.
2. Inventory Management
Most physical stores handle their own inventory or manage their own warehouses. E-commerce companies generally rely on third-party fulfillment centers to handle their goods. In these cases, inventory management can get complicated as you will have to track returns, the movement of your stock, and calculate Cost of Goods Sold (COGS).
3. VAT Compliance
Hiring accounting services for your e-commerce business will take the obligation of staying compliant with tax laws off your plate. The experts in charge will handle keeping thorough records and file your returns on time. They will also advise you on the different VAT implications for your products and services and how they will affect your business.
4. Expense Tracking
E-commerce businesses incur multiple expenses across various categories like packaging, advertising, and shipping. Tracking expenses is vital when it comes to e-commerce accounting as it affects your tax liability, budget, and profit calculations.
5. Keeping Up with Local and International Regulations
If you’re running an e-commerce business, you are highly likely to have international customers. This opens you up to the possibility of dealing with foreign taxation and regulations. Without having proper accounting services for e-commerce operations, you risk penalties that could impact your revenue.
Consequences of Improper Accounting for E-Commerce Business
Mismanaging your books can have major implications to your business growth. It can impede your daily operations and even subject your company to an investigation from the authorities. If you find yourself in this situation, you can hire an audit firm in Dubai to assess your books and provide guidance on next steps.
1. Missing Tax Deadlines
With the introduction of corporate tax in UAE, tax compliance for e-commerce businesses has become essential. Proper recordkeeping ensures timely calculations and filing of returns. You will also need meticulous e-commerce accounting if you are planning to claim any tax deductions or credits.
2. Poor Understanding of Business Performance
If your books don’t accurately reflect your cash flow, you will never get a clear picture of your business’ profitability. You might be incurring unnecessary expenses or inaccurately tracking your inventory, making future strategies difficult to plan for.
3. Confusing Inventory Supplies
Mismanagement of your accounting records can also affect your inventory. If you don’t know how much stock you have left, you may overestimate or underestimate the amount. This can result in customers having to wait for orders or your business sitting on large quantities of unsold stock. In any case, hiring an e-commerce accounting firm to keep your records in check is an easy way to avoid this problem.
Benefits of Outsourcing Accounting for E-Commerce Business
A&A Associate houses experts in accounting and auditing who are skilled at helping e-commerce businesses manage their books and handle the entire accounting process, with no hidden costs. Outsourcing to an e-commerce accounting firm can have several benefits for companies looking to offload the process.
1. Cost-Effective
If you outsource your accounting, you can dedicate most of your funds to other revenue-generating activities. Hiring an external e-commerce business accounting company to take care of the day-to-day and detailed financial recordkeeping and reporting is much more cost-effective than maintaining an in-house accounting team.
2. Focus on Core Business
By taking accounting and bookkeeping off your plate, you can focus on actually running your business. Working with a company that specializes in accounting for e-commerce business can allow you to pour your energy into business operations that will generate profit, building contacts, and establishing yourself in your niche.
3. Access to Advanced Software & Professional Expertise
Accounting and bookkeeping software can often be expensive. But with an external accounting company, you can get access to those softwares at a fraction of the cost. You can also get detailed financial insights that can benefit your business across departments, without investing in your own accountants.
4. Tax Compliance
Keeping your business tax compliant can be challenging for owners unfamiliar with UAE’s tax landscape. It can also be difficult if your business is experiencing rapid growth. Outsourcing e-commerce business accounting can make filing your taxes and following tax regulations much easier.
How A&A Associate Can Help
The experts at A&A can completely handle the accounting for e-commerce business. They can streamline your operations and manage:
- Accounts payable
- Account reconciliation
- Payroll services
- Corporate tax
- VAT
- Bookkeeping
- Financial reporting
- Risk management
- External and internal audits
To get started with your Ecommerce Business Accounting, contact us at +971 54 793 9972 or email us at enquiry@aaconsultancy.ae.
FAQ’s
What is the Best E-Commerce Business Accounting Software?
There are many types of accounting software you can use as an e-commerce business (Zoho Books, SAP, XERO, Tally, QuickBooks, SAGE). Asking an accounting professional or hiring a company that provides accounting services for e-commerce businesses can help you work out the best software for your needs.
Where Can I Find an E-Commerce Accounting Firm?
The experts at A&A Associate offer accounting and auditing services for e-commerce businesses and provide valuable insights to improve business growth and strategy. They can handle the entire accounting operations at your company, leaving you to focus on your business.
How to do Accounting for an E-Commerce Business?
After you get an e-commerce license, you can start your online business. E-commerce business accounting involves categorizing transactions, tracking inventory, budgeting, maintaining cash flow, tracking returns, keeping records, and paying taxes.
What are the Benefits of Outsourcing E-Commerce Accounting?
Outsourcing accounting services for your e-commerce business can be advantageous by allowing you to focus on your business activities, not worry about tax compliance, save time and money on hiring and maintaining an in-house finance department.
Do I Have to Pay VAT on my E-Commerce Business?
The UAE imposes a 5% VAT on goods and services. This applies to e-commerce transactions as well. Hire an e-commerce accounting firm to help keep you compliant and pay what you owe on time.
What Documents do I Need for E-Commerce Business Accounting?
The main financial documents you will need to maintain as an e-commerce business are:
- Balance Sheet (shows assets, liabilities, equity)
- Profit & Loss Statement (shows company’s revenue and expenses)
- Cash Flow Statement (shows money coming in and out of the business)
What are the Accounting Services for E-Commerce Companies?
The main accounting services for e-commerce companies are:
- Tax planning
- Payroll management
- Risk management
- Cash flow management
- Bookkeeping
If you need help with any of these services as an e-commerce business, you can hire A&A Associate to take care of your accounting needs.
Do I Need an E-Commerce License to Sell in UAE?
You do need an e-commerce license to legally run an online business in the UAE. It applies to both physical and digital goods, and you will need one even if you operate in a free zone. If you’re operating on the mainland, you should apply through the Department of Economic Development (DED).
How can an E-Commerce Accounting Firm Help with Tax Compliance?
When you hire an accounting firm, you will have access to experts who are skilled at tax compliance. Outsourcing your finances to an external firm will help keep you on the Federal Tax Authority’s good side by paying and filing your tax returns on time. They will also be able to guide you on claiming tax deductions and other tax incentives.
Should E-Commerce Businesses Pay Corporate Tax in UAE?
E-commerce businesses are on the hook for corporate taxes in the UAE, if they make over the specified limit. The tax is currently levied at 9% on entities that have a taxable income over AED 375,000. Hiring a company that provides accounting services for e-commerce businesses can help you deal with corporate tax.
