Top Accounting and Bookkeeping Challenges Faced by E-Commerce Businesses

• Reading Time: 7 Minutes
• Published: January 11, 2023
• Last Updated: February 7, 2025

Managing an e-commerce business is a laborious task and being a business owner, you might face many difficulties in managing these tasks. Some of the most common challenges include ever-evolving customer expectations, data security, and customer retention, among others. However, this is not all; e-commerce businesses also face accounting and bookkeeping challenges. If you ask any fellow e-commerce business owner, they will tell you that you are not alone.

The complicated business model followed by e-commerce businesses has enabled them to reach out to their customers worldwide rather than being confined to a limited geographical location. Still, they have also faced greater challenges. The e-commerce accounting and bookkeeping departments have been severely affected among their different departments.

The importance of e-commerce accounting cannot be overstated. Accurate e-commerce accounting and bookkeeping data can help improve business decisions, enhancing growth and profitability. So, it doesn’t matter how difficult e-commerce accounting challenges may be, and it is still important that you learn about them, as this will allow you to find the best ways to handle the issues and avoid losses. Let us know more about accounting and bookkeeping challenges in e-commerce businesses so we can figure out the solution together!

Accounting and Bookkeeping challenges for E-commerce Businesses

Managing the books for an e-commerce business can present various challenges that normal businesses do not experience. Here are some of the biggest bookkeeping and accounting issues for e-commerce businesses:

1. Selection of accounting software:

Finding the right accounting software for your e-commerce business is essential for success. E-commerce businesses face many accounting and bookkeeping challenges, so finding a solution that can withstand pressure is vital. There are many accounting software on the market, some more suited for e-commerce businesses than others. These types of software handle most—if not all—of the common bookkeeping obstacles and allow integrations with complementary software. Zoho Books, Tally, Xero, and FreshBooks are some available options. Zoho Books accounting software has the upper hand over other accounting software in e-commerce accounting.

Useful Read – “Zoho Books the Answer to Exit of QuickBooks From India”

2. Merchant fee tracking:

There are numerous e-commerce platforms used by e-commerce businesses to sell their products and services, and these platforms charge merchant fees. Most platforms charge a flat monthly merchant fee; however, there are other not-so-simple charges that the e-commerce platforms charge. These fees will differ from one e-commerce platform to another, which poses a big challenge for business owners because it is difficult to determine how much it costs them out of the revenue earned.

3. Tracking and reconciling inventory for multiple sales channels:

Inventory management is a significant part of running an e-commerce business, as you must know what inventory is being sold and what inventory is in low quantity. When you sell on multiple platforms, one platform can’t record the sales made on other platforms, meaning there will not be a proper and accurate inventory record. Multiple warehouses and sales channels also add up to this issue. The integrated inventory tracking feature offered by many e-commerce accounting software makes it easy to keep track of your inventory and efficiently manage the stock. Having a common platform for recording all the sales will help simplify accounting for any e-commerce business.

4. Balance reconciliation for multiple sales channels:

Every time a sale occurs, inventory and receivables change, so it is important to record the sales in your accounting software as soon as possible. With multiple sales channels, this poses a big threat during reconciliation. One mistake can mess up your whole book of accounts and become not just time-consuming but an expensive task to accomplish.

5. Tracking GST:

Keeping track of all the GST liability is one of the biggest challenges e-commerce businesses face, as the tax liability type is based on two major factors – product type and the state to which the sale is made. Different products can have different GST rates so charging the correct GST rate is very important. In the case of an inter-state sale, Integrated Goods and Service Tax (IGST) is chargeable and intra-state sale State Good and Service Tax (SGST) and Central Good and Service Tax (CGST) is chargeable. Since e-commerce businesses deal with customers from different states, accurately tracking them becomes even more crucial to determine the amount of GST payable. Also, it is important to note that if the e-commerce business has multiple warehouses in different states, then tracking GST gets even more challenging since the business needs to obtain GST registration in each state and track the GST liability separately for each state.

6. Ensure GST & Income Tax Compliance:

Tax compliance is imperative to ensure you don’t pay more tax than necessary. Tax law can be tricky, and there are many rules that a non-accountant may not know about. Calculating GST payable, the tax credit available for GST setoff, TDS withholding, and GST return filing & Income Tax return filling are all important tasks that your e-commerce accountant can help you with. GST or Income Tax Department investigate any business for non-compliance, penalizing you with considerable fines if they find anything wrong. To avoid this, it is vital to have an accountant who ensures tax compliances are always up to date.

7. The manual accounting process for various sales channels:

Not conducting your e-commerce accounting on time can have serious consequences. You might encounter inaccurate or missing data, late filing of financials and taxes, and risk of fraud. However, with accounting software, you can stay on top of all aspects related to transactions for your e-commerce business. You can utilize the automated solution by outsourcing accounting and bookkeeping tasks to a reliable service provider or in-house expert.

8. Analysis of sales data for decision-making:

As an e-commerce business, you probably have a variety of sales channels to count at the end of the day. A lot of data across these channels needs to be analyzed. For instance, each channel might have a different mode of payment, such as cash, credit or debit cards, or any other form of payment. It is a challenge to collect and analyze all this data. One single error can affect your cash position, inventory, and the accuracy of financial statements. Properly recording sales and their payments is crucial for having accurate sales data, which can be analyzed to make better business decisions.

Final Words

As e-commerce platforms become increasingly available and in demand, businesses must find solutions to e-commerce accounting and bookkeeping challenges. Some must-do tasks for an e-commerce business include choosing the right accounting software and hiring experienced e-commerce accountants.

As a business owner, you are busy with many other responsibilities but dealing with e-commerce bookkeeping and accounting challenges is also critical for your business growth. An easy way to deal with these challenges is to hire an outsourcing service provider that specializes in managing the finances of e-commerce businesses can help save time and money. You can contact us if you are looking for expert outsourced e-commerce accounting service providers. We at Whiz Consulting specialize in providing expert accounting and bookkeeping services to businesses from various industries, including e-commerce. We will ensure your business is more productive and profitable by providing the best services.

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