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Whether you’ve been running your Shopify store for a while or you’re just dipping your toes into the world of e-commerce as an online seller, staying on top of your finances is key to making it big. This guide will walk you through the essentials of accounting on Shopify, helping you keep your books in order and your business thriving.
The e-commerce basics crucial for running a successful online business are:
Before you start, it’s essential to have a solid system in place.
Tracking sales and expenses will keep your business in a healthy financial situation. By keeping a close eye on your revenue streams and properly categorising expenses, you can gain broader insights into your financial health. Utilising tools like Shopify’s reporting features and third-party apps can make this process more efficient and help you stay organised.
Understanding UK tax laws is essential for Shopify sellers to ensure compliance. In the UK, e-commerce businesses are required to collect and remit Value Added Tax (VAT) on applicable sales. It’s important to stay informed about VAT registration thresholds, as exceeding these thresholds will require you to register for VAT.
In addition to VAT, Shopify sellers in the UK should also be aware of other taxes and laws that may impact their business operations. For example, businesses in the UK are subject to paying business rates, which are taxes on non-domestic properties, including warehouses or offices used for e-commerce activities.
Sellers may also be liable to pay income tax on profits generated from their Shopify sales. An accountant can help you stay updated on the latest tax regulations and give you professional advice if needed to ensure your Shopify business remains in good standing with the law.
Once your accounting system is set up and running smoothly, it’s time to analyse your financial performance.
The profit and loss statement, also known as the income statement, gives you a snapshot of your company’s revenues and expenses over a specific period. This statement determines your net profit or loss and understands the sources of your income and the nature of your expenses.
The balance sheet provides a comprehensive view of your company’s assets, liabilities, and equity at a particular point in time. It helps you evaluate your company’s financial position and assess its ability to meet short-term and long-term obligations. Understanding the balance sheet can also help you identify areas where you might need to improve liquidity or manage debt more effectively.
The cash flow statement tracks the flow of cash in and out of your business. It highlights how well your company generates cash to pay its debt obligations and fund its operating expenses. By analysing your cash flow, you can ensure that your business has sufficient liquidity to sustain operations and invest in growth opportunities.
Regularly reviewing these financial statements will enable you to make data-driven decisions, such as identifying cost-saving opportunities, optimising pricing strategies, and planning for future investments.
Even with the best tools and knowledge, sometimes you need professional help. Check our blogs on ‘How to find the right accountant’ for a comprehensive guide.
Expert e-commerce accountants like us can help you avoid a lot of headaches. At CloudAccountant.co.uk, we can ensure you have everything up-to-date and capitalise on all the tax relief you are legally entitled to.
After an initial free, no-obligation chat to learn more about your circumstances and requirements, we’ll send over a personalised quote based only on the services you need. This means that you’re not paying for services that you don’t need. If you’re happy with the quote, we will then get the ball rolling. All we require is your passport ID and proof of address.
To learn more about how we can help, check out our online sellers package, and our Guide to Accounting for E-commerce.
Here at CloudAccountants.co.uk, we also provide online accounting services for eBay sellers and Amazon sellers.