UK Ecommerce Accounting Software for Amazon FBA and Shopify
Estimated reading time: 16 minutes.
Running an ecommerce business in the UK comes with a unique set of challenges and opportunities. Regardless of whether you’re selling on Amazon, Shopify or another digital avenue, you need to have accurate financials in order to make sound business decisions.
Many digital entrepreneurs (and their bookkeepers) manually enter the sales or payout data into their accounting system. While it may seem like a suitable solution in the beginning, this can result in more work and a wide range of issues such as reporting errors, difficulties with comparing the performance of different channels and time periods, and challenges when it comes to selling your business down the line.
This is where A2X comes in handy. Our software connects your Shopify or Amazon Seller Central account with your cloud accounting system. In doing so, we make it easy for you to maintain reliable and reconciled financials.
We have been providing accounting software to digital businesses and ecommerce accountants in the UK since 2017, and have learned a great deal over the last few years.
This guide takes a closer look at:
- The UK ecommerce accounting landscape and how Brexit is changing the game.
- How A2X can make your life easier as an online entrepreneur in the United Kingdom.
- A brief look at the top ecommerce accountants in the UK.
- Where you can go to find out more information about ecommerce accounting and get answers to your burning questions.
The UK ecommerce accounting landscape
Over the last decade, the world of accounting and tax has changed rapidly. With the growth of cloud software providers such as Xero, Brexit affecting the way that our markets operate and governments working towards a digital future for tax collection, there is more to keep in mind when it comes to looking after your books than in the past.
As an online seller in the UK, the main accounting considerations that you’re likely to encounter are:
- Whether to use cloud or desktop accounting software, and which apps are best suited to your needs.
- The amount of time it takes you each week to maintain accurate financials, and the best bookkeeping strategy to adopt as you grow to ensure that you’re ready for the future.
- What’s required to manage VAT in the UK and Europe (as you expand to other countries).
- How recent market changes such as Brexit and COVID19 will impact the world of accounting moving forward.
What is the best UK ecommerce accounting software for online sellers?
When it comes to accounting software, there are a wide range of different options available for each type and size of business.
Whether you’re looking for a free option such as QuickFile, a desktop version like MYOB or a more comprehensive cloud-based solution, it’s important to consider your ongoing needs both now and in the future.
After all, if you get set up with the wrong software, the potential issues that come with changing providers down the line can be quite costly and inconvenient.
As an online seller, we recommend starting with a cloud based system that can integrate with your online storefronts. In doing so, you can automate away the data entry side of your bookkeeping to ensure that your financials are accurate and ready for the future as you grow.
For brands that sell on Amazon or use Shopify, we highly recommend working with Xero or QuickBooks, as these apps are designed to work well in the digital environment and can integrate with a wide range of other apps.
How should we look after our bookkeeping as our sales increase?
If you’re like many small business owners, you might be managing your own accounts without any help from others. While this might be an easy solution right now, it’s important to consider how this will look in the future once you have a higher volume of sales.
You might decide to:
- Work with a bookkeeper or accountant that is skilled in ecommerce accounting to look after data entry and reconciliation.
- Pass these responsibilities on to one of your employees.
- Use ecommerce accounting software such as A2X to automate away the workload so that you can keep on top of your accounts with just a few clicks.
- A combination of these activities.
Either way, it’s important to keep the future in mind when planning how to manage your financials - otherwise you’ll get stuck in the ‘busy trap’ of working harder and becoming the bottleneck in your business.
What’s required to manage VAT in the UK and Europe?
Otherwise known as VAT, value added tax is paid by the end consumers in any supply chain. However, the companies that supply end users are responsible for looking after VAT on behalf of the government.
“VAT is designed to be paid by the end user, although it is collected and managed by the companies that make up the supply chain (from the manufacturer to the retailer). Unlike income tax, which is taken off a person’s income, VAT is added to the final price that we pay for goods and services.” Source
Making Tax Digital (MTD)
“Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.” Source
This new system was introduced by the HMRC (the UK tax department) in April 2019 to move away from paper based VAT returns. In doing so, they are working to streamline the process of paying tax to make it more effective and efficient, and easier for taxpayers to get it right.
Put simply, MTD allows you to file tax returns directly from within your accounting software.
For businesses that use cloud accounting software, the process of filing VAT returns under MTD is much simpler and can be done with ease (if the software is set up properly). To find out more about Making Tax Digital, check out this guide.
How A2X handles VAT
If you’re using quality cloud accounting software such as Xero or QuickBooks Online, the process of filing a VAT return is relatively simple. However, it requires that you have an accurate set of financials in the first place.
This is especially important if you’re selling into multiple countries or jurisdictions that have different tax rates, as you need to know how much money is owing to each tax department.
By accurately recording Shopify and Amazon sales in your accounting system, A2X gives you a precise set of financials that make it easy for you to know how much VAT needs to be paid in each country so that you can file returns with ease.
For more information about setting up A2X to handle VAT in your accounting system, check out chapter 10 of our UK VAT Guide.
Brexit and VAT
When companies located in the European Union trade with each other, VAT is handled differently to how it is looked after for companies located outside of the EU.
So when the UK voted to proceed with Brexit, this created a wide range of difficulties and ‘question marks’ (many of which are still being worked out at the time of writing). Before Brexit, online stores in the UK would look after VAT in the following way:
- They begin by registering for VAT in their home state. Sales to customers within the EU would have VAT charged at the sellers local tax rate. Sales to customers located outside of the EU would have no VAT charged upon export (taxes are levied at the receiving end).
- As their sales in different EU countries surpassed the distance selling thresholds, sellers would register for VAT in those countries, collect tax at the destination country’s rate and file regular returns with the destination country’s tax department to pass on the VAT collected.
- When sending products to companies (instead of consumers) in other EU member states, they would have the option of using the reverse charge mechanism and not charging VAT as part of the transaction.
While it is not yet certain how the tax and accounting landscape will look for the UK moving forward, it is likely that goods moved between the UK and the EU will be treated as imports and exports - just like how it works for other non-EU countries.
“Under this structure, the exporter would not charge VAT, but when items reach the destination country, the local tax authority may charge VAT.” Source
In addition to this, here are a few other things to consider when thinking about the tax implications of Brexit (taken from The Ultimate VAT Guide for UK and EU Amazon Sellers):
Distance selling into the EU may become a thing of the past for UK sellers. Rather than keeping an eye on thresholds, sellers will probably have a choice between registering in an EU country or simply exporting Amazon sales to customers in the EU.
If that happens, it is likely that many UK based Amazon sellers (and other ecommerce businesses) will need to get an EU EORI number. It is also likely that holding stock in a European FBA warehouse is going to make more sense for smaller UK-based sellers (compared to EFN with distance selling from the UK).
If parcels sent between the UK and EU are treated as export and import events, then the reverse charge mechanism will no longer be valid in these instances. Rather, the importing business would need to pay VAT on arrival and claim it back in their return.
COVID-19 and VAT
Due to the widespread chaos and market disruptions that have occurred throughout the world during 2020, many governments have provided tax relief to help businesses stay afloat.
“Because of coronavirus (COVID-19), you can delay (defer) any VAT payments due between 20 March 2020 and 30 June 2020. If you choose to defer a VAT payment, you will have until 31 March 2021 to pay it.” Source
If you have been adversely impacted by COVID-19, it’s worth speaking with your accountant about the types of tax relief and stimulus that are available to help you get through.
A2X integrates your accounting system with Amazon and Shopify to make your life easier
When you sell products online, there is a large amount of data generated for every order (sales, commissions, credit card fees, delivery addresses etc.). While this gives you the ability to have a clear understanding of your clients needs and where the money is flowing, it can also create a large amount of extra work (and errors) if this information isn’t handled correctly.
As we mentioned earlier, many sellers simply enter their sales or payouts received into the accounting system and leave it at that. In doing so, they:
- Increase the likelihood of human error during data entry.
- Increase the workload, especially as sales increase.
- Make it difficult to compare sales between different channels and time periods.
- Often record the wrong information in their accounting system.
How A2X works
A2X solves this problem by integrating your Amazon Seller Central and Shopify seller accounts with online cloud accounting software such as Xero or QuickBooks Online.
Here’s how it works:
- You sell products on your online store and the payment is processed by the platform.
- Every few weeks, a ‘settlement’ payment arrives in your bank account, which includes the revenue received from your sales minus any transaction fees or returns.
- A2X pulls the sales data from your store and sorts it into tidy groups of transactions (categorized by platform, settlement payment and also split into different months when settlements cover sales from two periods).
- A2X then posts these tidy summaries into your accounting system as invoices or journal entries.
- When the settlement payment arrives in your bank account, you can easily reconcile the money received with the transactions that occurred in just a few clicks.
By managing your data entry in this way, you can relax knowing that your books are accurate, comparable and set up properly to handle VAT (both now and in the future).
“Been using A2X for a few years now with Amazon and it is fantastic. I used to have to download and parse the Amazon deposit reports manually and they were over 10,000 lines long! It was brutal and it was never possible to get them to accurately reconcile with the revenue reports on Amazon. A2X completely redefines the process and removes my input altogether! So thankful and so much time saved!” Review by Dan Cates
The Gold Standard in ecommerce Accounting
A2X was created by our founders, Paul Grey and Ashley Schroder to solve a problem that they were facing at the time. Their other business, Export-X takes products from New Zealand and Australian brands to international Amazon marketplaces.
However, they were struggling to reconcile the transactions with what was being paid into their company’s bank accounts, so they created an internal tool to solve their problem.
One thing led to another, and this tool was launched in 2016 as A2X. During the years that followed, we entered marketplaces throughout the world, and expanded our offering to look after other platforms like Shopify.
By coming from a practical background in ecommerce and accounting, we have been able to design A2X from the outset as a tool that’s made for the modern needs of online businesses and their accountants.
Key benefits of A2X
Alongside the benefits we’ve mentioned above, here are a few other reasons why people love A2X:
Ease of use - it’s easy and intuitive to use, extremely simple to set up, and saves you time from day one. Once A2X has been properly configured, it automatically balances settlement statements as you receive them.
Provides clarity - information about your sales, fees and cost of goods sold are always matched correctly, and sorted into the right time periods.
Accrual accounting - by recording your income and expenses in the time periods when they were actually incurred (instead of when the money changed hands), you can get a much more accurate picture of the performance and health of your business.
Works anywhere in the world - A2X is compatible with all Amazon and marketplaces and works with any currency. This helps to expand your business internationally and track your money efficiently.
Backdating the books - if you’ve been selling for a while, you can use A2X to import your settlement history and correct previous accounting errors.
Creating a saleable asset - if you’re planning to sell your business in the future, having an accurate and reliable set of financials is critical. By using A2X, you can give potential buyers a trustworthy set of accounts to work with.
If you’re in a position where A2X could potentially be the right solution for your business, we are happy to provide you with a free trial to take it for a test run. Click here to sign up as an Amazon seller or click here to sign up with your Shopify store.
Top ecommerce accountants in the UK
Have you tried working with an ‘old school’ accountant that doesn’t quite understand the needs of your online business? If so, you might find one of our UK based accounting partners useful.
These specialist ecommerce and Amazon FBA accountants are experienced in the world of online commerce, and have a wealth of knowledge when it comes to automation, distance selling, digital taxes and cloud accounting software.
AVASK Accounting and Business Consultants
With offices in the UK, US and China, AVASK are expert Amazon FBA Accountants that can handle both small local sellers and large international operators.
“We are an innovative, proactive, young firm of qualified accountants, with offices in Southampton, Hampshire, and in Richmond, London.”
While they are specialists in international VAT, AVASK can provide a wide range of different services for all of your accounting needs.
The team at Cloud Accountant serve the needs of a range of different types of businesses. However, their core strength is focused towards helping multi-channel Amazon sellers with annual revenues over £1m.
Instead of billing their services at an hourly rate, they work on monthly retainers that start at £59+VAT.
“Our flexible approach means you get the accountancy services and support you need, when you need them. We’ll get to know your business circumstances and will adapt to your changing needs.”
Essendon Accounts & Tax
Based in Milton Keynes, Essendon is an accounting firm that helps an array of different businesses with their finances. They serve both startups and established companies, and aren’t just limited to ecommerce operations.
“Their focus is specifically on making the best use of technology to reduce time wasted on repetitive tasks.” Source
Essendon are a Xero Gold Partner, and work with this accounting system to bring their clients books into the cloud.
Fullstop are a youthful ecommerce accounting team with a twist. Not only do they provide modern accounting advice and services, but they also have an online store where you can purchase office stationery and essentials to keep your business running smoothly.
“Our speciality is streamlining your systems and processes around your multi-channel stores and allow you up to date information on your business performance.”
Lodestar looks after small to medium sized ecommerce and Amazon FBA businesses in the UK.
“Whether you need someone to process the paperwork, prepare statutory returns, or help guide the business we are here. Our main aim is to make your life easier… Using A2X, we ensure the bookkeeping is kept up to date on a real time basis, ensuring that up to date data is available to business owners, allowing them to make decisions quickly.”
They work with leading accounting apps such as Xero, A2X, Dear Systems and CIN7, and provide monthly retainer packages starting from £145+VAT.
Elver are a small but highly competent team of accountants located in Wigan, Greater Manchester. With over 30 years of experience in the accounting world, they bring a wealth of traditional business knowledge and skills to the digital space.
“We have extensive experience of Amazon accounting from single marketplaces to international sellers with VAT/GST obligations in multiple countries. Elver Consultancy is Xero proficient, can help with A2X setups, UK tax compliance and planning for sole traders and companies.”
Where to find more information about ecommerce accounting
If you have accounting questions that need answering, or are just looking to learn more about managing your financials and taxes, you’ll be pleased to know that there is plenty of support available for you.
A2X expert accounting support
Our support staff are not only skilled at looking after the technical side of things, but they are also expert ecommerce accountants, so they can help to answer all of your burning questions.
Alternatively, if you’d like a bit more hands on help from an accounting firm, head over to our ecommerce accountant directory to find a firm that suits your needs best.
Educational courses and guides
Here’s a quick list of places that you can go to learn more about managing your own finances and understanding your tax obligations:
- The Ultimate VAT Guide for Amazon Sellers in UK & Europe
- Catching Clouds Academy - a leading educational school for online sellers that want to level up their accounting game.
- Profit First for ecommerce Sellers - Profit First is a modern framework for looking after your finances and ensuring that you get paid what you deserve. Led by Cyndi Thomason, this course is useful for getting a good grip on your financials.
We hope that you have found this guide useful, and we wish you all the best with ongoing success in your ecommerce journey.
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