If you run an eCommerce business, sending your accountant access to Xero and a folder of bank statements may not be enough to prepare the year-end accounts.
That is because the amount landing in your bank often is not the same as the amount your customers spent.
Amazon, eBay, Shopify, Stripe, PayPal and other platforms can sit between the customer sale and the money eventually reaching you. Along the way there may be refunds, marketplace fees, payment charges, advertising costs, VAT, money being held back, foreign currencies and other adjustments.
Giving your accountant the right reports at the start can save a lot of questions later.
Start with everywhere you sold during the year
Make a list of all the ways customers could buy from you. That might include Amazon, eBay, Shopify, Etsy, TikTok Shop, your own website, wholesale customers, physical retail or another marketplace.
It sounds simple, but businesses often add a new sales channel during the year and forget that their accountant does not know about it. If you sold through it, tell them.
A marketplace payout is not necessarily your sales figure
Suppose customers bought £100,000 of products. During the same period, £8,000 was refunded to customers, the marketplace charged £12,000 of fees and £80,000 reached your bank.
Your bank statement shows £80,000. But your customers did not only buy £80,000 of products. The £80,000 is simply what was left after refunds and fees had been taken out.
That is why your accountant may ask for settlement or transaction reports from the marketplace. Those reports help show how the customer sales eventually became the amount paid into your bank.
Send the marketplace reports
Depending on the platform, those reports may include sales, refunds, selling fees, fulfilment charges, advertising costs, chargebacks, subscriptions, reimbursements and other adjustments.
You do not need to work out the accounting yourself. You just need to make sure the reports are available. If you use more than one marketplace, provide the reports for each one.
Do not forget payment processors
You may take an order through one system and receive payment through another. For example, Shopify records the sale, Stripe processes the payment and Stripe later sends the money to your bank. PayPal and other payment services can work in a similar way.
Your accountant may therefore need the payment-processor reports as well as the sales reports.
What if money is still being held at year end?
Suppose your company year ends on 31 March. A marketplace owes you £6,000 for sales already made, but the payout does not reach your bank until 3 April.
If you only send your accountant bank statements ending on 31 March, that £6,000 is not visible there. Marketplace and payment reports from around the year end help show money that the business has earned but has not yet received.
Send every business bank, card and payment account
Think beyond the main bank account. Did the business use another bank account, a company credit card, PayPal, Wise, Revolut, a foreign-currency account or another digital wallet?
If company money went through it during the year, your accountant needs to know about it. Even an account you stopped using halfway through the year may still be relevant.
Count your stock
If you sell physical products, your year-end stock figure can make a significant difference to the accounts.
Your accountant normally needs to know what stock the business owned at the year end and what that stock cost. That can include goods in your own premises, at an Amazon fulfilment centre, with another fulfilment company, being shipped to you, returned by customers, damaged or no longer likely to sell.
Do not simply use the selling price from your website. Keep the stock report or stock count you used at the year end.
If you are VAT registered, send the VAT information too
Your accountant will normally need the VAT returns filed during the year and access to the records behind them.
For an online retailer, they may also need to understand which products have different VAT rates, overseas sales, customer refunds, marketplace adjustments, import VAT and sales through different channels.
If something unusual happened with VAT during the year, tell them rather than waiting for them to discover it.
Tell them about loans and finance
If the business borrowed money or bought something on finance, provide the agreement and the latest statement. This might include business loans, vehicle finance, hire purchase, merchant cash advances or finance provided through a payment platform.
The payment leaving your bank each month does not always tell your accountant how much relates to repaying the borrowing and how much relates to interest or charges.
Include payroll information
If you employ staff, make sure the year-end payroll information is available too. If your accountant already runs your payroll, they may already have it. If somebody else runs the payroll, do not assume the information is automatically shared between them.
Tell your accountant when something unusual happened
This is one of the easiest ways to make the year end smoother.
Tell them if you opened or closed a sales channel, a marketplace held back a large amount of money, a payment processor froze funds, you changed fulfilment provider, you received a large reimbursement, you started selling overseas, you bought a vehicle, you took out new finance or you paid company expenses personally.
A short explanation now can save several emails later.
A simple eCommerce year-end checklist
Before sending the records, make sure your accountant has a list of every sales channel, marketplace sales and settlement reports, payment-processor reports, all business bank and card statements, details of money being held by platforms, your year-end stock figure, VAT information, payroll information, loan and finance documents and details of anything unusual that happened during the year.
You do not need to prepare the accounts yourself. You just need to make sure the accountant has enough information to understand how your sales became the money appearing in the bank.
If your records are becoming difficult to keep on top of, Thames Williams works with eCommerce businesses and can help with bookkeeping, VAT returns and annual accounts.
