By Richie Lennon
Ecommerce accounting connects orders, refunds, VAT, payment settlements, stock and costs to reliable profit and cash figures. Your bank payout is not your sales total, and your advertising dashboard is not your accounts. For an Irish online retailer, the monthly job is to reconcile those records, establish the correct tax treatment and show which products and channels leave money to cover the business’s overheads.
We would start with the cost data underneath the dashboard. Landed costs, shipping charges, merchant fees and returns can all be wrong while the report still looks convincing.
Our view is straightforward: a platform can calculate a margin from the inputs you give it. It cannot make missing or incorrect costs disappear. The accounting job includes checking those inputs and connecting the report back to the accounts.
If your accountant can confirm that the apps are connected but cannot explain the difference between your sales, settlement and contribution, the reporting job is unfinished.
Before you increase the ad budget, you need to know what the extra sales leave behind after product costs, discounts, delivery, returns and advertising. You also need to know whether the business can fund the stock and wait for the cash. If your current accounts cannot answer that, see how our monthly ecommerce accounting support can help.
What the accounting system needs to capture
Online sales produce several records of the same activity. An order appears in the store, the payment processor collects it, the marketplace deducts fees, and the bank receives a settlement later. Recording each feed as new income duplicates sales.
| Record | What it tells you |
|---|---|
| Orders and refunds | What was sold or returned, including the relevant dates and tax data |
| Payment or marketplace settlement | What was collected, deducted, withheld or released |
| Bank transaction | The amount and date received in the bank |
| Stock record | Units held, bought, sold, returned, lost or written down |
| Supplier and operating costs | What the sale and the business cost to deliver |
Agree which system is the source for each figure. Then reconcile the links between systems. An unexplained balance in a clearing account is a question to resolve, not an expense to write off automatically.
Your payout is not your revenue
Here is a simplified illustration with no refunds, reserves or timing differences. Assume sales of €10,000 excluding VAT, €2,300 of VAT collected and €300 deducted in payment fees:
| Settlement bridge | Amount |
|---|---|
| Customer payments including VAT | €12,300 |
| Payment fees withheld | −€300 |
| Bank payout | €12,000 |
| Revenue excluding VAT | €10,000 |
| VAT collected | €2,300 |
Recording €12,000 as revenue overstates sales by €2,000 and hides the €300 fee. Recording both the orders and the payout as revenue creates a different error: duplication.
Actual settlements may include earlier orders, refunds, chargebacks, reserves and currency conversions. The reconciliation must explain those differences. Our Shopify and Xero guide covers that workflow in more detail.
Choose software around the work
The ledger, connector, stock system and profit dashboard have different jobs. Buying one does not automatically cover the others.
Xero or QuickBooks Online may provide the accounting ledger. A specialist connector such as A2X or Dext Commerce may help organise sales and settlements. Choose it around VAT complexity, transaction volume, currencies and the number of stores or marketplaces. Test the actual records your business produces before committing.
Invoice capture and sales integration are also different tasks. Do not assume a receipt-capture subscription imports every marketplace settlement or establishes the right VAT treatment.
Cin7 can sit in the stock and order-management part of a setup. StoreHero belongs in the profitability and reporting conversation, rather than being described as a warehouse-management system. Check each product’s current scope, connections and plan requirements.
Our ecommerce software-stack guide explains those architecture choices. The practical test is whether the finished setup reconciles and provides the decisions you need, with someone responsible for exceptions.
Build a useful channel report
Keep sales and direct costs on a consistent basis. Separate VAT from revenue and identify refunds, discounts, shipping income, product cost, fulfilment, merchant fees and marketing spend.
Avoid assuming the website is always the highest-margin channel or that a marketplace is always the lowest. Compare what each channel actually contributes after the costs you have consistently allocated to it.
For illustration, suppose a channel has €10,000 of net sales excluding VAT:
| Contribution calculation | Amount |
|---|---|
| Net sales | €10,000 |
| Landed product cost | −€4,500 |
| Gross profit | €5,500 |
| Fulfilment | −€1,200 |
| Merchant fees | −€300 |
| Direct marketing | −€2,000 |
| Contribution before the remaining overheads | €2,000 |
Gross margin is 55%. Contribution is 20% of sales. Dividing those sales by the €2,000 marketing spend gives 5x, but that does not mean the business made €5 for every €1 spent.
The €2,000 contribution still has to cover the overheads excluded from this illustration. Set out the definition beside the report so that nobody mistakes contribution for final net profit.
Attribution needs a separate conversation
Several advertising platforms can claim the same sale. Adding those attributed revenues together does not create a reconciled sales figure.
We use the actual sales and spending records to establish the financial result. That gives you a grounded view of the money involved, but it does not by itself tell you which campaign caused each order or which channel to cut.
Keep the marketing analysis and the accounting reconciliation connected. A blended sales-to-spend measure can be useful alongside attribution analysis, provided its definition stays consistent. Neither replaces a sound contribution calculation.
Before reacting to a change in the dashboard, check whether a landed cost, shipping band, refund or fee allocation changed. A data correction and a change in commercial performance call for different actions.
Stock is a profit and cash decision
Buying stock uses cash. Selling it normally brings its cost into the profit calculation. Those events can happen in different months.
Reconcile quantities and values, including stock in transit, returns, damaged items and goods held by a third-party fulfilment provider. Establish ownership before including goods in your stock figure.
Use a consistent permitted costing method suited to the goods and applicable accounting framework. Neither FIFO nor weighted average is universally more accurate simply because a business sells online. Slow-moving or damaged stock may need a lower valuation.
Our inventory accounting guide explains the detail. At the management review, ask which stock is tying up cash, what can be sold and what the next order will require before payment settlements arrive.
Map the VAT route before adding a market
Domestic VAT registration, EU consumer sales, imports and stock held abroad are separate checks. A marketplace collecting VAT on some transactions does not settle every obligation of the seller.
For eligible businesses established in one EU Member State, the €10,000 place-of-supply test combines relevant cross-border EU consumer goods sales and relevant electronic services. It examines the current and previous calendar years. It is not a separate €10,000 allowance for each country.
Above the test, destination VAT normally applies to those sales. Union OSS can provide a reporting route for covered transactions. Stock in another country, domestic sales there, imports and marketplace arrangements require their own assessment. Revenue’s distance-sales manual explains the threshold and place-of-supply rules.
Use our ecommerce VAT guide for the fuller sales-route map and our Irish VAT threshold guide for domestic registration. Decide the treatment before orders ship, then check the store, connector, ledger and return all follow it.
Put tax and profit in the right place
Company profit, personal drawings, dividends and VAT liabilities are different figures. A company tax rate does not tell you what an owner keeps personally.
Do not assume routine website work or a software integration qualifies for an R&D credit. Eligibility needs a separate technical and tax assessment. Similarly, buying equipment or software does not make the full cost an immediate tax deduction in every case.
The monthly accounts should identify liabilities and the cash needed to pay them. Ask which returns are included in the service and who handles cross-border or specialist work. Avoid finding a gap only when the filing deadline arrives.
The monthly pack should lead to decisions
A useful retailer’s pack connects:
- Net sales, refunds and contribution by relevant channel or product group.
- Stock quantities, valuation, slow movers and upcoming purchase commitments.
- Settlements, reserves and clearing-account reconciliations.
- Cash receipts, supplier payments, tax and funding requirements.
- A short account of what changed and what the owner needs to decide.
Customer acquisition, order value, repeat buying and lifetime value can add insight. Define the measures and ensure the underlying data supports them. An attractive lifetime-value estimate is not cash available to fund the next purchase order.
Ask for a specific action, owner and date. If a channel’s contribution falls, is the next step to correct cost data, adjust price, review fulfilment or change advertising? The accounts should help narrow that decision.
Plan the cash before the busy season
Map when supplier deposits and balances are paid, when stock arrives, when customers order and when processors release the money. Include refunds, tax, debt payments and overheads.
Test a slower sell-through and a delayed settlement. A profitable season can still create a cash shortage if the business funds stock months before collecting the sales. Avoid assuming every retailer has the same Black Friday concentration or needs the same reserve.
Revisit the forecast when purchasing, lead times or demand change. Supplier terms can help, but they need to be agreed and the forecast must still show the actual payment obligations.
When the accounting support needs to change
The trigger is often complexity rather than a universal turnover threshold. Multiple channels, overseas stock, material reserves, repeated corrections or unexplained margins all deserve attention.
Compare the work delivered with the work you need. Who resolves settlement differences? Who validates stock cost? Who explains the channel report and keeps the tax calendar in the cash plan?
Our ecommerce accounting service sets out the commercial starting point. If you run a growing Irish business turning over €250,000 or more, a Finance Fit Call can establish whether Around Finance’s ongoing support fits your setup. Agree the scope, including any specialist tax or implementation work, before engaging.
FAQs
What is ecommerce accounting?
It is the work connecting online orders, refunds, settlements, VAT, stock and costs to reliable financial records and reports. It includes explaining differences between systems, rather than treating every feed as new revenue.
Is my marketplace payout my sales figure?
No. It may include VAT and deduct fees, refunds or reserves, while covering orders from another period. Reconcile it to the underlying activity before posting the accounting entries.
Which accounting software should an Irish retailer use?
Choose the ledger and connected tools around your sales routes, stock, currencies, VAT and reporting needs. Verify current support and test your own transaction types. A popular product is not proof that a particular setup works.
Should I use A2X or Dext Commerce?
Compare the supported platforms and accounting workflow against your VAT complexity, volume and number of stores. Check settlements, refunds, fees and tax mapping, not just whether the connection is available.
Does OSS cover all my VAT obligations?
No. It covers specified transactions. Domestic registration, foreign stock, imports and other sales can have separate obligations. Map the actual sales and fulfilment routes before deciding the returns needed.
What should my accountant explain each month?
The reconciled sales and cash figures, contribution, stock position, tax liabilities and decisions coming up. A report becomes useful when someone explains the change and the action it calls for.
