Accounting Alternatives for Marketplace Sellers

A realistic guide to selecting and using bookkeeping solutions for online sellers

Selling via an online marketplace introduces some unique bookkeeping hurdles: prompt fees, inventory volatility, multichannel sales and a mess of transactions. The following are several reasons why generic accounting methods often cannot address the unique needs of sellers. This guide covers how to assess the alternatives out there for mainstream bookkeeping, key features to consider and a checklist so sellers can make the move with confidence and best practices specifically focused on ensuring sellers can track their profitability accurately.

Why consider an accounting alternative?

Most of the general accounting systems work well with simple flow through sales and expenses. The complexities marketplace sellers face include per-order fees, inbound shipping charges, multichannel orders, bundled SKUs and occasional reimbursements or chargebacks. A seller-oriented accounting option takes this intermediary step into account, providing seamless reconciliation of marketplace statements, calculating of cost of goods sold per SKU and generating actionable profit reports.

Core features to look for

Automated render of transactions:

Importing your sales, fees, refunds and reimbursements from marketplace statements or transaction downloads is a must-have feature. Manual import is fraught with errors and does not scale as orders volume increases.

— Transparent fee reconciliation:

The fee structures for marketplaces can be opaque. Seek out a solution, which maps fees to every order and separates commission from shipping and other deductions to create clear summaries for reconciliation and tax reporting.

Inventory cost monitoring and COGS:

Monitor your inventory layers, purchase costs and Cost of Goods Sold (COGS) by SKU to effectively record the true profit. Support for FIFO, average cost, or layer-based costing can make a big difference when margins are thin.

Multi-currency and international sales:

Sellers selling in multiple markets or exporting out of their home country want accurate currency conversion and transparent reporting on gains / losses from exchange rates.

Reports for Tax:

generate sales and expense reports you can use come tax time so that taxable events, sales tax collected, and expenses which deduction can be tracked.

Multi-channel order matching:

If you sell on more than one channel, pick a system that integrates multiple orders and avoids duplication of sales or stock records.

Easy integration –

Being able to connect to bank feeds, payment processors and expense tracking software means less manual work and better accuracy.

How to evaluate options

Establish your priorities:

Select which qualities are the most important—like inventory cost precision, fee reconciliation, multi-currency handling, or ease-of-use. Prioritization makes it less likely that you’ll be paying for features that won’t help you.

Test data:

Import a month of real orders and inventory using trial periods. - Look at how fees are mapped, if COGS is accurate and how easily they can create profit-by-SKU reports.

Assess clarity of reporting:

Good reporting can turn raw data into actionable insights. Seek out customizable reports that display the net profit after fees and shipping, and dig into order or SKU level.

Evaluate workflow fit:

See how the solution fits into your current workflow – do I need to ‘export tables’ manually outside of my system or will it automate that once installed? Is your money man going to be ok with the reports?

Verify scalability and pricing:

Make sure the pricing fits your growth. Tools that bill per transaction can get expensive with volume; others scale more predictably.

Migration checklist

Back up existing data:

Export your raw transaction history, inventory items lists, purchase receipts and bank statements before you begin.

Clean catalog:

Clear duplicated SKUs and normalize naming to avoid hiccups when migrating.

— Import historical transactions:

Bring in a minimum of the past 12 months of sales and fees to set accurate opening inventory and expense baselines.

Reconcile opening balances:

Ensure your opening cash, accounts receivable, inventory balance and vendor payables match what you have from the past.

Verify COGS and inventory valuation:

Post migration, generate SKU profit reports on couple of samples SKUs, and compare these with purchase invoices to verify the cost.

Run parallel bookkeeping:

the first month, use your existing, traditional method of keeping books alongside to catch discrepancies before committing.

Best practices for seller accounting

Multiple sales channels:

Refer to marketplace and direct sales one by one to check channel-wise performance and fee influence.

Track order level fees:

When fees are incurred at the order, you get a better understanding of net profitability by product and campaign.

– Get on top of your reconciliations:

Timely reconciliation (at least weekly) of the market-place such as statements, bank receipts, and stock movements means no surprises at month end.

Keep an eye on inventory health:

Inventory turnover and aged inventory reports can help you spot slow-moving stuff and prevent overstocking.

Accurately calculate shipping and fulfillment costs:

Use inbound shipping, handling and fulfillment fees rep when costing products.

Partner with an accountant:

Accountants that are experienced and specialize in seller accounting can assist with setting up tax and guide you on cost allocation.

CPAs detail common accounting mistakes (and how to avoid making them)

Not accounting for marketplace reimbursements:

Reimbursements and adjustments should be offset against orders or inventory as failure to do so may distort margins.

Gross vs. net reporting has to make sense:

Make sure gross or net recording is consistent across the gap with accounting; are sales gross (total sale amount) on the P&L, or after marketplace fees? And profitability metrics will be destroyed by mixing approaches.

Neglecting marketplace reserves and chargebacks:

Certain marketplaces reserve the funds or issue a chargeback. Follow those individually to avoid being surprised by cash flow shortfalls.

Making the final decision

Material selection is a trade between features, usability and cost. Start by identifying the reporting and reconciliation requirements specific to your selling model. Then test with real data to ensure the tear-down of fees, inventory costing and reporting clarity. Implementations without any cumbersome manual reconciliations and SKU-level profitability. And lastly, make a commitment to frequent reconciliation (bank accounts, credit cards) and partner with an accountant who can... help your business maintain tax compliance while keeping up with the sketched-in bookkeeping.

Conclusion

Marketplace sellers require accounting methods that are a more accurate reflection of the day-to-day operations of online selling. By focusing on automated importing of transactions, correct cost tracking for inventory, better reporting and reconciliation around fees, and supporting multiple sales channels, sellers will be able to see how profitable their products are (or aren’t) and make smarter business decisions. TOC A thoughtful analysis, systematic transition and a disciplined accounting will convert intricate marketplace data into actionable financial intelligence.