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Shopify and Amazon have proven to be very vital platforms when it comes to online retailing since the industry is highly dynamic, and any business that wants to influence the global ecommerce market must have them. Yet, although the possibility of online sales is available on both platforms, the nature of the business conducted there is quite different, not to mention the fact that the ways their financial aspects need to be handled are also quite different. This is the place where the specialised ecommerce accountants and Amazon accountants will come in handy. It is inefficient and potentially financially inaccurate and risky to apply a blanket accounting strategy to these systems.
In this blog post, we examine why accounting in ecommerce is not a one-size-fits-all package and why some important differences should be noted between accounting in a Shopify vendor to accounting in an Amazon vendor, especially the U.S. approach to accounting.
The Core Challenge: One Business Model, Two Very Different Worlds
Both Shopify and Amazon provide ecommerce, yet in the most different ways. Shopify also has the ability to empower businesses to sell directly to the consumer, and they have complete control of the branding, checkout experience and operations. Amazon, however, is a marketplace, an ecosystem in its own right with its regulations, prices, and logistics services (especially through Fulfilment by Amazon, or FBA).
Due to these variations, accounting operations of operating the Shopify store are not identical to those that are necessary in an Amazon business. The nature of the transactions, costs of doing business, the processes of handling the inventory, and even paying the sales tax are vastly different in the two.
Shopify Accounting: Flexibility with Responsibility
Shopify is affiliated with versatility, and it enables its customers to create their shopfronts, install third-party applications, and adjust all parts of their ecommerce process. But there is more accounting responsibility as well as that freedom.
1. Direct Sales Management
The owners of Shopify stores make their own payments and customer transactions. This involves installing payment gateways such as Stripe, PayPal, or Shopify Payments and handling refunds, shipping, and conversations with customers.
2. Sales Tax Compliance
Sales tax is complicated in the U.S. because of state-by-state requirements. Users of Shopify sellers pay the sales tax at the required level and in the right amount, which is then reported and paid properly according to the nexus laws. Software is available to do this, though the interpretation and compliance must be done by experienced ecommerce accountants who understand the local tax requirements.
3. Inventory Tracking
Shopify does not take care of inventory on behalf of sellers. Otherwise, businesses have to monitor their inventory levels and cost of goods sold (COGS) and have to write off losses or shrinkages. The information will be essential in creating proper financial statements and the reorder cycle planning.
4. Reconciliation using Payment Gateway
It is important to balance sales data on the Shopify platform with those in deposit of third-party portals. Unless reconciled on a routine basis, differences in cash flow and income reporting may occur that will cause erroneous tax reporting.
5. Accounting Software Integration
Luckily, Shopify supports the connection with the major accounting suites, such as QuickBooks, Xero, and Zoho Books. With a competent ecommerce accountant, such integrations are simplified so that sales, costs, and inventory figures do move in the correct directions into the general ledger.
Amazon Accounting: The Complexity Behind Convenience
Amazon provides a convenient and well-developed sales channel, yet its corporate business model throws accounting into the challenge, as it involves specialised knowledge, particularly in the context of cooperating with Amazon accountants.
1. Fee Structure and Marketplace Model
As opposed to Shopify, Amazon dominates most of the transactions. Amazon pays its sellers after deducting a number of other charges that range from referral fees, FBA charges, and storage charges, among others. Proper accounting of these deductions should be made in order to determine and formulate gross and net profit.
2. Sales Tax Collection
With the aid of the marketplace facilitator laws, Amazon charges and pays sales tax on behalf of sellers in most states. Nevertheless, sellers are still required to monitor this activity and report it properly in their tax returns. In other jurisdictions, sellers continue to carry the burden of collecting taxes directly.
3. It is around fulfillment by Amazon (FBA).
FBA makes shipping easier on the seller and more complicated on inventory accounting. The sellers have to monitor the inbound products, warehousing costs, and the unsold merchandise, as well as buyer returns. This information is frequently found in the Amazon Seller Central, and then it has to be manually or automatically uploaded to accounting programs.
4. Accounting Payments and Matching
Amazon pays scheduled payments net of fees on an ad-hoc basis that can be twice per month. Matching such lump-sum deposits against in-depth sales records is unreliable and lengthy unless the appropriate resources and a bookkeeping expert are offered.
5. Inventory reporting and Sales reporting
Amazon is quite comprehensive with its reporting and utilisation of such information into accounting software needs and skills. In order to have a clean financial view, sellers have to reconcile inventory reports, settlement reports and performance data.
Key Differences Between Shopify and Amazon Accounting
| Feature | Shopify | Amazon |
| Sales Model | Direct-to-consumer | Marketplace model |
| Fee Structure | Subscription + app/gateway fees | Multiple fees: referral, FBA, storage, closing |
| Inventory Management | Seller-managed or third-party logistics | FBA or seller-fulfilled (complex tracking required) |
| Sales Tax | The seller is responsible for the collection/remittance | Amazon collects in some states and sells in others |
| Payment Reconciliation | Direct deposits via Stripe/PayPal | Disbursements after deductions, more complex tracking |
| Accounting Integration | Easy integration with platforms like Xero, QuickBooks | Requires third-party tools and Amazon-specific knowledge |
Why You Need Specialised Ecommerce Accountants
Applying an identical accounting method to both platforms will create confusion and potential non-compliance. This is where ecommerce accountants, in particular, those who are knowledgeable of platform-specific peculiarities, can come in useful
- Reconciliation Expertise: Proper matching of payment and record of transactions and deductions of fees.
- Inventory Accounting: Ensuring that COGS and unsold goods are being correctly accounted for in the various fulfillment models.
- Sales Tax Guidance: Diving headfirst into what seems to be a complicated sales tax regulation, including the differences in state tax regulation, and various capabilities of the platforms.
- Integration with platforms: The ability to easily integrate Shopify or Amazon with cloud-based financial software.
- Financial Strategy: Assistance of businesses on realising their actual margins, planning of taxes, and scaling of profitability.
Amazon sellers, especially, will be a step ahead in the use of Amazon accountants to help them understand aspects of performance, fee arrangement, and research in meeting the IRS tax laws, including 1099-K declaration requirements.
Wrapping Up: Tailored Accounting Is Essential for Ecommerce Success
Ecommerce does not fit all and neither does accounting. Shopify and Amazon can both facilitate online sales, but when it comes to the financial operations of the back end, the two companies are completely different. Shopify offers flexibility to sellers but you have to do your own accounting of all the elements, such as sales tax to payment gateways. Amazon provides automation and scale through layers upon layers of complexity of its fee structures, fulfillment services and reporting.
The challenge of the ecommerce business in both environments is that they have to partner with accountants on how the complexity of each platform works. Unless you know what you are doing, whether you are launching a brand into the Shopify ecosystem or finding yourself perusing through an Amazon marketplace, having the right assistance in the form of an ecommerce accountant or maybe even an Amazon accountant can be the difference between financial clarity and chaos.
Want assistance with your ecommerce accounting?
Connect with our E2E Accounting team of U.S.-based ecommerce accounting experts today to seek personalised aid suitable to your platform and development targets.