If you want to start an e-commerce business in 2025, you need to prepare yourself and effectively overcome all the financial complexities. The scenario is even harsher for online retailers operating across platforms like TikTok Shop, Shopify, and Amazon. You must follow and comply with all the applicable tax rules across the UK, US, and EU.
To give you a gist of the situation, this guide distills an accounting framework that a seasoned e-commerce accountant would implement from day one and scale seamlessly.
Multichannel financial consolidation that truly scales
A 2025 Statista report highlights that 78% of e-commerce brands are now trading on more than two channels, which only introduces fragmented cash settlements and complex fee structures, making it difficult to track profitability. In addition to that, different platforms mandate different payout formats for commissions, chargebacks, and refunds, which again creates reconciliation hurdles, while inventory lies across warehouses and 3PLs adds blind spots.
So, what reliable solution should you implement to prevent unwanted accounting headaches?
- You can adopt a Single Source of Truth (SST) in your general ledger, including QBO, Xero, or NetSuite. Post every platform settlement, not order totals, to avoid gross/net mismatches.
- Categorize marketplace-collected taxes (Amazon, TikTok, and Shopify’s 2025 Shop channel update) as non-remittable, followed by a weekly reconciliation.
- Create granular channel-specific sub-accounts, such as “Marketplace Fees – Amazon” or “Commission – TikTok” (TikTok Shop hiked its order fee to 6% in April 2024).
- You can also use tools like A2X or QuickBooks Commerce to automate this workflow and have it configured by an e-commerce accountant for accurate COGS allocation.
- Perform weekly reconciliations and a monthly settlement roll-forward per channel to generate investor-grade, lender-ready reports.
Global tax nexus: UK VAT, EU IOSS, and US sales tax
While international sales can boost your profit margin, they also bring more compliance risk. Such as:
- UK VAT
- Current threshold: £85,000 annual turnover.
- MTD Phase 3: Compulsorily applies to all VAT-registered businesses, regardless of turnover.
- EU IOSS (Import One-Stop Shop)
- Covers B2C shipments for goods valued below €150, enabling central VAT reporting.
- Risk of compliance, customs delays, fines, or blocked deliveries.
- US Sales Tax
- Revenue threshold: State-specific, such as California’s $500k sales threshold.
- Marketplace facilitator laws: Amazon/TikTok directly collect taxes in most states, but direct sellers still need to register and file.
Pro tip: An e-commerce accountant with global tax expertise can help you set up an automated filing model via Avalara or Quaderno, ensuring compliance throughout and reducing manual administration.
COGS optimization for DTC brands
Your Cost of Goods Sold (COGS) drives gross margin, yet many businesses tend to underestimate the hidden variables that affect it. Here’s how you can optimize your COGS:
- Capitalize landed costs correctly: As per ASC 330 (U.S. GAAP), inventory cost includes the product, inbound freight, duties, handling, and any other cost that makes the product saleable. However, abnormal costs, such as expedited freight due to poor planning, should be written off.
- Negotiate 3PL and shipping rates: During late 2024, the warehouse space loosened, allowing sellers to renegotiate. Moreover, depending on your product and location, many 3PLs offer 15-30% shipping savings once you hit 1,000-3,000 orders per month. Therefore, to avoid excessive costs on storage and warehouses, you can consolidate slow movers to fewer nodes.
- Manage returns as a margin line: Post-holiday “Returnuary” consistently harms profit margins, with return rates rising annually. Design SKU-based and channel-specific return rates into your profit model. For instance, in the case of low-value products, a returnless refund may cost less than reverse logistics.
- Run the contribution margin by channel: Maintain a rolling 90-day file:
- Net sales − platform fees − payment fees − fulfillment costs − shipping − packaging − variable ad spend = contribution margin.
- Quarterly update current fee schedules and shipping rates.
Cash flow forecasting for inventory-heavy businesses
Poor cash flow management can be the core reason for many e-commerce failures. Listed below are the best practices for an accurate cash flow forecast for your inventory-based business.
- Design a 13-week cash flow forecast (TWCF): The TWCF is the go-to liquidity management model favored by many businesses, as well as lenders. You track receipts (settlements, payouts, wholesale invoices) against disbursements (inventory POs, payroll, marketing, taxes, debt), followed by a weekly update with actuals vs. forecast.
- Pair it with a long-range plan: Where the TWCF model handles the short term, a longer, 12–24 month model enables you to plan for growth hires, new channels, or capex.
- Watch days inventory outstanding (DIO): DIO leverages better forecasting and rationalization to reduce excess stock and improve turns. Plus, with the digital inventory “twins”, you can scenario-test before any investment.
Recommended tools:
- CashFlowTool for “what-if” scenario forecast.
- Pulse by LimeLight for real-time cash position tracking.
M&A Preparation: Financial hygiene & investor reporting
If your accounting books are sloppy, you might lose millions in valuation in the event of M&A. Then, how do you prepare your business?
- Order a sell-side QoE early: An advanced Quality of Earnings (QoE) report months before a sale helps normalize EBITDA, identify adjustments, and address potential deal breakers early on.
- Document accounting policies: Record inventory capitalization, revenue recognition, and returns handling in the books accurately. They must also be compliant with ASC 330 (or IAS 2 under IFRS) for smooth cross-border transactions.
- Deliver the KPIs investors expect: Meet monthly KPIs based on revenue by channel, contribution margin by SKU, CAC & payback, return rates, DIO, cash runway, and cohort performance, if applicable. Also, define your parameters in a data dictionary to prevent confusion during due diligence.
- Maintain accurate tax proof: Keep proper records of marketplace-collected tax, direct sale registrations, and returns. For further compliance with the UK/EU, keep VAT/IOSS proof and import VAT statements for quick access.
- Negotiate the working capital peg: To strengthen your peg discussions, leverage past working capital data and your 13-week forecast, and avoid last-minute purchase price reductions.
Closure
A well-implemented accounting framework doesn’t just ensure your compliance; it also maximizes profit margins, boosts cash visibility, and paves a path to a successful exit. Even if you’re not ready to sell or for M&A, the impact is immediate and fruitful. And if you feel overwhelmed with workload, a skilled e-commerce accountant can help build appropriate systems, while you focus on growth.
