Everything to know about e-commerce accounting for Singapore

Introduction

Running an ecommerce store in Singapore offers unparalleled benefits but many small ecommerce businesses face issues of cash depletion. This might be because many entrepreneurs don’t follow ecommerce accounting procedures to manage their online business in Singapore. It is true that ecommerce accounting can be complex due to higher transactions and sales. You can’t avoid it, but can make this an easier process with a partner like Sleek. 

Here’s a detailed guide to help you understand ecommerce accounting in Singapore, different metrics to keep track of, compliance with tax regulations, etc., to help you scale your online business.

Ecommerce Accounting and its Significance

Ecommerce accounting is recording, summarising, and classifying financial transactions of your online store to gain more visibility into business performance.

When they have an accurate record of financial data, business owners can get answers to various questions on the revenue and expenses of their business, fixed costs, and cash inflow. 

Accounting for ecommerce companies helps owners to track essential aspects and determine their online business’ profitability and growth.

Not to forget that Singapore tax regulations demand businesses to keep financial records for at least five years. Following proper ecommerce accounting procedures ensures legal compliance and simplifies tax filing. 

Moreover, recording financial transactions highlights some critical aspects that are necessary to set budgets and make forecasts. Knowing such information can help you manage inventory levels, manage resources, and make accurate forecasts, thereby optimising your online business in Singapore. 

How is eCommerce Accounting Different?

Now you must wonder how accounting for ecommerce companies differs as even brick-and-mortar businesses maintain business data and follow accounting practices.

But, an ecommerce business is not as simple as entering an offline store and purchasing a product– many variables are involved in managing an online business.

Here are a few:

• A high volume of transactions: As online stores run 24×7 for 365 days, transactions are higher compared to a retail business. It can be hectic for ecommerce sellers in Singapore to record each sale precisely and this makes accounting for an ecommerce business challenging. 
• Complicated tax rules for cross-border transactions: Thanks to the advent of ecommerce, people can order anything from anywhere in the world. But, this can be challenging for ecommerce stores in Singapore as they have to comply with the regulations of different countries, such as import duties, GST, currency conversion rates, and much more. 
• Difficulty managing different invoices: An online business involves multiple variables– customers, online platforms, vendors, logistics partners, payment gateway, etc. Managing customer receipts, vendor invoices, refunds and returns, and essential tax and import documents can be challenging. 
• Challenges in monitoring transactions and inventory: As the volume of transactions is high in online business, tracking each transaction and accordingly managing inventory levels can take time and effort. 

Ecommerce businesses in Singapore can partner with an ecommerce accounting firm, gain the benefits of ecommerce accounting services, mitigate these challenges, and grow their online business without worrying about financial management. Streamline ecommerce accounting efforts with Sleek today!

Different Metrics for Ecommerce Businesses to Track

Now that you know what ecommerce accounting is and how it differs, you must learn the essential tasks or metrics ecommerce store owners in Singapore should monitor and record. Failure to do so can not only lead to erroneous accounting but also can pose legal and financial implications.

Track sales transactions

Despite the high volume, accounting for ecommerce business demands owners to record all sales transactions, including nitty-gritty details like the date, description of each sale, and platform source. 

Track expenses

Along with sales, monitoring expenses is also essential. However, many business owners in Singapore do not record small expenses like shipping and handling charges.

While these expenses might seem petty, they eventually become big and affect your budget. Additionally, it can significantly impact your profit margins and result in an inaccurate cash flow statement. 

However, classifying expenses under different categories is essential as it can help you understand where expenses are rising and take steps to control them. Not to forget, you need to keep personal and business finances separate when running ecommerce platforms. Some common expense heads are the cost of goods sold, administrative fees, marketing and advertising expenses, and payroll. 

Track Inventory

Ecommerce business owners in Singapore can face challenges listing products online or meeting customer demands if they don’t monitor inventory levels, making accounting for ecommerce businesses troublesome.

Track Returns and Refunds

Product returns and refunds are expected in an online business model. Ecommerce businesses in Singapore should have the resources and procedures to manage returns effectively.

Likewise, you should track each return and refund to ensure accurate cash flow statements and simplify accounting for your ecommerce business.

Maintain Accurate Records of all Financial Reports

To comply with legal and tax regulations in Singapore, you should maintain an accurate record of all financial reports.

You should maintain accurate records of not only balance sheets, business incomes, or cash flow statements but also keep a record of invoices and receipts, cancelled or bounced checks, tax returns of previous years, and all bank account statements.

Maintaining all details of your ecommerce platforms in Singapore ensures effective business management and highlights any mistakes like twice bank debits.

Analyse Financial Performance

Another benefit of maintaining accurate financial records is that you can rule out discrepancies and ensure precise analysis of your business’s financial performance, helping with financial forecasting.

All this can make managing accounting for ecommerce businesses in Singapore daunting. But thanks to ecommerce accounting services, you don’t have to burrow under paperwork and constantly monitor your online business transactions. Taking the help of professional ecommerce accounting services in Singapore can help you streamline your business’ financial management and focus on growth strategies.

Talk to one of our Sleek experts today and get started with ecommerce accounting in Singapore.

Accounting and Tax Standards for ecommerce Companies in Singapore

Irrespective of the business type, it is essential to comply with business laws and regulations to report financial performance. Accounting standards govern the treatment of your business’ various financial transactions.

If you plan to start an ecommerce store in Singapore, you must abide by the ecommerce business laws and accounting standards of Singapore.

Accounting Standards in Singapore

• Singapore’s accounting standards are known as Singapore Financial Reporting Standards (SFRS) and are ruled by International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
• All business entities with a financial period starting from or after 1 January 2003 must comply with SFRS.
• Singapore follows accrual-based accounting, and all business entities have to prepare their financial statements on an accrual basis. 
• Ecommerce stores must be updated with the Accounting Standards Council (ASC) and the Inland Revenue Authority of Singapore (IRAS) regulations. These regulations govern how ecommerce entities should manage their financial statements. 
• Additionally, online businesses must comply with Generally Accepted Accounting Principles (GAAP) to record revenue, expenses, and inventory accurately.