Everything to know about e-commerce accounting for Singapore
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.
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.
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.
Let the experts handle the accounting for your ecommerce business
Important accounting requirements for eCommerce Businesses in Singapore
- Ecommerce sellers must record all sales in Singapore dollars.
- Companies should report inventory at market value or cost, whichever is lower.
- Sales tax (VAT) should be levied on all sale transactions.
- An ecommerce business owner should maintain the necessary documentation for payables, receivables, and allowances.
Tax Liabilities for Ecommerce Businesses in Singapore
One of the most common challenges for ecommerce sellers in Singapore is understanding the country’s complex tax policies.
Failure to comply with Singapore’s tax regulations can result in fines and penalties. Let’s understand the tax rules of Singapore to make accounting for ecommerce businesses simple.
Primarily, there are two taxes applicable to your ecommerce store in Singapore–Income tax and Goods and Services Tax (GST).
- Income Tax: Ecommerce sellers in Singapore have to pay income tax on business profits. Currently, they have to pay 17% income tax. So, if your online business earns S$75,000 profit annually, you must pay S$12,750 business income tax. But if you sell any type of software online, you’ll have to bear Singapore Goods and Services Tax (GST).
- Goods and Services Tax (GST): GST is the tax applied on the sales of goods and services along with the import of goods into Singapore. The GST rate was 7% earlier, but in 2023, it increased to 8%. To pay GST tax, you must follow the required processes to file tax, VAT registration, and anything else laid down by GST regulations.
Tax authorities can track your online business tax payments in Singapore through the Business Registration number– a unique number for each business while registering for GST. But if your ecommerce sales globally don’t go beyond S$ 1,000,000, then you’re not liable to pay GST.
Accounting standards and regulations may evolve, so it is essential to stay updated with accounting standards in Singapore and stay compliant with business regulations.
Alternatively, you can opt to work with professional ecommerce accounting firms that are well-versed in Singapore’s accounting standards and regulations.
Our experts at Sleek can provide guidance on proper financial reporting, compliance with standards, and other financial matters specific to the ecommerce business.
Why Choose an Ecommerce Accountant?
Undeniably, an accountant is a must for your ecommerce store and accounting, considering the multivariate nature of online transactions. Ecommerce accounting firms offer custom ecommerce accounting services as well as tackle the complexities related to ecommerce accounting.
Traditionally, ecommerce owners would do bookkeeping manually, which was time-consuming and could result in erroneous cash flow.
Nowadays, ecommerce accounting services take over this headache and let you focus on business growth. From preparing a balance sheet and monitoring cash flow to filing taxes, ecommerce accounting firms take care of everything and give you the necessary peace of mind.
Our experts at Sleek can help ecommerce sellers in Singapore with detailed analyses of their business’s financial health using cutting-edge tools and software to automate data reporting, saving time, and reducing human errors. Increase business efficiency and make informed decisions with Sleek!
Effective ecommerce accounting in Singapore is essential to maintain financial transparency, ensure compliance, and optimise the profitability and growth of an online business.
With Sleek’s professional ecommerce accounting services, ecommerce business owners in Singapore can address accounting complexities and provide accurate financial management.
You can effectively manage an ecommerce store in Singapore by monitoring the business' financial performance, complying with accounting and tax regulations, and keeping accurate financial statements.
There are two types of ecommerce accounting: cash basis accounting and accrual basis accounting. Ecommerce business entities in Singapore have to follow accrual accounting.
It would be best to have ecommerce accounting software for proper accounting compliance. However, you can partner with a professional ecommerce accounting firm in Singapore like Sleek to ensure accurate ecommerce accounting and get peace of mind.
Choosing the Right Accountant Does Not Have to be Difficult
When you choose to hire a traditional accountant, expertise, knowledge, and accreditation are all the things you might have to worry about. But you can save on valuable time and effort spent on research and instead switch to Sleek.
Sleek accountants go beyond just managing complex financial work; they become invaluable partners in helping your company thrive. With their accounting expertise and guidance, you can expect significant savings in both the short and long term.
If you’re not sure how to choose an accountant for your small business, come to Sleek. Let us simplify it for you!