E-commerce bookkeeping has a reputation for being simple — and it is, until your accounts stop balancing for reasons that look completely unrelated to bookkeeping. Why did Amazon settle £18,400 when the gross sales were £23,100? Why does Shopify Payments show a different VAT total to your Shopify orders report? Why does your stock figure drift by £2,000 every month?
These are not exotic problems. They are the normal operational complexity of selling on platforms with their own fee structures, settlement timelines, tax treatments and returns handling. Here is what good bookkeeping for Shopify and Amazon sellers actually looks like — and the five errors we see most often.
The core problem: gross sales versus settlements
Every selling platform settles you on net, not gross. Amazon shows you £23,100 of gross sales for the fortnight and pays you £18,400. The difference is some combination of:
- Marketplace fees (referral, FBA fulfilment, storage, advertising)
- Refunds and returns processed in the period
- Sales tax collected on your behalf (VAT in UK/EU, sales tax in US states)
- Held funds or reserves
- Currency conversion for non-base-currency sales
Posting just the £18,400 net into Xero may balance the bank — but it loses every piece of information you need to run the business. Gross sales, VAT, fees and refunds all need to land separately in the ledger.
The structure that works
The correct posting pattern for an Amazon settlement:
- Dr Sales (net) — gross sales excluding VAT
- Dr Output VAT — VAT charged on sales
- Cr Refunds — sales reversals in the period
- Cr Marketplace Fees — broken out by fee type
- Cr Advertising Costs — sponsored product spend
- Cr Bank — the actual settlement amount
Done properly, every settlement posts as a multi-line journal that ties back to a downloadable platform report. The bank reconciles, the P&L makes sense, and VAT returns can be substantiated.
VAT — the part everyone gets wrong
VAT for e-commerce sellers is more complex than for almost any other small business model. The traps:
Marketplace facilitator rules
Since 1 January 2021, where Amazon (or another marketplace) sells goods imported into the UK with a consignment value of £135 or less, or where goods are sold to UK customers by an overseas seller via the marketplace, Amazon collects and remits the UK VAT. The seller's records must reflect this — the VAT is not the seller's to account for in those cases, even though it shows up on the platform reports.
Cross-border B2C in the EU
The One Stop Shop (OSS) regime allows UK-established sellers to register once for distance sales of goods into the EU. Failing to register and crossing the country-specific thresholds (now harmonised at €10,000 EU-wide for non-EU sellers, with separate rules for EU-established sellers) creates retrospective VAT liabilities in multiple member states.
VAT on platform fees
Amazon Seller Services Europe S.à r.l. invoices UK sellers without UK VAT under the reverse charge mechanism. The seller's VAT return must include both the output and the input under reverse charge — not posting this correctly is a common error that does not change the net VAT due but does break the return's box totals.
Stock and cost of sales
Most e-commerce sellers we onboard have one of two stock problems:
- No stock figure at all — purchases hit cost of sales as paid, with no closing stock adjustment. Gross margin is therefore meaningless and corporation tax position is wrong.
- A stock figure that drifts — usually because FBA inbound stock is recorded but FBA outbound (sales) is not properly relieved. Stock balance grows month after month even though physical inventory does not.
The fix is a monthly stocktake (using platform inventory reports for FBA, physical counts for self-fulfilled) and a stock adjustment journal at month-end. Software like A2X, Link My Books, or Synder can automate large parts of this for Shopify/Amazon, but the journals still need supervising by someone who understands the accounting.
The five errors we see most often
- Posting net settlements only. Loses gross sales, fee analysis, and VAT clarity.
- Missing marketplace-collected VAT. Either double-counting it (paying VAT on sales Amazon already remitted) or under-claiming where it should be input recoverable.
- Ignoring the reverse charge on platform fees. Net VAT is the same but the return is wrong.
- No FX policy. US sales in USD settled in GBP need consistent rate treatment — usually month-average for the P&L and spot for the balance sheet.
- Refunds netted off sales rather than tracked separately. Hides the return rate, which is a critical operational KPI.
Tooling stack we recommend
For most Shopify/Amazon sellers under £5m turnover:
- Xero — general ledger
- A2X or Link My Books — platform-to-ledger automation for settlements
- Dext or AutoEntry — supplier invoice ingestion
- Fathom or Spotlight — management reporting and KPIs
Above £5m, the tooling often moves to Sage Intacct or NetSuite and the integration work is more bespoke.
How we structure e-commerce engagements
Our bookkeeping service for e-commerce sellers includes the platform-specific tooling setup, monthly multi-line settlement posting, FBA reconciliations, and the monthly stock adjustment. Sitting alongside is our VAT service, which handles OSS registration where applicable, marketplace facilitator analysis, and the quarterly returns.
If your books currently make your accountant pull a face when they look at them, we are happy to do a free diagnostic. Send us the last three months of platform settlement reports and bank statements and we will tell you which of the five errors are present, what they are costing you, and what a clean rebuild would look like. Book the diagnostic call or send us a note directly.