Accounting for E-Commerce Businesses: What You Should Know

For many businesses, e-commerce is now their primary method of selling goods and services – and is a common sight in today’s world. It’s an industry that demands extensive expertise in carrying out business over the internet. Successful online trade also requires staying vigilant for new opportunities for business growth. Yet, accounting for them can be complicated. This article will cover some of these aspects in detail so you know what to expect if you’re running your own e-commerce business or are considering starting one.

Accounting for E-Commerce Businesses

There are essentially three methods of managing the accounting of your e-commerce business, and the financial information would have a direct impact on the various taxes that your business is required to pay in Singapore.

Firstly, you can use your in-house accountants especially when you are starting out or in the initial stages of building your business. Secondly, you can use accounting software to help you reduce the load but you would still have input the data and analyse the numbers yourself. Thirdly, you can do even better by outsourcing your accounting and tax tasks to professional Chartered Accountants, such as Chartsworth’s cloud accounting services and free up your precious time to focus on your business growth while still getting accurate numbers and detailed reports from us.

A professional accounting firm can help your business in these major areas:

1. Manage voluminous transactions online

Most e-commerce businesses handle voluminous transactions everyday compared to traditional businesses. It is extremely time-consuming to keep track of the transactions and very challenging when it comes to accounting at month end. With your trusted accounting service provider, you can connect your e-commerce platforms (Lazada, Shopee, Shopify, Qoo10, etc) to your accounting software to manage online transactions more efficiently.

2. Financial health check

With the right accounting services, Singapore e-commerce business owners can have a better picture of their company’s financial health on a timely basis to grow their businesses.

Combined with our accounting packages customisable for your company, Chartsworth can produce reports by sales platform, product group and more so you have clear visibility of the product profitability to make quick business decisions on how to boost sales.

Which Taxes Apply for E-Commerce Businesses?

Besides staying up to date with your business’ accounting, you must also be aware of your tax liabilities. There are two types of taxes that are applicable for your company as an e-commerce business in Singapore:

Corporate Income Tax

Corporate income tax is a mandatory tax that all businesses operating in Singapore are obligated to file and pay. At present, the corporate tax rate stands at 17%, down from 20% from the year 2005 to 2007 and 18% from 2008 to 2009. With various tax credits and incentives offered by the Singapore government to encourage businesses that is deemed beneficial to the country’s economic development, the effective tax rate is usually much lower than 17%.

There are several tax rebates that your tax advisory consultant can advise more depending on the type and nature of your business. You can also find more information about Corporate Income Tax from the IRAS website.

What is Goods and Services Tax (GST)?

GST is another tax that may be applicable to your e-commerce business. Registration for GST fall into two categories – i) mandatory registration where your company’s taxable turnover (i.e. revenue) in a calendar year is more than S$1 million; or ii) voluntary registration where you may opt to register for GST voluntarily for business reasons, even though your business turnover does not exceed S$1 million. Once your business is registered for GST, you are required to submit GST returns to IRAS every quarter.

With the help of an accredited tax professional, you will know if your business is required to be GST registered and what to do in the case of late registration. For voluntary registration, your tax advisory consultant will go through the cost-benefit analysis to help you decide whether you should register for GST. Check out how we can help you handle your tax-related matters with our tax services, easily accessible for businesses in Singapore so you can focus on what matters most.

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The rapid technology revolution has dramatically changed the way we do business today. The internet has also given rise to new ways of trading as well as new technologies for processing electronic payments.

As such, it’s understandable that accounting for e-commerce sales can be tricky. It can thus be helpful to get the assistance and expertise of Chartered Accountants who understand how to handle these transactions. Outsource accounting, tax services and other operational tasks to Chartsworth today!