Ecommerce bookkeeping: Inventory, revenue, refunds, and fees

For an online shopper, the process is simple: They pay, receive their product, and move on.

But for you on the business side, things get a bit more complicated. For instance, the order may include sales tax. Perhaps a payment processor takes a fee. Or, the payout may arrive days later, bundled with dozens of other transactions. Meanwhile, the product sold needs to move out of your inventory account and into your cost of goods sold (COGS) account.

That’s what makes ecommerce bookkeeping different from bookkeeping for many service businesses. Money, products, fees, and taxes move through several systems, often on different timelines. A strong bookkeeping process brings it all together, so you can answer practical questions like how much you sold, what those sales cost, and how much money should ultimately reach your business bank account.

In this article, we cover how to track the inventory, revenue, refunds, fees, and payouts behind an ecommerce business.

Ecommerce bookkeeping is the process of recording and organizing the financial activity of an online retail business.

Along with recording revenue and expenses and reconciling bank accounts, bookkeeping for ecommerce businesses also accounts for:

• Inventory and cost of goods sold (COGS)
• Discounts, refunds, and chargebacks
• Payment processor and marketplace fees
• Shipping and fulfillment costs

Tracking these separately gives you a more accurate view of revenue, costs, and margins.

A consulting company might send a $10,000 invoice and receive a $10,000 payment. Connecting revenue to cash is relatively straightforward.

But with an ecommerce brand, you could generate $10,000 in sales, but that number won’t necessarily match the amount that lands in your bank account. Payment processors and marketplaces typically deduct fees before sending payouts, and transactions and payouts may be recorded on different timelines. Discounts, refunds, and chargebacks can change the math further.

You also have the cost of physical goods to account for. Buying $20,000 worth of inventory doesn’t necessarily translate directly to $20,000 in COGS. Generally, the cost of that inventory is recognized as COGS as the products are sold, depending on the accounting method and tax rules that apply to the business.

That distinction matters because it affects both COGS and gross profit. Count inventory as COGS too early, and your gross profit can look lower than it really is. Wait too long to account for inventory you’ve sold, and it can look higher.

Start with sales activity rather than the deposits reaching your bank account.

You’ll generally need to account for gross product sales, discounts, returns and refunds, shipping income, sales tax, and processor or marketplace fees. How you track each one can vary depending on your sales channels and accounting setup.

Suppose gross sales rise 20% in one quarter. That looks great, but if discounts double and refunds climb sharply at the same time, the top-line increase may overstate how much the business actually improved.

That’s why it’s useful to break out the different pieces of your sales activity: You can see what’s driving changes in revenue instead of collapsing everything into a single sales figure.

One of the most common ecommerce bookkeeping mistakes is recording each Shopify, Amazon, Stripe, or other platform deposit as revenue. A payout is a cash movement. Revenue is an accounting measure.

Consider a simplified $100 order:

Recording the $105 bank deposit as revenue in this example would overstate revenue by $5 while failing to capture both the sales tax liability and processing fee.

Your sales records show what customers bought, your payout reports show what the platform sent you, and your bank statement confirms the cash that arrived. Your books need to connect all three.

Inventory is one of the biggest differences between bookkeeping for ecommerce and bookkeeping for many other businesses.

As we covered earlier, buying inventory doesn’t necessarily translate directly to COGS. Instead, the cost of that inventory is generally recognized as COGS as products are sold, depending on the inventory and accounting method your business uses.

A simplified COGS calculation looks like this:

Beginning inventory + inventory purchases − ending inventory = COGS

Say you start the month with $50,000 of inventory, purchase another $20,000, and end with $45,000. Using this calculation, your COGS would be $25,000.

If net sales were $60,000, that would leave you with $35,000 in gross profit before other operating expenses.

Tracking refunds separately can tell you whether return rates are changing and how much they’re affecting revenue.

A refunded order may require:

• Recording the return or refund
• Accounting for any processor adjustments
• Updating sales tax balances where applicable
• Returning the item to inventory if it can be resold
• Reversing or adjusting COGS where appropriate

A chargeback happens when a customer disputes a transaction. The payment processor may remove funds from your account and charge a dispute fee before the case is resolved. Tracking refunds and chargebacks separately helps you see costs that might otherwise get lost in your net payouts.

Processor and marketplace fees are easy to miss because platforms often deduct them before sending money to your bank.

Suppose you make $50,000 in sales and your processor sends you $48,500 after deducting $1,500 in fees.

If you record only the deposit, your books show $48,500 of revenue and no processing expense. Recording $50,000 of sales and $1,500 of fees instead shows your full sales and what it cost to process them.

Sales tax collected from customers isn’t revenue. You’re collecting it on behalf of the tax authority, so it’s recorded as a liability until you remit the money.

Let’s say you sell a $100 product and collect $8 in sales tax. Your customer pays $108, and your books should only show $100 in revenue. The extra $8 is money you owe to the tax authority.

That’s the basic idea. But sales tax can get more complicated as your ecommerce business grows because registration, collection, filing, and marketplace rules vary as you sell across jurisdictions or marketplaces.

Your bookkeeping should keep sales tax separate from revenue and give you a clear record of how much tax was collected, where it was collected, and what has been remitted. If you sell through multiple states or marketplaces, keep enough detail in your records to reconcile those amounts by jurisdiction and sales channel. A tax professional can help you figure out the obligations and accounting treatment that apply to your business.

Reconciliation is how you confirm that orders, payouts, accounting records, and bank deposits line up.

Here’s an example: If your platform reports $30,000 in sales, but only $27,800 reaches your bank account. Your processor report shows $1,500 in fees, $500 in refunds, and $200 in chargebacks. Those records explain the $2,200 difference and let you reconcile the payout back to your sales.

Making this part of your regular month-end close process helps catch discrepancies before they accumulate.

Common ecommerce bookkeeping mistakes include:

• Recording processor payouts as revenue
• Treating inventory purchases as ordinary expenses without considering the appropriate inventory treatment
• Failing to separate sales tax from revenue
• Missing marketplace and processor fees
• Failing to regularly reconcile your ecommerce, accounting, and bank records
• Waiting until tax time to reconcile transactions

At month-end, work through the full flow, from customer order to cash in the bank:

• Reconcile gross sales across each ecommerce platform and marketplace.
• Record discounts, returns, refunds, and chargebacks.
• Update inventory for products sold, returned, damaged, or restocked.
• Record COGS for the inventory sold during the period.
• Record payment processor, marketplace, shipping, and fulfillment fees.
• Confirm sales tax collected and amounts owed or remitted.
• Reconcile platform and payment processor payout reports.
• Match those payouts to deposits in your bank account.
• Investigate any remaining differences between sales, payouts, and cash received.

The workflow will vary by sales channel and accounting setup, but you should be able to trace a sale from the original order through the final bank deposit.

As transaction volume grows, building an ecommerce tech stack that scales can reduce manual reconciliation.

You don’t need an in-house finance team when you make your first sale.

Outside support becomes more useful when transaction volume rises, you add channels or jurisdictions, inventory becomes difficult to track, reconciliation starts consuming too much time, or you’re no longer confident your reports reflect what’s actually happening in the business.

Professional help can also be useful when choosing an accounting method, dealing with complex inventory questions, or managing sales tax obligations.

Ecommerce bookkeeping turns orders, fees, returns, inventory movements, and payouts into information you can use to run the business.

With accurate books, you can see what you sold, what those sales cost, which channels produce healthy margins, how much cash is tied up in inventory, and whether higher sales are translating into better margins.

As transaction volume grows, so does the work involved in keeping your books accurate. Building a solid system early can make that growth much easier to manage.

For a broader look at the numbers ecommerce founders should understand, read Mercury’s guide to ecommerce financial fundamentals.