The importance of recording transaction fees as an e-commerce business

Recording your transaction fees is essential as an e-commerce business, to ensure you have the full picture of your business. Below are 5 reasons why you should record your transaction fees for your Shopify, Etsy, E-bay, or any other e-commerce platform.

 

  1. Accurate Financial Reporting

 

By recording your transaction fees it allows your e-commerce business to have a precise and complete understanding of your online store’s performance. If you don’t track your transaction fees then your revenue can be inaccurate and will affect your financial reports, budgeting and decision-making.

 

  1. Cost Analysis

 

Without separating your transaction fees for the varying methods of payment you may have on your online store you won’t be able to do a complete cost analysis of each provider and to identify payment methods that might not be cost-effective.

 

  1. Pricing and Profitability

 

The transaction fees charged by merchant facilities and platforms form part of your cost of goods sold and should be a part of the overall cost structure of your e-commerce business.  Everything in the cost of goods sold does affect your pricing strategy. Understanding the impact of transaction fees on your business with ensure that margins are maintained at a profitable level.

 

  1. Tax Compiance

 

Transaction fees are a tax deduction and to ensure you can deduct the maximum you can from them will help reduce your taxable income. Having the transaction fees recorded in your accounting system will simplify the process for your accountant.

 

  1. Payment reconciliation

 

To ensure swift and easy reconciliation the recording of transaction fees is a must, if you don’t record your transaction fees your sales figures in your accounting software, like Xero, won’t match your sales platform, like Shopify.

 

If are you an e-commerce store business owner and not sure where to begin in recording your transaction fees then please reach out to our e-commerce bookkeepers for a no-obligation meeting to see how we can help keep your store financials streamlined.