If you carry inventory, accrual is the right method. Cash basis hides the timing gap between when you pay for inventory and when it sells. A seller who paid $40K for inventory in November sees the $40K as a November expense on cash basis, when in reality most of those units sold in December and the cost should have followed the sale.
The result on cash basis: November looks unprofitable, December looks suspiciously profitable, and the trend tells you nothing. Switch to accrual.
Booking COGS at supplier invoice price ignores tariffs, freight, brokerage, and inbound shipping. For a typical seller importing from China in 2026, the gap is 20-40% of supplier price. A seller who books COGS at supplier price overstates margins by 4-6 percentage points and undertaxes their actual cost basis at year-end.
Fix: every shipment carries its landed cost (supplier + freight + duty + tariff + inbound). FIFO consumption posts the right per-unit cost. See our landed cost glossary.
One "Sales" account that mixes Amazon, Shopify, Walmart, eBay, and TikTok Shop revenue. This makes per-channel profitability invisible. You can't answer "is Walmart actually profitable for me" without breaking out the revenue and the expenses by channel.
Fix: one revenue account per channel. Same structure for fees, returns, advertising, and inventory. The chart of accounts triples in size and the reporting becomes useful.
Amazon, Walmart, and eBay collect and remit sales tax on most of your sales. If your accounting books that sales tax as a payable but never reduces it (because you never file on it; the marketplace did), the payable account grows month after month. After a year, it can be $20K to $100K of phantom liability.
Fix: marketplace-facilitator sales tax posts as a net-zero transaction (collected and remitted in the same period). Self-collected sales tax (your Shopify own checkout) sits in the payable until you remit. See our marketplace facilitator tax glossary.
Amazon deposits roughly every 2 weeks. The deposit is net of: gross sales, refunds, promotional rebates, FBA fees, referral fees, advertising, reserve adjustments, and sales tax. Booking the entire deposit as a single "Amazon income" line collapses all of that detail.
The result: you can't see which fees are growing. You can't track advertising spend separately. You can't see returns rate. You see one number that goes up and down.
Fix: split each settlement into its components. ConnectBooks does this automatically; manually it's a 30-minute exercise per settlement.
The inventory on your balance sheet should reconcile to physical inventory at fulfillment centers monthly. If you've never done this reconciliation, your inventory asset is wrong, and the gap probably grew over years.
Common causes of variance: FBA Removal Orders not booked, damaged units not written off, transfers between locations not recorded, shrinkage at the 3PL.
Fix: monthly reconciliation. Pull FBA inventory report, pull 3PL on-hand, compare to ledger, post variances. ConnectStock does this automatically across all locations.
If your inventory is at Amazon FBA, you have physical nexus in every state where Amazon stores your inventory. For most sellers, that's 15-25 states. Each one has its own registration, filing, and compliance requirements.
Most marketplace-facilitator states handle the actual sales tax remittance for you, but registration is still required in many of those states because you have physical nexus from inventory storage.
The hidden risk: an unregistered seller with inventory in a state for years can face back-tax assessments, even though the marketplace has been remitting the customer tax all along. The states get aggressive about this in audits.
Fix: audit your nexus map at least annually. ConnectStock surfaces the inventory nexus by state. Use that as the input to a sales tax compliance specialist (TaxJar, Avalara, or a sales tax CPA).
Closing means: every account reconciled, journals posted, accruals recorded, financials produced. Most ecommerce sellers do this quarterly at best, annually at worst. The result is that financial reporting is always 60-90 days out of date.
Decisions get made on memory and feel, because the books that would inform them are stale. Tariff impact, advertising cost creep, FBA fee increases: none of these show up until the lagging close happens, and by then they've been compounding for months.
Fix: target a tenth-of-the-month close for the prior month. Software like ConnectBooks does most of the volume work. A part-time bookkeeper handles the non-marketplace items. You review the financials and run the business on current data.
Each individual mistake costs money. Combined, they create the dynamic where a seller can grow revenue 30% year-over-year and still feel like the business isn't getting more profitable. The books they're looking at aren't reflecting the operation. Fix the books, and the decisions get easier.
COGS at supplier price (instead of landed cost) is usually the largest dollar gap, because it compounds across every unit sold. A 4-6 point margin overstatement on $2M of annual revenue is $80K-$120K of phantom margin you're paying tax on.
Mid-year is better. Each month you wait is another month of distorted books. Most of these fixes can be applied prospectively starting the next monthly close, with a retroactive cleanup of the in-progress year done by your CPA at year-end.
For most sellers, no. Fixing COGS to landed cost typically reduces taxable income. Fixing marketplace-facilitator sales tax doesn't change the income tax. Fixing inventory reconciliation might surface inventory shrinkage that's a deductible expense.
Fix the books so the decisions are easier. ConnectBooks closes most of these gaps by default. 30-day free trial. We'll walk through your current setup and identify the specific fixes that move the needle on your operation.
Running an e-commerce business comes with plenty of challenges, but ConnectBooks is here to make your life easier. With real-time insights, seamless integrations, and detailed tracking of your profitability and inventory, you can stay ahead of the game. Whether you’re selling on Amazon, Shopify, Walmart, TikTok or eBay, ConnectBooks helps you manage your finances with 100% accuracy and confidence, so you can focus on growing your business.
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