As more and more people choose to shop online instead of in a physical store, and the options for doing so continue to grow, the world’s approach to marketing, selling and running a business is changing all the time. However, the accounting requirements for all businesses remain the same wherever and however transactions occur. And how to apply the same traditional rules and regulations to online sales can be one of the most difficult aspects of finding ways to manage e-commerce accounting.
FAQs With Regard to E-commerce Accounting in Dubai
- What Is E-commerce Accounting?
E-commerce, which involves conducting commercial transactions online, is making huge inroads into the markets of traditional trading. Globally, about one in four people shop online, and in 2018 they spent about 2.8 trillion US dollars doing so. And that spend is expected to grow to 4.6 trillion USD by 2021.
- Why Is E-commerce Accounting Challenging?
E-commerce is similar to self-drive cars. Both reach the same destination and perform the same function, without any physical human contact. And just as those driverless cars have to obey the same rules of the road as those with drivers, so e-commerce accounting has to adhere to the same accounting rules regarding tracking, recording, reconciling and reporting transactions as ground-based businesses.
- What Happens About Transaction and Inventory Checks and Data?
One of the biggest problems facing E-commerce businesses is access to the necessary data, about transactions, inventory and the costs of goods sold. That’s because, instead of involving transactions across a counter or at a checkout point in a shop, e-commerce sales go through a different chain of actions, and are sometimes never seen by the sellers.
Orders are placed online, paid for at the site’s check-out, and then the product is packaged, shipped and delivered to the buyer, sometimes by the supplier or manufacturer, or from large e-commerce platforms the seller is partnering, like Amazon.
The same batch of goods can be situated at different points in the distribution process, so making inventory management difficult. And while the software running the channel will record the transactional data, and log changes to the often virtual inventory, this information can only be retrieved from the back-end of the selling channel.
Keeping track of the 5% VAT required on certain sales in Dubai and the foreign transaction costs involved can also cause confusion.
- Can Software Help with E-commerce Accounting?
Specific software can take care of some of the accounting and bookkeeping procedures involved in e-commerce accounting, like tracking expenses and income, as well as VAT liabilities. But using this software involves knowing how to use it effectively, understanding the terms and processes used for digital marketing and sales, and learning how to retrieve the information gathered, record it and report on it.
When faced with these challenges, the best way to manage e-commerce accounting in Dubai may require professional (and digital ) assistance. This is especially vital for online businesses using more than one channel, an operation that can be likened to running all the stores in a retail chain from one virtual outlet. Calling in accounting experts who can handle traditional accounting in a digital world may be the best decision ever made.