Bookkeeping is a critical part of running any business, but it can be especially daunting for those who are just starting out in ecommerce. After all, there’s more to consider than just tracking sales and expenses — you also have to think about calculating GST and PST taxes. To help you get started, let’s take a closer look at what you need to know about bookkeeping for ecommerce and how to calculate GST and PST taxes.
Bookkeeping Basics for Ecommerce
Bookkeeping is the process of recording transactions that occur within your business. For ecommerce businesses, this means tracking things like income from sales, expenses like advertising costs, inventory costs, and shipping fees, as well as any other related costs. Keeping accurate records will help you understand your financial situation better so that you can make strategic decisions based on data instead of guesswork.
When it comes to bookkeeping for ecommerce businesses, there are two main methods: manual tracking or using accounting software. If you’re a small business just starting out on a tight budget, then manual tracking may be your best option since it doesn’t require any upfront costs (aside from the cost of supplies). On the other hand, if you want an easier way to track transactions without having to manually enter each one into spreadsheets or paper ledger books then accounting software is the way to go. Accounting software usually requires a monthly subscription fee but it can save you time in the long run by automatically generating reports and giving you insights into your finances.
GST (Goods and Services Tax) is a type of sales tax that is charged on most goods and services in Canada; while PST (Provincial Sales Tax) is an additional sales tax that is charged only in certain provinces (British Columbia currently has no PST). As an ecommerce business owner in Canada, it’s important that you understand how much GST/PST needs to be collected from customers and remitted back to the government. In order to do this accurately, you need to understand the different categories of “exemptions” which are items that are either exempt from or eligible for reduced rates of taxation under specific conditions. You also need to make sure that any applicable taxes are being properly calculated when processing payments from customers. A good accounting software should be able to help with this by automatically calculating GST/PST when necessary so that you don’t have to worry about making mistakes or missing out on revenue due to incorrect calculations. And you may even get tax credit in certain cases.
Doing bookkeeping for an ecommerce business can seem overwhelming at first but if you take the time to learn how it works then it can become much easier over time. It’s important not only to keep track of income and expenses but also understand how GST/PST works so that you can collect these taxes correctly from customers and remit them back accurately when required. With accurate record-keeping practices such as using accounting software or manual tracking methods coupled with understanding exemptions related to GST/PST calculations, your ecommerce business will have a solid foundation on which success can be built upon!