Digital commerce, direct to consumer, and other b2c-focused startups need a strong financial foundation to be successful.

The chart of accounts (COA) is central to this foundation, and it’s a crucial tool that organizes a company’s financial transactions and provides invaluable insights into its fiscal condition. Your chart of accounts can help you efficiently manage your eCommerce startup’s finances, make informed strategic decisions, and maintain growth in the ever-evolving landscape of online retail.

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Distinctive chart of accounts needs of ecommerce startups

Ecommerce startups operate in a dynamic and competitive environment, leveraging digital platforms to offer a wide array of products and services to customers worldwide. Unlike traditional brick-and-mortar businesses, ecommerce ventures have unique financial requirements shaped by their online presence, digital transactions, and supply chain complexities.

Unique accounts for ecommerce ventures

Given the nature of ecommerce operations, the chart of accounts for such startups will include distinctive categories that these companies need for effective financial management. Kruze Consulting uses a structured six-digit account numbering system, which allows for the creation of detailed accounts within each category to capture essential financial information. We have more detail on charts of accounts here.

We use the following categories and number groupings:

Current Assets 100000 - 199999
Liabilities 200000 - 299999
Equity 300000 - 399999
Sales 400000 - 499999
Cost of Good Sold 500000 - 599999
Sales, General, and Administrative Expenses 600000 - 699999
Research & Development Expenses 700000 - 799999
Other Operating Expenses 800000 - 899999
Other Income / Expenses 900000 - 999999

Under these accounts, you’ll find sub-accounts that roll up into the main asset category. The first digit of each account number indicates which group the account belongs to.

eCommerce specific chart of accounts

Account Number Account Name Account Type Detail Type
104000 Cash Current Assets Checking
120000 Accounts Receivable Current Assets Accounts Receivable
131100 Prepaid Expenses Current Assets Prepaid Expenses
139000 Inventory Current Assets Inventory
150000 Fixed Assets Current Assets Computer Equipment
159000 Accumulated Depreciation Current Assets Accumulated Depreciation
210000 Accounts Payable Liabilities Accounts Payable
221000 Credit Card Payable Liabilities Credit Card Payable
236100 Sales Tax Payable LIabilities Sales Tax Payable
241000 Notes Payable Liabilities Notes Payable
300000 Equity Equity Equity
400000 Sales Sales Sales of Product Income
503000 Freight & Delivery Cost of Goods Sold Shipping - Cost of Services
505000 Hosting Fees Cost of Goods Sold Other Costs of Services
601000 Marketing and Advertising Expenses SG&A Expense Marketing
602000 Payroll Expenses SG&A Expense Payroll
602104 Payroll Taxes Payable SG&A Expense Payroll Taxes Payable
603000 Software Subscriptions SG&A Expense Software Subscription
604000 Professional Services SG&A Expense Professional Fees
614000 Rent Expenses SG&A Expense Rent
810000 Depreciation Expense Other Operating Expenses Depreciation
812000 Utilities Expenses Other Operating Expenses Utilities

Here’s a breakdown of potential unique accounts specific to ecommerce startups:

  • Transaction Processing Fees. This account tracks fees incurred for processing online transactions, including credit card payments, digital wallet transfers, and other forms of electronic payments.
  • Shipping and Fulfillment Costs. Reflecting expenses associated with packaging, shipping, and order fulfillment services, this account provides insights into the operational expenses of delivering products to customers.
  • Marketing and Advertising Expenses. Ecommerce startups often allocate significant resources to digital marketing campaigns, including social media ads, search engine optimization, and influencer partnerships. This account monitors expenditures related to promoting products and driving customer acquisition.
  • Platform Usage Fees. This represents revenue generated from subscription fees, transaction commissions, or usage charges for accessing the ecommerce platform or marketplace.
  • Inventory Valuation Adjustments. This account tracks adjustments to the value of inventory based on factors such as obsolescence, shrinkage, or market fluctuations, ensuring accurate financial reporting.
  • Customer Returns and Refunds. This account records refunds issued to customers for returned or defective products, facilitating proper tracking of sales reversals and associated costs.
  • Technology Infrastructure Costs. These accounts are for expenses related to website development, hosting, security enhancements, and software subscriptions essential for maintaining a robust ecommerce infrastructure.
  • Sales Tax Payable. With ecommerce sales subject to various tax regulations, this account tracks the amount of sales tax collected from customers and owed to tax authorities.
  • Vendor Payments and Disbursements. These accounts monitor payments made to suppliers, manufacturers, and vendors for inventory purchases, raw materials, or services rendered.
  • Fraud Prevention Expenses. This reflects costs associated with implementing fraud detection systems, chargeback management, and security protocols to mitigate the risk of online fraud and cyber threats.

A meticulous chart of accounts is indispensable for ecommerce startups that deal with the complexities of online commerce. By incorporating unique accounts tailored to the nuances of digital retail, ecommerce founders can gain deeper visibility into their financial operations, make informed decisions, and get sustainable growth in the competitive ecommerce landscape.

For personalized guidance on setting up a chart of accounts for your ecommerce venture, contact us.

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