Everything To Know About E-commerce Accounting For Singapore

  • Post category:Singapore

Although there are many advantages to operating an online store in Singapore, many small businesses face difficulties with running out of cash. This could be the result of the fact that many business owners in Singapore manage their online ventures without complying with e-commerce accounting procedures. Since there are more transactions and sales in e-commerce, accounting can get complicated. 

The process of recording, categorizing, and summarizing financial transactions is known as accounting, and it produces data that can be utilized to inform business decisions.

Everything to know about e-commerce accounting for Singapore

The process of recording, categorizing, and summarizing financial transactions is known as accounting, and it produces data that can be utilized to inform business decisions.

Accounting for e-commerce operates similarly to accounting for any other type of business: financial transactions are tracked and analyzed to develop accounting acumen, or the capacity to make decisions about the company quickly using financial information and to comply with tax authorities. 

HOW IS E-COMMERCE ACCOUNTING DIFFERENT IN SINGAPORE?

Even physical businesses maintain company data and follow accounting procedures. However, running an online business involves a lot of factors; it’s more challenging than walking into a physical store and making a purchase. They are:

  • A high volume of transactions: Compared to retail businesses, online stores have more transactions because they are open 24/7/365. Accounting for an e-commerce business can be difficult because it can be stressful for e-commerce sellers to accurately record every sale.
  • Complicated tax laws for international trade: With the rise of e-commerce, consumers can purchase anything from anywhere in the world. However, this can be difficult for e-commerce businesses in Singapore as they have to follow international laws governing taxes. 
  • Difficulty keeping track of various invoices: Running an online business requires managing a variety of factors, including vendors, customers, online platforms, payment gateways, and logistics partners. It can be difficult to keep track of client receipts, vendor invoices, refunds and returns, and necessary tax and import paperwork. 
  • Challenges in inventory and transaction monitoring: Since online businesses deal with a large volume of transactions, it can take time and effort to keep track of every transaction and adjust inventory levels accordingly. 

DIFFERENT METRICS SINGAPORE E-COMMERCE BUSINESSES SHOULD TRACK

  • Track sales transactions – Owners of e-commerce businesses must record all sales transactions, including the specifics like the date, each sale’s description, and the platform source, even with the high volume of transactions.
  • Track expenses – Monitoring expenses is just as important as sales. However, a lot of business owners fail to keep track of minor expenses like shipping and handling.

Even though they now seem small, these costs add up over time and have an impact on your budget. It can also lead to an inaccurate cash flow statement and have a major effect on your profit margins. 

To understand where expenses are increasing and take action to control them, it is essential to categorize expenses into different groups. When managing e-commerce platforms, you need to keep personal and business finances separate. Payroll, marketing and advertising costs, administrative fees, and cost of goods sold are common expense categories. 

  • Track Inventory – Accounting for e-commerce businesses can be difficult since owners may find it hard to meet customer demands or list products online if they don’t keep a tab on inventory levels.
  • Monitor Refunds and Returns – Refunds and product returns are standard in online business models. E-commerce companies should be equipped with the tools and protocols needed to handle returns efficiently.

Similarly, to guarantee correct cash flow statements and simplify accounting for your online store, you should keep track of every return and refund.

  • Maintain Accurate Records of all Financial Reports – You must keep an exact record of all financial reports in order to abide by Singapore’s legal and tax requirements.

In addition to balance sheets, business income statements, and cash flow statements, you should accurately maintain records of all bank account statements, invoices and receipts, cancelled or bounced checks, and the previous year’s tax returns.

Keeping your Singapore e-commerce platform details up to date guarantees efficient business management and highlights errors like double bank debits.

  • Analyse Financial Performance – Maintaining accurate financial records also helps with financial forecasting by allowing you to check for discrepancies and guarantee accurate analysis of the financial performance of your company.

ACCOUNTING STANDARDS AND REQUIREMENTS FOR SINGAPORE E-COMMERCE COMPANIES

When starting and operating an e-commerce business in Singapore, it’s important to understand the relevant local accounting standards. When creating financial accounts, corporations must follow accounting laws and regulations established by Singapore’s Accounting and Corporate Regulatory Authority (ACRA).

The Singapore ACRA refers to e-commerce businesses as “e-traders.” They are subject to accounting standards based on IFRS and use similar ideas.

To ensure that all online transactions are accurately recorded and taxes are paid on time, Singapore has created a special accounting system for eCommerce businesses.


KEY ACCOUNTING REQUIREMENTS FOR AN E-COMMERCE BUSINESS IN SINGAPORE

  • Singapore dollars must be used for recording all transactions.
  • Sales tax (VAT) must be collected and properly recorded with every taxable sale.
  • Inventory must be valued at market value or at a lower cost.
  • Records are required for payables, receivables, and allowances.

Whether or not your business is profitable, you still need to file your corporate tax returns and annual accounts on time. Penalties and fines for noncompliance could be severe. 


TAX LIABILITIES FOR E-COMMERCE BUSINESSES IN SINGAPORE

The main problem faced by online business owners is understanding the complex tax laws of the nation.

In Singapore, your e-commerce store is primarily subject to two taxes: income tax and goods and services tax (GST).

Income Tax

In Singapore, online retailers are required to pay income tax on their earnings. At the moment, their income tax is 17%. For example, you will have to pay S$12,750 in business income tax if your online business makes S$75,000 in profit a year. However, you will be responsible for Singapore Goods and Services Tax (GST) if you sell any kind of software online.

Goods and Services Tax (GST)

The tax known as the Goods and Services Tax (GST) is levied on both the import of goods into Singapore and the sales of goods and services. Previously, the GST rate was 7%; however, in 2023, it rose to 8%. You have to follow all procedures set forth by GST regulations to file taxes, register for VAT, and pay GST tax. 

The Business Registration number—a distinct number assigned to each business upon GST registration—allows tax authorities in Singapore to follow your online business tax payments. However, you won’t have to pay GST if your worldwide e-commerce sales don’t exceed S$1,000,000 in total. 

It is important to stay up to date with accounting standards in Singapore and follow business regulations as they are subject to change.


COMMON ACCOUNTING MISTAKES TAX LIABILITIES FOR E-COMMERCE BUSINESSES IN SINGAPORE

  • Inventory not recorded properly – When managing an online store, inventory control is essential. You run the risk of inflating or undervaluing your profits if you don’t accurately record inventory levels.
  • Sales tax mishandled – Managing and collecting sales tax is a complex subject that can easily lead to errors, particularly given its recent rise in complexities. For your e-commerce business, it is important to avoid costly mistakes like reporting inaccurate numbers, neglecting to register and collect sales tax when required, or not filing sales tax returns within the allotted time.
  • Small expenses not tracked properly – Small expenses are often ignored by business owners and are not entered into accounting records. These purchases might seem like a small amount, but they quickly add up to an issue with overspending. A measurable impact on your profit margin may result from inaccurate expense tracking.
  • Not taking purchase refunds into consideration – Purchase refunds are common in the e-commerce sector. When a customer, either an individual or a business, returns merchandise to the seller for a refund or store credit, as per the seller’s policies, this is known as a purchase refund. Refunds are a unique kind of expense transaction that should not be entered into the revenue record.

PRACTICAL E-COMMERCE BUSINESS IN SINGAPORE TIPS

  • Keep track of your sales and expenses – Including the date, amount, and description of every transaction completed on your website and other e-commerce sites such as Amazon or eBay; keep a record of all your sales and expenses. This data will help you maintain your company’s smooth operation and compliance with Singapore’s accounting regulations.
  • Use relevant accounting software – It is recommended that you get familiar with the accounting requirements needed by e-commerce businesses and make use of accounting software that satisfies these needs. Tracking your e-commerce finances to precisely manage the financial health of your company can be made much easier with the appropriate accounting software.
  • Keep your financial records up to date – To monitor the progress of your business and ensure compliance with Singapore laws, all necessary documentation, including bank statements, invoices, and receipts, should be kept up to date.

Refer to Singapore company registration to know more about starting a new business here.

Reach out to us at Relin Consultants – Leading Global Business Set Up Partners for further assistance with your e-commerce accounting in Singapore.

FAQs

Is e-commerce accounting software necessary?

For proper accounting compliance, e-commerce accounting software would be perfect. To ensure accurate e-commerce accounting, you can, however, collaborate with a seasoned e-commerce accounting company in Singapore.

How can an e-commerce company in Singapore be managed efficiently?

Maintaining correct financial records, keeping an eye on the company’s financial performance, and following tax and accounting laws are the essential elements of managing an online business successfully in Singapore.

What are the different types of e-commerce accounting?

Cash basis accounting and accrual basis accounting are the two forms of accounting used in e-commerce. E-commerce companies are required to use accrual accounting. 

What is the e-commerce accounting procedure?

Gathering, organizing, assessing, and reporting financial data for a company are all part of e-commerce accounting. It involves carrying out various accounting duties for your online store. E-commerce bookkeeping is also necessary, as it organizes and stores all of the financial data.