Set up ecommerce bookkeeping in this order: a separate business bank account, an accrual-basis chart of accounts built around marketplace payouts, a way to record inventory at cost, and a routine for reconciling each settlement before the next one lands. Do those four things in the first month and the rest of the year is maintenance. Skip any one of them and you will spend January rebuilding twelve months of history from bank statements.
This guide assumes you sell physical products through at least one marketplace and you either have nothing in place or a shoebox of PayPal exports. The worked example uses a seller doing $40,000 a month across Amazon and Shopify, because that is roughly the point where the shoebox stops working.
Step 1: Separate the money before you touch a ledger
Open a business checking account and route every marketplace payout into it. Amazon, Shopify Payments, Walmart and eBay all let you change the deposit account in seller settings. Move your supplier payments, ad spend and software subscriptions onto a business card tied to that account.
The reason is not tidiness. Your bookkeeping system will import bank transactions and try to match them against sales and expenses. Every personal grocery run mixed into the feed is a transaction someone has to explain, and at year end that someone bills by the hour. The Small Business Administration covers the basics of separating business and personal finances in its manage your business guide, and it is the one piece of advice sellers most often ignore and most often regret.
Step 2: Pick accrual, because you carry inventory
Cash-basis bookkeeping records income when money arrives and expenses when money leaves. It is simpler and it is wrong for a product business, because you buy inventory in one month and sell it over the next six. Cash basis makes your buying months look like disasters and your selling months look like windfalls, and neither picture is true.
The IRS says as much. Publication 538 states that if you must account for an inventory in your business, you must use an accrual method of accounting for your purchases and sales. There is a small business taxpayer exception for average annual gross receipts of $26 million or less, indexed for inflation, but even sellers under that line who choose to keep an inventory generally must use accrual and value it each year to determine cost of goods sold. Talk to a CPA about which election fits you. For the ledger itself, set it to accrual from day one so you never have to convert.
Step 3: Build a chart of accounts around payouts, not sales
A generic chart of accounts has one income line called Sales. A marketplace seller needs the ledger to mirror what the settlement report shows, because that is the document you will reconcile against.
For the $40,000 seller, a minimum viable chart looks like this. Income: Amazon Sales, Shopify Sales, Shipping Income, Refunds (contra-income). Cost of Goods Sold: Product Cost, Inbound Freight, Packaging. Marketplace Expenses: Amazon Referral Fees, Amazon FBA Fees, Amazon Storage Fees, Shopify Payment Processing, Shopify Subscription. Advertising: Amazon PPC, Meta Ads. Then the balance sheet accounts that trip people up: Inventory Asset, Amazon Reserve (a receivable for money Amazon is holding), Sales Tax Payable, and a clearing account per marketplace.
The clearing account is the part most first-time setups miss. Amazon does not deposit $40,000 of sales. It deposits one net figure every two weeks after subtracting referral fees, fulfillment fees, storage, advertising, refunds and a reserve. If you post the deposit as Sales, your revenue is understated by every fee Amazon took and your expenses are missing entirely. The clearing account lets you post the gross sale and each fee separately, then match the net against the bank deposit.
Step 4: Record inventory at landed cost
When 1,200 units arrive from a supplier at $8.50 each with $1,140 in freight and $360 in customs, the inventory asset goes up by $11,700, or $9.75 per unit. Nothing hits cost of goods sold yet. When a unit sells, $9.75 moves from Inventory Asset to Product Cost.
Do this per SKU, not in aggregate. A seller with 60 SKUs and one blended cost figure cannot tell which products are losing money after fees, and on Amazon that is a common condition. Amazon’s published fee schedule, as of September 2026, puts the referral fee at 15 percent for most categories with a $0.30 minimum per item, before fulfillment and storage. A $19.99 item with a $9.75 landed cost and 15 percent referral fee has $7.24 left before FBA fees and advertising. You need to know that number per product, not per catalog.
Software can carry the per-SKU cost for you. ConnectBooks, for instance, posts marketplace activity into QuickBooks Online, QuickBooks Desktop Enterprise or Xero with either summarized entries or item-level detail, and its automated COGS and real-time inventory tracking are built around exactly this per-unit movement from asset to expense. Whether you use a tool or a spreadsheet, the rule is the same: inventory is an asset until the day it ships.
Step 5: Reconcile every settlement, not every month
Monthly reconciliation is the standard advice for service businesses. Marketplace sellers should reconcile per settlement, because a two-week Amazon statement contains roughly 15 fee types and the errors compound if you let three of them pile up.
The routine: download the settlement report, post gross sales to the income account, post each fee category to its expense account, post refunds to the contra-income account, post the reserve movement to the Amazon Reserve receivable, and confirm the net matches the bank deposit to the cent. If it does not match, the difference is almost always a reserve change or a reimbursement you have not posted yet.
Shopify works the same way with payouts instead of settlements. Each payout nets processing fees and refunds against gross orders, and the payout schedule rarely aligns with your month end, so the last few days of every month sit in a receivable until the next deposit.
Step 6: Set up the tax side before the first 1099-K arrives
Marketplaces report your gross payment volume to the IRS on Form 1099-K. The IRS page on understanding your Form 1099-K gives the current federal threshold as over $20,000 in more than 200 transactions, and notes that platforms may send the form at lower amounts. The figure on that form is gross, before refunds and fees, so if your ledger only shows net deposits, your reported income will not match what the IRS received and you will spend time explaining a gap that proper bookkeeping would have eliminated.
For sales tax, most large marketplaces now collect and remit as marketplace facilitators, but your own Shopify store usually does not. Track Sales Tax Payable as a liability from the first order and confirm your state’s rules with its department of revenue or a professional. This article is not tax advice and the rules vary by state.
What the first month should produce
By the end of month one, the $40,000 seller should be able to open the ledger and read: gross sales by channel, total marketplace fees by type, advertising spend, refunds, cost of goods sold at landed cost, and an inventory asset balance that matches a physical count within a percent or two. Gross margin per SKU should be a report, not a guess.
If you cannot produce that, one of the six steps is incomplete. Most often it is step three or step four, and the fix is cheaper now than it will be in April.