Understanding Two E-Commerce Giants
With online selling rapidly expanding in Pakistan, entrepreneurs are increasingly turning to global platforms like Shopify and Amazon to reach broader markets. Both platforms offer powerful selling tools, but when it comes to accounting and financial management, their structures differ significantly.
Whether you are running a dropshipping business on Shopify or listing products on Amazon’s global marketplace, understanding the nuances in accounting can help ensure accurate financial tracking, tax compliance, and better decision-making.
Platform Revenue Models: Direct vs Commission-Based
One of the most important differences in accounting for Shopify versus Amazon lies in how each platform handles revenue. On Shopify, merchants operate standalone stores and collect payments directly from customers using third-party gateways like Stripe or PayPal. This means the full transaction value hits your account before fees are deducted, and you're responsible for recording gross revenue and associated fees separately.
In contrast, Amazon acts as a marketplace intermediary. When a sale is made, Amazon collects payment, deducts its referral and fulfillment fees, and then deposits the net balance to your account. For accounting purposes, this creates the need to reconcile deposits against detailed transaction reports to correctly record gross sales, platform fees, and payouts.
Handling Payment Gateways and Timing
Timing of payments is another area where Shopify and Amazon differ. Shopify payments are often processed almost immediately, depending on the gateway used. This provides better visibility into cash flow, making it easier to track revenue and update books in real time.
Amazon, however, typically pays sellers on a 14-day cycle. This delay can complicate cash flow planning and requires businesses to maintain a buffer when projecting monthly income. Accounting software integrations for Amazon should be set to recognize accrued revenue based on order fulfillment rather than deposit receipt to reflect accurate financials.
In Pakistan, where many businesses operate on tight margins, understanding this difference helps in forecasting working capital and ensuring liquidity during slower payout periods.
Managing Fees and Expenses
Fees vary widely between Shopify and Amazon and must be accounted for correctly. Shopify charges a monthly subscription fee and, depending on the plan, a percentage for each transaction if third-party payment gateways are used. These are straightforward to log as monthly business expenses.
Amazon’s fee structure is more complex. It includes referral fees, variable closing fees, fulfillment fees (if using FBA), and optional advertising costs. These are deducted from sales, so what lands in your bank account is already net of expenses. This requires careful tracking and reconciliation to properly account for gross revenue and the corresponding fees to get a true picture of profitability.
Recording fees incorrectly can distort profit and loss statements, leading to inaccurate tax filings or misjudged performance metrics.
Inventory and Fulfillment Accounting
Inventory management and fulfillment methods also shape how accounting is handled on both platforms. With Shopify, sellers typically manage their own inventory or work with dropshippers, requiring manual or third-party tools to track purchases, shipments, and inventory costs.
On Amazon, especially with Fulfilled by Amazon (FBA), the platform handles storage, packaging, and shipping. This introduces additional costs—such as storage and fulfillment fees—that must be separated from cost of goods sold (COGS) for clear financial reporting.
For Pakistani businesses selling internationally, this distinction is vital. Shopify sellers must carefully calculate inventory valuations and shipping charges, while Amazon sellers need to monitor FBA-related deductions to prevent hidden profit leaks.
Sales Tax and VAT Obligations
Accounting for taxes is critical when selling online, and Shopify and Amazon differ in how they manage sales tax. Shopify gives sellers full control over tax settings, requiring them to configure tax rates per country or region. This means the seller is responsible for collecting, reporting, and remitting the correct tax.
Amazon automates much of this by collecting tax on behalf of sellers in applicable jurisdictions and remitting it directly to the authorities. However, sellers must still understand where they have nexus or tax obligations and ensure that Amazon’s tax reports are accurately reflected in their accounting records.
For Pakistani sellers exporting goods or selling across borders, managing VAT or GST becomes essential to ensure regulatory compliance. A robust accounting setup must be in place to handle the varying tax treatment across different platforms and markets.
Reporting and Reconciliation Challenges
Shopify allows complete customization of financial reporting. Since sellers have direct control over transactions, data exported for reconciliation is typically cleaner and more direct. However, this requires active effort in setting up financial tracking systems and integrating accounting software.
Amazon, on the other hand, offers detailed reports but in formats that may be difficult to interpret without accounting expertise. The settlement reports include various line items—promotions, returns, fees, and taxes—that must be accurately mapped for reconciliation.
Because Amazon aggregates transactions and delays deposits, sellers may find discrepancies between order reports and actual payouts if reports are not reviewed consistently.
Choosing the Right Accounting System
Accounting software integrations for Shopify and Amazon vary, and choosing the right one can simplify bookkeeping significantly. For Shopify, solutions should offer real-time syncing of orders, refunds, and fees. For Amazon, look for tools that support multi-marketplace reporting and offer clean reconciliation with settlement reports.
Regardless of the platform, businesses in Pakistan should work with advisors who understand e-commerce accounting. From managing cross-border sales to handling digital tax compliance, expert guidance ensures your books reflect the real health of your business.
Professional support from platforms like SNS Accountancy can help online sellers navigate the complexities of financial reporting, stay tax-compliant, and grow confidently across platforms.