Running an eCommerce business? You’re crushing sales, your Shopify or Amazon store is buzzing, and things seem to be going great. But when you check your bank account, it’s not quite adding up. Sound familiar?
Here’s the deal: revenue means nothing if you don’t know your real profit. Between platform fees, shipping costs, and sneaky expenses, it’s easy to assume you’re making more than you actually are. That’s where smart accounting comes in.
At Insogna CPA, a leading CPA firm in Austin, Texas, we help eCommerce sellers stop guessing their profits and start knowing their numbers. Let’s break it all down (in plain English).
Revenue vs. Profit: Why “Sales” Don’t Tell the Full Story
Your store is making sales, but are you actually making money? Let’s clear up some common financial terms so you can track what matters.
1. Gross Revenue vs. Net Revenue: Know the Difference
- Gross Revenue = Total sales before expenses
- Net Revenue = What’s left after deducting refunds, discounts, and platform fees
Example: Your store does $50,000 in sales, but after refunds ($5,000) and platform fees ($2,000), your net revenue is actually $43,000—not $50K.
If you’re only looking at gross revenue, you’re not seeing the whole picture.
2. Cost of Goods Sold (COGS): The Real Cost of Selling
COGS includes everything it takes to get your product into a customer’s hands:
- Raw materials & manufacturing
- Shipping & packaging
- Amazon FBA or warehouse storage fees
Why this matters: If your product sells for $50 but your COGS is $30, your gross profit is $20 per sale—not $50.
Many eCommerce sellers forget to calculate COGS correctly, leading to underpricing their products or thinking they’re making more money than they actually are.
3. Profit Margins: The Number That Actually Counts
Your profit margin is what’s left after all your costs are covered. It’s the real test of whether your business is actually profitable.
Formula: (Net Revenue – COGS) ÷ Net Revenue = Profit Margin %
A healthy profit margin? 25-40% (depending on your niche). If yours is lower, it’s time to revisit pricing, expenses, or operations.
How to Track Expenses (and Save on Taxes While You’re At It)
Every dollar you don’t track is money you might be overpaying in taxes. Here’s how to categorize expenses the smart way:
Deductible eCommerce Business Expenses:
- Advertising & Marketing: Facebook ads, influencer sponsorships, email marketing
- Software & Subscriptions: Shopify, QuickBooks, inventory management tools
- Shipping & Packaging: USPS, FedEx, UPS, custom packaging
- Storage & Fulfillment Fees: Amazon FBA, 3PL warehouses
- Office Equipment: Laptops, desks, even your home office setup
Pro tip: Keeping clean records isn’t just good bookkeeping, it saves you thousands on taxes. As an experienced Austin tax accountant, Insogna CPA helps eCommerce sellers maximize deductions and keep more money in their pocket.
Automate Your Bookkeeping (Because You Have Better Things to Do)
Manually tracking sales and expenses? No thanks. Cloud-based accounting software automates bookkeeping so you can focus on growing your business.
Best Accounting Tools for eCommerce:
- QuickBooks Online: Connects with Shopify, Amazon, PayPal
- Xero: Ideal for scaling businesses, especially if you sell internationally
- A2X: Auto-syncs your Amazon & Shopify sales into accounting software
Why this matters: Automation saves you time, reduces human error, and gives you real-time financial insights. As a leading Austin accounting firm, we help eCommerce sellers set up and optimize these tools so they work for you, not against you.
Let’s Make Sure Your eCommerce Business is Actually Profitable
If you’re running an eCommerce business, understanding your real profit margins, expenses, and tax deductions is essential, otherwise, you’re just guessing.
At Insogna CPA, one of the most trusted CPA firms in Austin, Texas, we help online sellers track every hidden cost, automate bookkeeping, and stay tax-compliant so they can grow profitably.
🚀 Want expert guidance? Let Insogna CPA help you take control of your finances! Schedule a free consultation today!