Online & trading businesses

Online trading businesses buy products to resell through websites, social media, or online marketplaces. The area that needs special attention is recording "inventory cost" accurately to match actual stock, because these businesses often buy multiple batches of goods at different prices, and platform fees, shipping costs, and return costs all need to be included in the cost calculation. Incomplete cost calculations can affect both accounting and tax as follows:

• Miscalculating inventory cost causes the gross profit shown in your financial statements to not reflect reality, leading to an inaccurate read on your business's financial position.
• Failing to deduct the full actual cost (for example, forgetting to include platform fees) results in paying more income tax than you actually owe.

1. Which inventory costing method do you use (FIFO or weighted average), and do you apply it consistently?
2. Are platform fees automatically deducted from your sales recorded in full as expenses?
3. How are returned or defective products recorded — are stock and revenue adjusted accordingly?
4. When did you last do a physical stock count and compare it against your accounting records?
5. Does your business need to register for VAT yet?