DTC accounting becomes increasingly important as established online sellers expand beyond a single marketplace. A business may have proven its products and built substantial sales through Amazon, but now wants greater control over its brand, customers and future sales channels.
Direct-to-consumer (DTC or D2C) ecommerce provides that next step. Sellers can develop their own branded online presence while continuing to benefit from Amazon and other marketplaces that helped build the business.
For many sellers, that means launching a DTC ecommerce store through Shopify, WooCommerce, BigCommerce, Wix or another ecommerce platform. At the same time, they may continue selling through Amazon and other marketplaces.
The opportunity can be significant. So can the accounting complexity.
A business that once relied primarily on Amazon may eventually generate sales through Amazon, its own DTC website, TikTok Shop, Walmart Marketplace and other channels. Each channel can produce different fees, payouts, refunds, fulfillment costs and accounting data.
Schultz & Associates provides DTC accounting services for established ecommerce businesses making this transition. We bring financial activity from multiple ecommerce channels into one reliable accounting system. This helps owners understand the financial performance of the entire business.
From Amazon Seller to DTC Brand
For many established ecommerce companies, DTC represents the next stage of growth.
Amazon gives sellers access to an enormous marketplace and a sophisticated infrastructure for selling and fulfilling products. But as an Amazon seller grows, relying heavily on one marketplace can create concentration risk.
A DTC strategy gives an established Amazon seller another way to reach customers and develop its own branded ecommerce presence. It also allows the business to diversify sales while continuing to benefit from Amazon.
A growing DTC ecommerce business may eventually sell through:
- Amazon
- Its own DTC ecommerce website
- TikTok Shop
- Walmart Marketplace
- eBay
- Etsy
- Wholesale channels
- Other direct sales channels
The objective does not have to be leaving Amazon. Instead, the company can build a DTC and multichannel ecommerce business that reaches customers through several sales channels.
As the business expands, its accounting system must evolve with it.
Ecommerce Platforms Used by DTC and D2C Brands
Shopify is one of the most widely used platforms for building a branded direct-to-consumer ecommerce store. Customers visit the company’s website, shop under its brand and purchase directly from the business. Shopify provides much of the ecommerce infrastructure behind the website.
DTC and D2C brands can also operate their ecommerce stores through platforms such as:
- Shopify
- WooCommerce
- BigCommerce
- Wix eCommerce
- Squarespace Commerce
- Adobe Commerce (Magento)
- Custom ecommerce platforms
- Headless ecommerce storefronts
The ecommerce platform may change, but the accounting requirement remains the same.
Sales, discounts, refunds, payment processing fees, fulfillment costs and other ecommerce activity ultimately need to flow accurately into the company’s accounting records.
DTC Accounting Gets More Complex as Sales Channels Grow
One advantage of a DTC and multichannel ecommerce strategy is diversification. It also creates significantly more accounting data.
Consider an established Amazon seller that launches its own DTC Shopify store and later begins selling through TikTok Shop.
The company now has three sources of ecommerce sales activity. It may also have different transaction data, fee structures, payout schedules and fulfillment arrangements for each channel.
The deposits reaching the company’s bank account do not necessarily equal sales.
An ecommerce platform may reduce a payout for fees, refunds, adjustments and other activity before sending cash to the seller. Recording only the net deposit as revenue can understate sales, misclassify expenses and distort gross margin.
Accurate DTC accounting requires the accounting system to capture what happened before the net payout reached the bank.
Bringing DTC Ecommerce Activity Into QuickBooks Online
A growing DTC company still needs one reliable set of financial statements.
Accounting information from Amazon, Shopify, TikTok Shop and other ecommerce channels must ultimately come together in the company’s accounting system.
For many of our ecommerce clients, that system is QuickBooks Online (QBO).
Tools such as A2X can help translate detailed ecommerce transaction activity into accounting entries for QuickBooks Online.
However, software and ecommerce integrations alone do not determine whether the financial statements are correct.
The chart of accounts, mappings, inventory procedures, reconciliations and accounting decisions behind those systems determine whether management can rely on the resulting financial information.
Understanding DTC Channel Profitability
Growing sales does not necessarily mean growing profits.
A DTC business may generate significant revenue through Amazon, its branded ecommerce website, TikTok Shop and other channels. The financial results from each channel can be very different.
Marketplace fees, payment processing fees, advertising, fulfillment costs, discounts and returns can affect each channel differently.
Accurate DTC ecommerce accounting allows management to look beyond total revenue and understand how the business performs as it expands.
That information becomes increasingly important when management decides where to invest in inventory, advertising, fulfillment and future growth.
Inventory and Fulfillment for DTC Ecommerce Businesses
DTC brands may use several inventory and fulfillment models at the same time.
Products may be:
- Fulfilled through Amazon FBA
- Stored in a company-owned warehouse
- Held by a third-party logistics provider (3PL)
- Dropshipped directly from a supplier
- Distributed through a combination of fulfillment methods
As a DTC business grows, inventory can sit in multiple locations while the company sells products through multiple ecommerce channels.
The accounting system needs to properly reflect inventory and cost of goods sold. Management needs accurate gross margin and financial information to make decisions.
Poor inventory accounting can make a successful ecommerce business appear more or less profitable than it actually is.
DTC Accounting for the Next Stage of Your Ecommerce Business
Moving toward DTC does not require abandoning the marketplaces that helped build your company.
An established Amazon seller can continue selling successfully on Amazon while developing its own DTC ecommerce store. A Shopify DTC brand can add TikTok Shop, Walmart or other marketplaces. A growing ecommerce company may eventually combine marketplaces, its own website, wholesale relationships and multiple fulfillment methods.
As the business becomes more complex, the accounting infrastructure needs to keep pace.
Schultz & Associates provides DTC and D2C accounting services for established ecommerce businesses that need accurate financial reporting as they expand beyond a single marketplace.
Our goal is straightforward: bring the financial activity from each part of the ecommerce business together into accurate, useful financial statements. Management can then rely on those numbers as the company continues to grow.