scruttonbland.co.uk
E COMMERCE
The E-Commerce Landscape In The UK
Five Ways Outsourcing Your Business Finances Can Benefit You
Starting To Sell In Other Countries?
Contents
Welcome To The Summer Edition Of Our E-Commerce Newsletter
3 Welcome To The Summer Edition Of Our E-Commerce Newsletter
8 Connecting With Amazon Experts
10 Reconciling Amazon Transactions
4 The E-Commerce Landscape In The UK
12 Starting To Sell In Other Countries? How To Handle The VAT
6 Five Ways Outsourcing Your Business Finances Can Benefit You
14 Meet The Team
Welcome to our latest E-Commerce newsletter; in this edition, we explore the growing importance of e-commerce in the UK economy and the challenges businesses face when transitioning to an online presence.
W e provide valuable insights into the logistics, administrative tasks, and red tape involved in selling online and abroad, as well as the challenges of sourcing products from overseas factories. Our goal is to help business owners start and run successful e-commerce businesses, giving them more time to work on their business rather than in it.
In this edition, we feature articles from industry experts, about their experience transitioning business to a direct-to-consumer e-commerce
model, as well as looking at options for automating transaction reconciliation.
We also introduce our new outsourcing service, which can provide valuable support and time savings to business owners, and we explore the practical issues of reporting requirements when selling abroad to consumers.
Simon Pinion Business Advisory Partner
We hope you find this edition informative and helpful in your e-commerce journey.
2 | SCRUTTON BLAND | E-COMMERCE
E-COMMERCE | SCRUTTON BLAND | 3
The E-Commerce Landscape In The UK
In recent years, the United Kingdom has witnessed a profound shift in consumer behaviour, with an increasing reliance on digital platforms for shopping. Simon Pinion, Business Advisory Partner explores the e-commerce landscape in the UK and the opportunities it brings.
T he e-commerce economy in the UK has flourished, propelled by technological advancements, changing consumer preferences, and the convenience offered by online shopping. As we delve into the state of the e-commerce economy in the UK, it becomes evident that it has not only transformed the retail landscape but has also become a cornerstone of economic growth and innovation.
Unprecedented Growth The e-commerce sector in the UK has experienced unprecedented growth, with online sales consistently outpacing traditional retail. According to recent statistics from the Office for National Statistics (ONS), online sales accounted for over 25% of total retail sales in the UK, demonstrating the significant impact of e-commerce on the economy. The chart plots this growth over the last 10 years. It can be seen how Covid accelerated the growth and undoubtedly accelerated uptake of online customers.
The proliferation of Online Marketplaces The rise of online marketplaces such as Amazon, eBay, and Etsy have provided both consumers and businesses with unparalleled opportunities. These platforms offer a vast array of products and services, catering to diverse consumer preferences and driving competition in the market. Opening your own online store brings agility to retailers that cannot be matched with bricks and mortar, removing a huge barrier to entry and encouraging new startups. There is a lot to learn, though, with product listings and understanding how the Amazon algorithms work. On page 8 of this newsletter, we hear from one of our expert consultants who has gained a large insight into this and other areas.
Mobile Commerce Revolution The proliferation of smartphones and mobile devices has fuelled the growth of mobile commerce (m-commerce) in the UK. With increasing smartphone penetration and the development of user-friendly mobile apps, consumers can now conveniently shop anytime, anywhere, further propelling the e-commerce economy. Convenience will drive sales. Evolving Consumer Behaviour The digital-savvy consumer base in the UK seeks convenience, personalised experiences, and competitive pricing. As a result, retailers are embracing innovative technologies such as artificial intelligence (AI), augmented reality (AR), and machine learning (ML) to enhance the online shopping experience and stay ahead in a competitive market.
Challenges and Opportunities While the e-commerce economy in the UK presents immense opportunities for businesses, it also poses challenges such as cybersecurity threats, logistical complexities, and regulatory compliance. Unfortunately, it also poses record keeping challenges, such as tracking sales and inventory across multiple platforms and reconciling against platform fees. However, forward-thinking companies are leveraging data analytics, automation, and cybersecurity measures to address these challenges and capitalise on the growing e-commerce market.
Future Outlook Looking ahead, the e-commerce economy in the UK is poised for continued growth and innovation. Emerging trends such as social commerce, voice commerce, and sustainability- driven shopping are expected to shape the future of online retail. Moreover, the ongoing digitalisation of traditional industries and the adoption of omnichannel strategies will further blur the lines between online and offline shopping experiences. The e-commerce economy in the UK is thriving, driven by technological advancements, changing consumer behaviour, and the pursuit of convenience and innovation. If you are a business looking to adapt and embrace digital transformation reach out to Simon or a member of our e-commerce team to see how we can support you by calling 0330 058 6559 or by emailing hello@scruttonbland.co.uk
Internet sales as a percentage of total retail sales (ratio) (%)
40.0
35.0
30.0
25.0
0.0
125.0
10.0
5.0
0.0
2014 FEB 2014 SEP 2015 APR 2015 NOV 2016 JUN 2017 JAN 2017 AUG 2018 MAR 2018 OCT 2019 MAY Source: ONS
2019 DEC 2020 JUL 2021 FEB 2021 SEP 2022 APR 2022 NOV 2023 JUN 2024 JAN
4 | SCRUTTON BLAND | E-COMMERCE
E-COMMERCE | SCRUTTON BLAND | 5
Five Ways Outsourcing Your Business Finances Can Benefit You
Time Savings E-commerce is a fast-growing area and as a result, the market is competitive. Directors and business owners can lose valuable time trying to navigate the intricacies of reconciling transactions to sales made via various platforms and this is the case even when the system setup is effective and efficient (think stock management systems integrated seamlessly with finance software). This time could be better used by concentrating on the operational side of the business and driving continued demand for products. Outsourcing your finance function can free up your time as a business owner to do just that, with all allocation and reconciliation completed by outsourcing professionals who can ensure that your financials are recorded in a timely manner. Tax Compliance Support In a lot of cases, sales are processed through multiple forums and in multiple currencies and import/export VAT can be difficult to understand if you’re not from a finance background. Using an outsourced finance service can help ensure that transactions are recorded in your finance system correctly in the first instance, meaning you can rely on a correct VAT return being prepared when the deadline comes around. Outsourcing providers will often have access to tax specialists who can provide in-depth information and advice surrounding your trading activities. Cost Savings An outsourced finance function can save you money when compared to the cost of an in- house finance team for a few reasons:
Scalable and Flexible A major benefit of outsourcing your finance is that providers will grow with your business, providing a pick-and-mix of services to keep up with your evolving needs. In the first instance, a business may require bookkeeping and VAT services to keep the financial records up to date. This may evolve over time into a requirement for management reporting and support with budgets. Flexibility is also another big benefit when your finance function is outsourced. Bookkeeping can be completed on a quarterly, monthly or weekly basis, depending on the need of the business at any point in time. This means the service provided always aligns with the needs of the business. Better Understanding Of Cashflow Cashflow can be hard to manage effectively within an e-commerce business as it can be hard to predict when sales will be made but is vital to making informed strategic decisions. An outsourcing provider can help with tracking and reporting cash flow to help make the best decisions for the business. This can be done to pre-agreed time frames to ensure that the information is at hand for whenever it’s needed. To find out how our pick-and-mix outsourcing service could benefit your business at any stage of the business life cycle, get in touch with Lydia by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
Accounting for e-commerce businesses can be a minefield when it comes to compliance, but outsourcing your finance function can help with navigation of this. Lydia Brasted, Outsourcing Manager shares five ways that outsourced finance can benefit businesses.
1.
Businesses will often be charged less for final accounts preparation if their accountant is completing the bookkeeping for them No need to train or arrange CPD for external finance providers, saving a business the ongoing cost of maintaining staff Businesses pay for the level of experience required at different rates. Compared to the annual salary of staff members required to complete the job in-house, there are often savings here
2.
3.
6 | SCRUTTON BLAND | E-COMMERCE
E-COMMERCE | SCRUTTON BLAND | 7
Connecting With Amazon Experts When you work with the Scrutton Bland E-commerce Business
Advisory Team it is more than just the numbers. We work with consultants who are experts in Amazon, product and factory sourcing on an international level.
O ne of those consultants, who is also a Business Advisory client, gives us some insight as to how he developed his knowledge as he stepped into the world of Amazon with one product and now sells globally as well as helping others achieve the same through consultancy. Ray has 30 years of product marketing. He takes us through how he started, the initial challenges and how he now helps others.
I set up my company in 1993, just before leaving my Financial Worlds job in Derivatives where I worked in the US, Germany, Switzerland, and the UK. It was born out of finding products that were different from what was out there, starting in the sporting goods area and switching to cleaning products, I have launched, and managed products that you will use today. Products that have become global hits like Oxi Clean, which we know better these days as Vanish Oxi Action. When I started looking at Amazon as an opportunity, it was many years ago and was done by supplying them directly. This was fraught with issues, hidden costs, and charges which made it unappealing, so I set about having re-sellers who lived and breathed Amazon and eBay. As time went by, I got more intrigued as to how Amazon worked, and with impeccable timing, I opened my account on 29 January 2020 with just one product, just to see how it worked. In March 2020 lockdown arrived, and so my one product that had been gathering dust suddenly became very popular. That product was a microfibre radiator brush.
Sales went from one or two to dozens, and then multiple dozens and into the 100s, which kept us very busy working from home, packing and dropping parcels at the local Hermes (now Evri) drop-off shop. From there, we added more products that we had in the warehouse and haven’t looked back since.
Not being happy with just the UK, my go- getting style got me looking at launching in the EU. Since Brexit, as we all are aware things have become more bureaucratic, Amazon does assist you to launch elsewhere and they have approved companies to utilise, and you tap into Amazon’s subsidies. So, getting registered for VAT in five countries was actually quite straight forward albeit each country had different needs, e.g. Poland, black ink, the signature must 100% match your passport signature, Spain required Notarizing, Italy was the easiest, all electronic just clicked and done. I have spent 28 years scouring the world for products, notably China. It has been a voyage of discovery, and I now have three strategic partners who specialise in different areas - from plastic goods to mechanical technical products, and factory control if running a bespoke product. All these contacts were very helpful during COVID-19, as they helped me ship PPE to customers in the UK including NHS England.
I have supplied major retailers in the US and the EU, names such as Costco US and EU, Bed Bath and Beyond, Walgreens, Linens N ’Things, and Home Depot among others. Amazon is a vast marketplace with enormous potential, and launching your brand on it can be a rewarding experience. I have gained extensive knowledge of navigating the platform and developed shortcuts, workarounds, and effective ways to make your products and brand stand out amidst the competition. Whether you are thinking of launching on Amazon, and maybe a little phased by how to do it or are already doing some Amazon business and want to do better or extend your reach to other Amazon territories, I can help. Amazon identified my brand and potential and offered me a development program that involves me having my own Amazon internal account manager and specialist. He has helped me understand how Amazon views sellers and their listings, and how to make things better so that you reach a higher positioning in product searches and win the all-important Buy Box.
As a seasoned Amazon seller with a successful track record of launching my brand on the platform, I am now fortunate enough to work with other business looking to sell online or expand on their offering and provide guidance and strategies needed to achieve success. If you are interested in discussing your business with Ray, please get in touch with our e-commerce team by emailing hello@scruttonbland.co.uk
There were countless things to learn, and given we were in lockdown, I had the time to spare.
I spent a lot of time researching, watching videos, and a bit like Thomas Eddison, a lot of trial and error, I gained a lot of knowledge which has become invaluable. There were routines that Amazon said I needed to follow in certain areas which were laborious, however, I found workarounds that saved time and effort, little inside tricks that just sped things up, and helped me achieve a much better response with my listings and their positioning.
8 | SCRUTTON BLAND | E-COMMERCE
E-COMMERCE | SCRUTTON BLAND | 9
R econciling Amazon transactions can be a challenge, accounting for sale price, VAT, refunds, charges, settlements and what is kept in the Amazon reserve accounts can be confusing and time consuming, especially if you choose to do this manually. There are multiple approaches to this, so let’s explore some of these.
Reconciling Amazon Transactions Selling on Amazon is a great way to get your products out to a huge market in a simple way. You can start small, but scale quickly if your products get traction. This can create operational challenges, none more so than for finance. Ryan Pearcy, SB
Direct links Some finance software have direct links to the Amazon reseller platform. QuickBooks Online (QBO) and FreeAgent are examples of these, whereas Xero and Sage Business Cloud do not have direct integrations at the time of writing this article (June 2024). The QBO solution is free, whereas FreeAgent charges £6 per month from 30 April 2024. The QBO offering splits out transactions automatically and shows your top selling products, as well as how many orders and income you have. It does not track inventory and the automatic allocations are not editable so you cannot control how it posts. It does not have great reviews which highlights its limitations and complexity. The FreeAgent offering only works on UK sales and needs a new version of the Mettle bank account to support settlements. It is a relatively new release and on that basis is still proving itself in the market. Integrator tools The complexity surrounding e-commerce sales from a financial perspective has led to a large volume of connector tools that automate the postings into finance systems. Examples of these are A2X, Dext Commerce, Linkmybooks, Synder, Weava and SaaSant, but there are more available. Each one operates slightly differently but with the ultimate objective of automating all postings so that you don’t need to do anything. They allow you to customise allocations, make adjustments and review what is going on. A2X is probably one of the first built and reliable, with the ability to split per product to specific nominals and tracking categories. This enables granular reporting in your finance system if you need it. Dext Commerce is another powerful tool in this space, which is more flexible but not as simple to follow when opening. If you use Dext Prepare it would make sense to use this tool as they are building offerings across their various platforms. Another one to mention is Weava as this can calculate Pan European VAT based on your order’s destination and tax jurisdiction, a highly complicated area once you start selling abroad. It should be noted that Weava only works for the EU and cannot handle US sales tax.
All of these tools require customisation upon setup but are simpler than working with the Amazon settlement reports or the direct integrations. They all come with a monthly cost, averaging between £15 per month and £100 per month based on volume and number of sales channels. Inventory systems Once you move into multiple sales channels, so that Amazon is just one offering, handling finite stock across these channels becomes a challenge. Rather than manually updating every item on every channel daily, there are inventory management solutions that connect to these channels, such as Amazon, and automate this. Examples of this are Expandly, Unleashed and Cin7. These tools handle inventory management from purchase to sale, updating availability and pushing transactions through to the finance system. Expandly is a tool that has grown into managing inventory across platforms. It will reconcile transactions but does not handle the inventory management side that well. Unleashed updates the inventory value in Xero, enabling you to have confidence in your profits, but will push across every transaction. Cin7 enables you to consolidate transactions daily, minimising transaction volume in your finance system which is important for scale. Best choice for you The best tool for you as an Amazon seller is based on your current business position and system setup, as well as where you expect to be in the near future. The integrator tools are a strong and reliable offering and one we tend to recommend, but an inventory tool may be a more suitable selection depending on your needs. We always advise speaking to an expert to ensure you select the right system for your needs, get this implemented correctly and have someone to reach out to for support if things change. The SB Digital team can assist so please reach out to Ryan if you have any queries by calling 0330 058 6559 or by emailing hello@scruttonbland.co.uk
Manual The basic way to handle transactions is
manually. Amazon create a settlement report for every deposit into your bank and this can be entered into your finance system as a journal. The settlement reports are not the easiest to interpret and it is common for these to be posted incorrectly if there is a lack of experience in finance and specifically e-commerce accounting. They are also not designed in a way that enable you to split out transactions per product or product group, making it impossible to segment your reporting in your finance system. A key item to flag at this stage is to ensure VAT is accounted for correctly for Making Tax Digital. To do this you should ensure settlements are occurring daily so that your accounting transactions are logged on the day your sales take place. Manual posting these transactions in volume is time consuming and prone to error. Bank rules in tools like Xero normally would help here, but the complexity of the settlement reports means both these and automatic document entry apps such as Dext cannot process these transactions accurately.
Digital Associate Partner, looks at how you can make your life easier when it comes to reconciling Amazon transactions.
In summary, manual posting is not a viable solution as you seek to scale.
1 0 | SCRUTTON BLAND | E-COMMERCE
E-COMMERCE | SCRUTTON BLAND | 1 1
Starting To Sell In Other Countries? How To Handle The VAT
When identifying whether there is a requirement for a business to register and report sales in an overseas country for indirect tax purposes, it is important to remember that different rules are likely to apply to the sale of goods, and to the sale of services (whether made remotely, or otherwise).
F urthermore, different treatment is likely to be applied to sales made to a business, and sales made to the public (referred to from hereon in as consumers). It is therefore important to confirm the customer’s status. In most cases, the reporting of sales to other businesses (‘B2B’) is less complex. This is due to zero rating relief on exports of goods, and mechanisms such as the reverse charge for services, which shifts the indirect tax responsibility to the customer. We have therefore left B2B sales outside of the scope of this article. It is worth noting that whilst it is part of the United Kingdom, Northern Ireland is still considered part of the European Union (‘EU’) for VAT purposes, so has some different rules to England, Scotland, and Wales. Goods When considering reporting requirements in relation to the sale of goods to consumers, let’s assume that we have not shifted the responsibility for payment of indirect taxes and duties to the customer.
We’ve all suffered the disappointment of receiving a notification that our parcel has arrived at the post office only to be told when we get there that we need to pay a further £X to cover the cost of VAT and duty before we can take the package home. As you will see, many countries (including the UK) have put requirements in place that shift the responsibility for reporting VAT to the seller of the goods in most cases. Example A UK business plans to export goods from the UK to France. The sales are all made to non-VAT registered consumers. In the UK, subject to obtaining evidence that the goods have left the country, the sales are classed as zero-rated exports. The UK VAT return simply shows the value of the sale in box 6. Post-Brexit, the responsibility to pay VAT in France has shifted from the consumer (who in most cases actually paid UK VAT) to the seller. Due to the nil threshold for non-resident businesses, this means that a VAT registration is required in France.
But what if the UK business sells goods to France, and Spain, and Germany, and even Ireland? Are multiple VAT registrations required? Technically, yes. However, a simplification, the Import-One-Stop-Shop (‘IOSS’), was introduced from 1 July 2021 for consignments of goods valued at less than €150. This allows a business to register in one EU member state and declare VAT due in each country at the applicable rate to that tax authority through one return. For example, the business might register for the IOSS in France and declare VAT at 20% on goods sold to France, 21% Spanish VAT on goods sold to Spain, 19% German VAT on goods sold to Germany, and 23% Irish VAT on goods sold to Ireland. This is then paid to the French tax department who remit the relevant amount to each country’s tax authority. The major disadvantage of this is the cost involved in appointing an agent to act as fiscal representative which is a requirement under the IOSS. That agent becomes jointly and severally liable for VAT debts of the seller so is likely to exert close control over the return workings and underlying transactions, and in turn charge a handsome fee. This cost is still likely to be lower and less burdensome than administering a VAT registration in each EU member state.
Where consignments of goods over €150 are sent to EU countries, the IOSS cannot be used. To avoid multiple registrations in this scenario, a business may choose to establish a presence and register in one member state (The Netherlands is quite popular given its proximity to the UK and logistics infrastructure) and make sales from that country to other member states. If the business has properly established itself in the EU (via a warehouse or 3PL arrangement), it may take advantage of EU distance selling thresholds which avoids the need for multiple registrations unless the volume of sales are significant. It is worth noting that some businesses using this arrangement have taken Irish sales outside of the EU registration and chosen instead to register for VAT in Ireland so it can ship goods direct from the UK rather than via mainland Europe. Similar measures which deem the place of supply to be the location of the customer are in place in other non-EU countries within Europe (Switzerland, Iceland, Norway etc.) and other countries (such as Australia) which are not in Europe. It is important to review the list of countries to which sales are made, to ensure obligations to register for indirect taxes are not missed.
In each of the scenarios above, it is likely the business will need to engage an overseas agent to administer the VAT registration and returns, due to technical and linguistic differences. Services The place of supply relating to services is further complicated by the exact nature of the service. Most business to consumer supplies (‘B2C’) of services result in a place of supply shift from the UK to the location of the consumer. Exceptions include land related services such as estate agency services relating to property in the UK, catering services, and the hiring of means of transport, all of which are taxed where performed. Under specific focus in recent years have been digital services provided remotely to mobile phones, tablets etc. This has resulted in many businesses becoming liable to register for indirect taxes all over the world to account for sales provided electronically.
In the EU, the Mini-One-Stop-Shop (‘MOSS’) which provided a similar ‘one return’ mechanism for sales of electronic services was started in 2015 and upgraded to the One-Stop- Shop (‘OSS’) in 2021 to include all services where the place of supply was considered the EU. Fortunately, there is no requirement for a business registered under OSS to appoint a fiscal representative, so returns can be submitted by a UK based organisation without representation. We also commonly see businesses register in Ireland and submit returns themselves through the Irish online system using English as the first language. The sales of services are outside of the scope of UK VAT, so no entry is made on the UK VAT return. Ignoring other services, most countries around the world have implemented similar systems for at least digital services, so it is worth reviewing whether overseas registration obligations exist for your business. Our specialist VAT Team are here to help you with your overseas VAT requirements. Contact them on 0330 058 6559 or email hello@scruttonbland.co.uk
1 2 | SCRUTTON BLAND | E-COMMERCE
E-COMMERCE | SCRUTTON BLAND | 1 3
Meet The Team We have a long-standing association with the e-commerce sector, and our specialists have a thorough understanding of the opportunities and challenges it currently faces.
We seek to build long term and trusted relationships with our clients, and to fully understand their businesses in order to provide bespoke and targeted advice.
Get in touch with a member of the team to see how they can help you.
Simon Pinion Business Advisory Partner simon.pinion@ scruttonbland.co.uk 01206 417202
Emma Clifton Business Advisory Partner emma.clifton@ scruttonbland.co.uk 01473 945764
Ryan Pearcy SB Digital Associate Partner ryan.pearcy@ scruttonbland.co.uk 01206 417218 Lydia Brasted Finance Manager lydia.brasted@ scruttonbland.co.uk 01473 945877
Joy Shaw Senior Tax Adviser joy.shaw@ scruttonbland.co.uk 01473 945837
Paula Mason VAT Manager paula.mason@ scruttonbland.co.uk 01473 945823
0330 058 6559 scruttonbland.co.uk
@scruttonbland
0829/06/2024/MKTG
Page 1 Page 2-3 Page 4-5 Page 6-7 Page 8-9 Page 10-11 Page 12-13 Page 14Made with FlippingBook Learn more on our blog