A reseller buys from several suppliers, holds some stock, sells through one or more channels, and lives on a margin that is often under twenty per cent. With margins like that, you need accounts that tell you more than a single answer in June.
Why cost of goods sold matters most
Revenue minus purchases is not your margin. The cost that belongs against a sale is the cost of the specific goods sold, including what it cost to land them. That means supplier price, freight, customs duty and any import charges you cannot recover.
Stock still sitting in the warehouse is an asset, not an expense. Treating it as an expense distorts both your profit and your tax position.
Once this is set up, you can answer the questions that matter. Which supplier is actually cheapest after freight? Which product line carries the business? And which one has been quietly losing money since the last price rise?
Stock valuation
Stock is valued at the lower of cost and net realisable value. In plain terms, that is the lower of what you paid and what you can realistically sell it for, after selling costs.
The second part matters if you hold seasonal or fast-moving goods. If a line will only sell at a discount, write it down when that becomes clear, not when it finally sells. This keeps the annual report accurate and stops a bad quarter from hiding inside the balance sheet.
Import VAT and duty
Goods brought in from outside the EU carry two charges. Import VAT is generally recoverable if you are VAT registered and the goods are for your business. Customs duty is not recoverable, and it belongs in the cost of the goods.
Mixing the two is a common and expensive error. Duty claimed as input VAT is a reclaim that will be reversed. Duty left out of stock cost understates what your products really cost you.
Ask for the landed cost per unit. Without it, nobody can tell you your margin, including you.
Supplier credit and terms
Volume rebates, settlement discounts and credit notes all change the cost of goods you already sold. Match them back to the purchases they relate to, rather than booking them as miscellaneous income. Otherwise your margin looks worse than it is during the year, and better than it is at the end.
Selling through several channels
Your own webshop, a marketplace, wholesale to trade customers and occasional retail each come with different VAT treatment, fees and payment timing. Keep them visible separately in the accounts. The profitable channel is rarely the one that feels busiest.
What we set up for resellers
- Cost of goods sold with landed cost, so margin figures are real.
- Stock valuation that holds up in the annual report and any audit.
- Purchases matched to supplier invoices, credit notes and rebates.
- Sales split by channel, and by destination country where the EU One Stop Shop (OSS) applies.
- Import VAT and duty separated correctly.
- A monthly margin report by product line, not just a profit total.
Frequently asked questions
Do I need inventory accounting if I only hold a little stock?
If you hold any stock at a year end, it has to be valued and shown on the balance sheet. Even small quantities affect the reported profit, and so what you can distribute.
Is customs duty recoverable in Estonia?
No. Import VAT is generally recoverable for a VAT-registered business, but customs duty is not. Duty forms part of the cost of the goods.
How do I know which product line is profitable?
You need cost of goods sold based on landed cost, and sales analysed by line. Without both, a profit total tells you the business made money but not which part of it did.
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