The Ultimate Guide To Shopify Accounting And Automation
Updated : 29-May-2023
If you're running a Shopify store, chances are you're always looking for ways to streamline your accounting and automate your business processes. After all, who has time to keep track of sales tax and inventory levels when there's so much else to do?
The good news is that there are plenty of great tools out there that can help you with both of these things. In this guide. In this article, we'll go over the basics of bookkeeping and introduce you to some great Shopify accounting tools that can automate tedious tasks and save you time.
Let's get started!
What is Shopify accounting, and why is it important?
Shopify accounting is tracking and managing your store's financial transactions. This includes things like sales, expenses, inventory, and taxes.
Why is it important? Because having a clear picture of your store's finances can help you make better decisions about where to invest your time and money. It can also help you avoid costly mistakes, like overspending on inventory or forgetting to pay taxes.
What are some common accounting tasks?
There are a few key accounting tasks that all Shopify store owners need to stay on top of:
1. Tracking sales and expenses
This is the most important task on the list. After all, you can't make informed decisions about your business unless you know how much money you're making (and spending).
2. Managing inventory
If you're selling physical products, you must keep track of your inventory levels. This includes knowing what items you have in stock, what needs to be reordered, and how much it will cost to restock.
3. Paying taxes
Depending on your location, you may need to collect and remit sales tax on your orders. This can be a complex task, so it's important to stay up. Here learn how to setup taxes on shopify.
By setting up a system in advance, you can avoid the last-minute scramble to get your taxes done each year. Plus, you'll be able to take advantage of tax planning strategies that can save you even more money.
What are some challenges for Shopify Accounting?
Inventory Budgeting and Tracking
Shopify accounting can be challenging for some business owners, particularly regarding inventory budgeting and tracking. Many small business owners are unaware of the need to track their inventory levels regularly, which can lead to overstocking or understocking issues. Without proper inventory tracking, business owners may also find it difficult to make informed decisions about pricing and promotions.
Your Shopify settlements don’t tell the whole story, especially when you factor in PayPal, other platforms, and refunds.
So how do you make sure you’re getting the full picture of your eCommerce business? The answer is simple: use a tool like Fulfillment Report from eCommerce Insights.
This reporting tool pulls all of your sales data, including Shopify settlements, into one place, so you can see your business’s full financial picture. Plus, Fulfillment Report offers a suite of other features designed to help you run your eCommerce business more effectively, including automated reporting, real-time alerts, and customized dashboards.
How to do accounting for Shopify businesses
There are a few key things that you need to keep in mind when doing accounting for your Shopify business. Just like you have a system for every other business process, from factories and product uploads to customer support and hiring, accounting should be no different.
There are a few key methods for accounting that all Shopify businesses should be aware of. Today we're going to go over the basics of accounting for your Shopify business, including:
1. How to track your income and expenses
2. How to categorize your transactions
3. How to record your sales and revenue
So let's get started!
Income and Expenses
The first step in accounting for your Shopify business is to track your income and expenses. This seems like a no-brainer, but it's important to have a system in place for recording everything that comes in and goes out of your business.
There are a few different ways to track your income and expenses, but the most important thing is to find a system that works for you and stick with it. Some people prefer to use spreadsheets, while others prefer dedicated accounting software.
Whatever system you use, make sure to track all of your income and expenses in one place. This will make it much easier to generate accurate financial reports later on.
The next step in accounting for your Shopify business is categorising your transactions. This is important because it will help you track where your money is going and identify areas where you may be overspending.
You can file your transactions a few different ways, but what's most crucial is finding a method that helps you stay organized. Some people prefer to use simple categories like "Income" and "Expenses," while others prefer more detailed categories like "Product Costs" and "Shipping Fees."
Recording Sales and Revenue
The next step in accounting for your Shopify business is to record your sales and revenue. This is important because it will help you track your progress over time and identify areas of your business that are doing well (or not so well).
While there are various ways you can document your sales and income, it's more imperative to find a system that is easy for you to follow. Some individuals prefer utilizing spreadsheets, while others like software created explicitly for accounting purposes.
Follow Shopify accounting best practices.
Though it may be difficult to hear, your business is not unique but that's not necessarily a bad thing. Here are some best practices all eCommerce businesses should follow, regardless of the platform they use.
It's important to keep your books up-to-date so that you have an accurate record of your finances. This will help you make better financial decisions and avoid penalties.
2. Inventory Management
If you're selling products, you need to have a good system for managing your inventory. This includes tracking stock levels and managing orders and returns.
3. Set up fraud prevention measures to avoid chargebacks.
Chargebacks can be a major headache for eCommerce businesses. To avoid them, implement measures to prevent fraud, such as requiring a signature on delivery or using AVS (address verification system) when processing payments.
4. Develop reliable and consistent financial practices
eCommerce entrepreneurs who rely on bank balance accounting check their bank balance(s) a few times per week and, if everything appears fine, go about their business as usual. This works for those with small businesses, but when you have employees, thousands of dollars in sales each month, and more regular inventory runs - like most growing businesses - this ad hoc system can quickly lead to cash flow issues and unnecessary stress.
The bottom line is if you're running a Shopify store, it's important to have a good accounting system to manage your finances effectively. There are several great accounting software programs out there that can help you do just that.