Updated June 3rd, 2018
Shopify is truly a great product. They allow ‘wantra’-prenurs to become entrepreneurs. They allow small businesses to flourish. One of the most challenging aspects of Shopify is the accounting piece. Let’s dive into this a bit deeper.
Let’s take a look at a simple Shopify setup. You launch your store. You list your products. Link to your bank account. Hustle to get customers and boom! you get some sales. Now a few days later, you get a deposit in your bank account.
That deposit is really not all the money you received for the sale. Really you received a few percentage points more. To find out what exactly is going on, let’s take a look at the payouts within Shopify. This can be found on your homepage under ‘view payouts’ on the right half of the screen. Now, select the most recent date that matches the amount seen on your bank account.
This will allow you to see the full picture. Shopify keeps some of the money for processing and often times you will see your refunds deducted from a future payout. The key to accounting properly is tracking all those additional expenses and refunds. What good are financial statements if they do not record everything going on in your business?
Let’s take a look at how we can track all the aspects of the transaction. For those using QuickBooks, you would go to ‘item list’ and create three different services; 1) Merchandise Sales 2) Processing Fee 3) Refunds. Sale of products should map to the income item in your chart of accounts, where you record revenue. Merchant processing should map to credit card fees on your chart of accounts (usually under bank fees). Refunds should hit a line item under income titled refunds, usually an income item.
Let’s take a look at how these are mapped. Please be aware the exact chart of accounts will vary business to business based on your configuration.
1 – Merchandise Sales
2- Processing Fee
3 – Refunds
Once done, you have the basic framework for success and need to record your sales. We then want to create a “new customer” where we will track all our Shopify sales. This customer will simply be called Shopify Sales. Under this customer we want to create a sales receipt.
Let’s pull up a recent deposit in Shopify. You will see the three components we added to the item list. Those items are the total sales, credit card fees and refunds. On the sales receipt, the total sales should be positive, the credit card should be negative (subtracted from total sales) and the refund should be negative (subtracted from total sales). The date should be the date in which the majority of the sales took place. Save this sales receipt.
Now, pull the income statement under reports. The sales, refunds, and credit card expenses should now appear on your income statement. If you did this correctly they will map to the correct accounts on this report.You have now properly recorded Shopify sales in QuickBooks! This method can also be used for all other accounting softwares as well.It is important to note that this method does not track cost of goods aka COGS. COGS will need to be tracked in a separate method. So the above works great for a solo-preneur who uses the cash basis method of accounting. The other way to quickly track COGS is generate one invoice at the month end for all items sold during the period – by using a $0 sales amount for that invoice, you will easily track the COGS knowing your revenue is correct as outlined in the method above.
Who is Zac Weiner?
A freelance financial and accounting consultant for hire in New York City with almost 10 years experience in the real estate, tech, restaurant and startup sectors. I started my career in the startup sector, moving to real estate, and the hospitality industry before finally working as a freelance financial consultant.
I offer a wide range of financial consultancy services — from full financial strategy and daily accounting management to financial vision and outsourced CFO services. Though I’m based in NYC and often work with clients in their offices, I handle financials for organizations across the country.