Your Shopify store is all setup and ready to go! Now, you’re probably wondering where to start with bookkeeping, and it’s understandable if you feel a little overwhelmed. But don’t worry – we’re here to help!
In this blog, we’ll share many useful tips on bookkeeping specifically tailored for Shopify store owners like you. You’ll discover how to choose the best accounting software to suit your needs, determine where you have a sales tax nexus, handle returns and refunds without stress, and much more.
So, if you’re ready to simplify your bookkeeping and keep your business on track, keep on reading!
1. Set Up a Separate Business Bank Account
Mixing personal and business finances can create confusion, making it harder to track your business expenses and income accurately. A separate business bank account helps keep your financial records clean and organized.
This separation allows you to see how your business is performing without personal transactions getting in the way.
Using a dedicated business account also makes tax time easier. You can quickly identify business expenses, which helps when claiming deductions. This minimizes the risk of errors and saves time when filing taxes. Additionally, it makes audits less stressful, as you have clear records of business transactions.
A business bank account also adds professionalism. Customers and suppliers will see your business as more legitimate when transactions are done through a business account. It can help you build a business credit history, which is important if you plan to apply for a business loan or credit card in the future.
2. Choose the Right Accounting Software for Shopify
Good accounting software helps you track your income and expenses, manage invoices, and stay on top of your taxes. It can save you lots of time and reduce the chances of making errors.
With so many options available, it’s important to find software that fits your business needs and works well with Shopify. Here are our top suggestions.
- Xero: Xero is known for its easy-to-use interface and powerful features. It integrates well with Shopify, allowing you to sync sales, inventory, and customer data automatically. Xero offers strong reporting tools and multi-currency support, making it ideal for growing businesses.
- QuickBooks Online: This is one of the most widely used accounting software options. It offers a range of features, including expense tracking, invoicing, and tax management. QuickBooks integrates with Shopify to streamline your bookkeeping processes, making it easier to keep your financial records up to date.
- FreshBooks: FreshBooks is a user-friendly accounting software that’s perfect for small businesses. It offers features like time tracking, expense management, and invoicing.
- Wave: It’s a free accounting software option that provides basic bookkeeping features, such as invoicing and expense tracking. While it may not have as many advanced features as other options, Wave is a great choice for new or small Shopify businesses looking for a budget-friendly solution.
- Zoho Books: Zoho Books is a comprehensive accounting software that offers features like automated workflows, inventory management, and detailed financial reporting. It integrates smoothly with Shopify, making it easier to handle your e-commerce accounting needs.
3. Regularly Reconcile Shopify Sales with Bank Statements
Reconciliation means matching the sales recorded in your Shopify account with the transactions shown in your bank account. This process helps you ensure that all your sales are correctly recorded and that there are no discrepancies or errors.
By reconciling regularly, you can quickly catch mistakes, such as missing payments or incorrect transaction amounts. This is important because even small errors can add up over time, leading to inaccurate financial reports.
Keeping your accounts reconciled also makes it easier to manage your cash flow. You can clearly see how much money is coming in and going out, which helps you make informed decisions about your business.
It’s a good habit to reconcile your sales with your bank statements at least once a month.
4. Understand Your Sales Tax Nexus Obligations
Sales tax nexus refers to the connection between your business and a state that requires you to collect and pay sales tax.
Nexus can be created by various factors, such as having a physical presence, reaching a certain sales threshold, or using third-party warehouses. Each state has its own rules and requirements, which can make understanding sales tax nexus complicated.
For example, if you’re running a business in Alpharetta, your sales tax nexus would be determined by Georgia’s specific regulations. You may need to collect sales tax on orders shipped to customers within the state.
If you reach a certain number of sales or revenue in other states, you might also have to collect and remit sales tax there. Failing to comply with these rules can lead to penalties and fines.
If you’re unsure about how to determine your sales tax nexus obligations, it’s always recommended to work with a tax professional who understands local laws. In this case, partnering with a skilled accountant who offers Alpharetta bookkeeping services would ensure you understand your obligations clearly. They can help you set up proper sales tax collection procedures, keep track of your sales, and file your tax returns.
By staying on top of your sales tax nexus, you will avoid costly mistakes and ensure your business remains compliant.
5. Manage Refunds and Returns Efficiently
A clear and organized process can help you handle refunds and returns with ease, minimizing any potential issues. Here are 3 straightforward ways to do it.
Establish a Clear Refund and Return Policy
Clearly outline your refund and return policy on your website, including the time frame for returns, condition requirements for returned items, and any non-refundable items. Make this information easy to find.
Use Shopify’s Refund and Return Features
Utilize Shopify’s order management system to issue refunds. This updates your financial records automatically and ensures that refunds are linked to the corresponding order.
Ensure that returned products are added back to your inventory if they are in a resalable condition. Shopify can automatically update your inventory, which helps maintain accurate stock levels.
Monitor and Analyze Return Data
Track the reasons for returns (e.g., product defects, wrong size, dissatisfaction) to identify any recurring issues. This information can help improve product quality or adjust product descriptions to reduce future returns.
Regularly review your return process to identify areas for improvement.
6. Monitor Cash Flow Consistently
Keeping a close eye on your cash flow helps you understand your financial health and make better decisions. Positive cash flow means you have enough money to cover your expenses, invest in your business, and handle any unexpected costs.
To monitor cash flow effectively, start by tracking all your income from sales and other sources. This includes money from Shopify sales, refunds, and any other revenue streams.
Next, keep track of all your expenses. This could be inventory purchases, marketing costs, shipping fees, and software subscriptions. Regularly updating these records will give you a clear picture of your cash flow status.
7. Implement a Proper Invoicing System
A well-organized invoicing system helps you track payments, manage customer orders, and maintain accurate financial records. Here’s how to do it.
- Choose your software: We’ve already mentioned several great options, such as QuickBooks, Xero, and FreshBooks.
- Set up invoice templates: Create professional templates that include your business name, logo, contact information, customer details, invoice number, date, and a detailed list of products or services. Clearly state payment terms, such as due dates and accepted payment methods.
- Automate invoice generation: Use your invoicing software to automatically generate invoices after each sale. This saves time and ensures consistency across all customer transactions.
- Send invoices promptly: Make it a habit to send invoices immediately after completing a sale or service. Prompt invoicing helps maintain accurate records and encourages timely payments.
- Establish a follow-up routine: Set up automated reminders through your invoicing software for customers who have not paid by the due date.
8. Keep Track of Shipping and Fulfillment Costs
These costs can add up quickly and
Start by recording every shipping cost associated with each order. This includes packaging materials, shipping fees, and any additional costs like insurance. Use Shopify’s built-in tools or accounting software to track these expenses accurately.
Also, consider negotiating with shipping carriers for better rates if your volume increases. Lower shipping costs can improve your bottom line.
9. Set Up Payroll and Manage Employee Expenses
If you have employees, it’s important to ensure they are paid accurately and on time.
To start, choose reliable payroll software that suits your business needs. The right software can automate calculations, deductions, and tax filings, saving you time and reducing errors. Make sure to input employee details correctly, including salaries, hourly rates, and any additional benefits or bonuses.
Keep track of all employee expenses, such as travel, meals, or supplies. Have a clear expense policy in place and require employees to submit receipts for reimbursement. Regularly review and approve these expenses.
And that’s it! Those were our 9 essential tips you should follow to keep your business bookkeeping on track. Remember to double-check things, keep detailed and organized records, and don’t hesitate to reach out for help if you need it. We wish you all the best with your Shopify store!
Frequently Asked Questions
How Do I Handle Sales Tax for My Shopify Store?
To handle sales tax for your Shopify store, first determine if your business has a sales tax nexus in any state. Shopify offers built-in tools to help you calculate and apply sales tax based on customer locations.
Make sure to configure these settings correctly. Keep track of all sales tax collected and file returns as required by each state.
How Do I Manage Inventory Accounting in Shopify?
To manage inventory accounting in Shopify, start by accurately tracking all the products you sell. Use Shopify’s built-in inventory management tools to add, update, and categorize your products.
Make sure each product has a unique SKU (Stock Keeping Unit) to avoid confusion.
Regularly update your inventory to reflect new stock, sales, and returns. This helps you know exactly what’s available at any given time.
What Reports Should I Review Regularly for My Shopify Business?
You should regularly review the sales report, inventory report, profit and loss statement, cash flow report, and tax report.
The sales report shows your total sales, best-selling products, and customer purchasing trends. The inventory report is essential for tracking stock levels and identifying when to reorder items.
Check the profit and loss statement to understand your revenue, expenses, and overall profitability. The cash flow report helps you see the money coming in and going out. Finally, the tax report should be reviewed to track collected sales tax and prepare for tax filing.
Should I Plan for Seasonal Sales and Cash Flow Fluctuations?
Yes, you should always plan for seasonal sales and cash flow fluctuations in your Shopify store.
Many e-commerce businesses experience higher sales during holidays, special events, or specific seasons. Preparing for these peaks can help you manage inventory, staffing, and marketing efforts more effectively.
On the other hand, slower sales periods might
