Key Takeaways
- Gain a financial advantage by fixing overlooked profit leaks before they hinder your store’s growth.
- Implement a system for tracking all business expenses and correctly valuing inventory to ensure accurate financial reporting.
- Build a more sustainable business by separating personal and business finances for greater clarity and peace of mind.
- Discover how minor costs like payment processing fees and unused app subscriptions can quietly drain your profits over time.
When your Shopify store takes off, running it can feel like a mammoth task.
Trying to manage everything yourself, from curating the product catalog to customer support, marketing, and bookkeeping, can lead to important jobs getting missed. Many people enjoy the creative aspects more and tend to delay, rush, or push aside admin-heavy tasks. This is why finances are often neglected. Leaks may be small at first, but they can add up quickly. If you’re a Shopify merchant, it’s important to get a handle on them as soon as possible. Here are seven of the ways your store may be leaking money, and how the right accountant can help plug them.
Unclaimed Business Expenses
Forgetting business expenses can mean your profits look higher than they really are. This can result in higher taxation. Essentially, you’re leaving money on the table, so it’s important to be vigilant about tracking your business costs. While running an online store may not incur as many expenses as a physical one, there are often more than you think. Little things like shipping tape and Zoom subscriptions can easily slip through the cracks. A good Shopify accountant can help you capture every eligible deduction, no matter how small.
VAT and Sales Tax Confusion
It’s fairly standard to serve shoppers in multiple regions, whether your customer base is across states or countries. However, this can get tricky when it comes to tax. In the EU or UK, you could face fines for not registering in time once you pass certain VAT thresholds. In the US, sales tax varies by state. The category of product also affects tax, making calculations even more complicated. Shopify accountants keep track of deadlines, reporting rules, and thresholds so you don’t end up getting penalized for simple mistakes.
Improperly Tracked or Valued Inventory
If you’re not tracking inventory correctly, it can skew your numbers. Inventory is often your biggest cost as a merchant, and getting it wrong affects profit, tax, and cash flow. This impacts your business decisions. Even something as minor as forgetting to log a batch of stock can have wider implications.
Another common error is using the wrong method to calculate the costs of goods sold (COGS). If you mark all your inventory purchases as immediate expenses, you could accidentally inflate your costs and shrink your profit on paper. That can be a red flag to tax authorities.
A qualified accountant knows how to monitor what you have and track inventory as an asset, not just an expense. They can register its worth the right way using methods like FIFO or weighted average. Unsold stock must also be recorded properly at the end of the year, and then there are aspects like discounts, returns, and write-offs to contend with. Unless you’re an accountant, taking care of these complex factors can be time-consuming, frustrating, and risky. Sometimes, things are better left to a professional.
Currency Conversion and Payment Processing
Another overlooked cash leak is payment and conversion fees, especially when you’re selling in multiple countries and currencies. Payment platforms like PayPal, Stripe, and Shopify Payments charge for conversions. If you have a lot of buyers abroad, this can add up to hundreds every month.
Working with an account that understands global e-commerce is the best way to ensure you’re not unnecessarily losing money here. They can look for patterns in your statements, flag charges, adjust payment settings, or recommend providers based on your audience’s purchasing habits.
Subscription and App Overload
The software-as-a-service subscription payment model is convenient for small businesses to get quick and affordable access to professional tools. However, many store owners sign up for more than they need. Shopify has thousands of apps. If you get carried away, you can end up paying for some you don’t use, so it’s important to stay on top of your subscriptions.
Do a regular app audit, ideally with your accountant’s assistance. They can highlight what’s worth keeping and what you can do away with. Once you look into the tools you’re automatically paying for every month, you might be surprised by what you find.
Mixing Personal and Business Finances
One of the most common mistakes for Shopify merchants is blurring the lines between personal and business finances. When you’re just starting out, you probably didn’t set up a business bank account straight away. Then, you might forget to use the company card when buying packaging supplies, or accidentally use the business PayPal to book a weekend getaway. This happens all the time, especially for new business owners. However, when it comes time to do your taxes, this can lead to serious confusion, not to mention potential trouble with the IRS, HMRC, or another authority.
A good Shopify accountant can help you untangle transactions and move forward with a clean, well-organized system. They’ll guide you to set up a dedicated business bank account and credit card. An account will also use smart tools like Xero or QuickBooks to effectively track and manage your spending. They can also ensure your receipts are logged correctly, even if it’s a few dollars for a coffee or a subscription upgrade. All of this contributes to your business being more legitimate, compliant, and profitable.
Not Using Financial Forecasting
If you’re not using cash flow and financial forecasting tools, you’re missing out on valuable insights. It’s normal to get caught up in day-to-day operations and metrics like managing orders, stock levels, and returns, but what about next month, next quarter, or even next year? Without a clear plan and a picture of your future cash flow, you could run into problems. For instance, you need money set aside for things like paid campaigns, bulk stock orders, and tax bills. More often than not, these business costs don’t line up with Shopify payouts, so you need to think ahead.
Shopify accountants have financial forecasting skills to help you zoom out and prepare for the future. With their guidance, you can predict month-by-month income and expenses based on real sales data. They’ll also help you plan for seasonal dips or spikes, so you’re not blindsided by the unstable income many store owners struggle with. An accountant knows what to expect from things like VAT, corporation tax, or self-assessment. This way, they ensure you have the right amount set aside to cover these costs. Once you have control of this, you can enter the phase of strategic, intentional growth, rather than accidental.
Endnote
While none of these issues may seem significant on their own, together, they can quietly drain your profits. Fortunately, there are ways to fix each one of them. Smart store owners work with Shopify accountants with niche industry expertise. They can plug leaks, optimize finances, and keep things running efficiently. The sooner you find a professional who understands your business, the easier you’ll find it to scale sustainably, grow profits, and provide a better service for your customers.
Author Bio
Lois O’Rourke is a Cyprus-based digital marketer and copywriter with 6+ years’ experience in e-commerce content, CRO, and creative strategy. Her latest project is Eat Travel Love, a blog connecting the digital nomad lifestyle and vegan philosophy. Learn more at eatplantstravelfar.com.
