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Managing Finances on Shopify: Key Insights for Running Your Shopify Store

Updated: 2 days ago

Chances are, as a creative entrepreneur launching your eCommerce store, tackling bookkeeping probably wasn't your initial excitement.

While crucial for any business's success, bookkeeping often proves daunting for many entrepreneurs. Moreover, the intricacies of eCommerce, such as multi-province sales and inventory management, underscore the necessity of being adequately prepared to avoid unforeseen challenges.

 

Here, we'll outline four typical challenges you may face while operating a Shopify store and provide strategies for overcoming them.


Bookkeeping for Shopify

 

Issue# 1: Documenting Transactions

 

Challenge: Each revenue transaction carries the risk of errors, underscoring the importance of accurate and thorough recording and reconciliation processes.

 

With each sale comes a credit card transaction, introducing reconciliation complexities since cash often arrives several days post-transaction. Moreover, the received cash amount may not align with the total transaction due to processing fees. Additionally, if you engage in cross-border sales, foreign exchange factors into the equation.

 

Resolution: Fortunately, numerous excellent platforms are tailored to aid in revenue reconciliation specifically for Shopify.

 

Applications such as A2X or Entriwise consolidate transactions, eliminating the need for individual entries for each sale in your accounting system. These tools streamline the reconciliation process by aggregating revenue data, segregating fees, and enhancing efficiency and accuracy. Additionally, they facilitate the generation of accrual-based statements.

 

Issue# 2: Revenue Recognition

 

Challenge: Discrepancies arise between the timing of cash receipt and the actual sale, complicating the process of generating accurate monthly reports.

 

Given that the cash receipt date doesn't align with the transaction date, recording revenue isn't as straightforward as merely tracking it upon cash arrival in your bank account.

 

Resolution: Two distinct methods exist for retrieving sales data for reporting purposes.

 

1. Utilize a third-party application to retrieve sales data, which can be customized to gather information for a designated timeframe, such as monthly intervals.

2. Utilize Shopify's Sales Report, accessible through Analytics > Reports > Finances > Finances Summary.

 

By employing this approach, input revenue, discounts, etc., based on the sales report into QuickBooks Online as a journal entry. Initially, aggregate all cash receipts from various origins into a clearing account. Subsequently, allocate the cash from the clearing accounts to this revenue.

 

 Issue# 3: Monitoring Expenses

 

Challenge: Managing numerous expenses can prove difficult, particularly in keeping track of all associated transaction documents.

 

Whether it's managing supplier payments or staying organized with SaaS tools, maintaining oversight of the multitude of receipts and expenses vital for your store's operation can be challenging. Moreover, it's essential to securely store your receipts and invoices in preparation for potential audits.

 

Resolution: Utilize a tool such as Dext Prepare to monitor expenses and store your documentation.

 

Here at Bluemount, we highly recommend Dext Prepare for its capability to track receipts and facilitate a transition to a paperless operational environment.

 

Their mobile application simplifies the process for users to capture a photo of receipts or invoices, while their OCR technology automatically extracts information from the image and archives a copy in the cloud. This not only saves users time on manual data entry but also enhances the efficiency of their document storage procedures.

 

Employees can submit their expenses, enabling you to promptly review all expenditures in real-time and monitor your budget closely. By having the ability to track expenses in real-time, you enhance your readiness for unexpected audits and can explore avenues for expense reduction, such as leveraging supplier discounts, bulk ordering, or pre-ordering.

 

Issue# 4: Inventory Tracking

 

Challenge: Manual inventory tracking can pose difficulties in maintaining accurate records.

 

Maintaining inventory records as assets necessitates continual updates as inventory enters and exits the system.

 

Resolution: Identify the appropriate inventory tracking method tailored to your business size.

 

For smaller shops, adopting the periodic method may be preferable. Here, you purchase products, add them to your balance sheet as assets, and periodically conduct inventory counts to record inventory sold or cost of sales.

 

As your business expands, accurate tracking of inventory becomes imperative for precise cost of sales calculations. You might ponder: When should I initiate inventory tracking?

 

That's an excellent question, and the answer truly varies. Typically, we observe businesses beginning to consider this around the $1.5-$2 million revenue mark. However, it also hinges on the complexity of your inventory and the specific metrics you aim to evaluate.

 

If you're manufacturing your own products, this process can pose challenges. In such instances, Entriwise offers a viable solution, although opting for QuickBooks Desktop is necessary if you pursue this route.

 

An alternative approach is to utilize inventory management software such as Trade Gecko or Dear Inventory. However, it's important to note that these systems require significant investment and are not suitable for those seeking simple solutions.

 

Executing the Plan

 

Now that you've familiarized yourself with the common challenges of Shopify store bookkeeping, it's time to implement some of these tips.

 

If bookkeeping isn't your forte and you prefer to delegate this task, you're in luck. At Bluemount, we provide bookkeeping tailored to eCommerce businesses of all scales. Get in touch to discover how we can assist you further.

 

How We Choose and Assess Our Recommended Software

 

We extensively research and evaluate the applications integrated into our standard workflow for client bookkeeping services. After establishing criteria for software evaluation and conducting thorough research on the application, we proceed to test it, identifying its strengths and weaknesses. We engage with the application for a minimum of several weeks before determining its suitability for recommendation to our audience. Throughout our assessment, we utilize the software according to its intended purposes. For an in-depth overview of our software selection and evaluation process, please refer to the detailed explanation provided.

 

Bluemount does not receive any form of compensation or consideration from software publishers for showcasing their software in our blog articles.

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How We Choose Bookkeeping Software (and Related Tools)

We exclusively showcase and endorse software utilized in our routine bookkeeping, accounting, and payroll tasks. Let me clarify, Bluemount neither receives nor seeks compensation from software develop

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