The Importance of Accurate Bookkeeping for Shopify Businesses

The Importance of Accurate Bookkeeping for Shopify Businesses

Bookkeeping is an essential accounting process for ecommerce businesses, involving the structuring of accounting software and the chart of accounts, as well as recording business activity to provide a clear view of the business' profitability, cash position, and overall wealth.

There are two recommended accounting platforms for small to medium ecommerce sellers: Quickbooks Online (QBO) and Xero. These platforms use the double entry methodology, facilitating financial data reconciliation for independent financial reports, such as bank statements.

The chart of accounts encompasses Assets, Liabilities, and Equity in the Balance Sheet, which reflects the business' wealth position, while Revenues and Expenses are reported in the Profit and Loss Statement, tracking profitability by financial year.

Accurate bookkeeping benefits businesses by facilitating past learnings and better future decisions. It also aids in the reporting required for income taxes, sales taxes, etc., and involves reconciling all transactions, recording journal entries, tax filings, and generating financial reports.

When selling on an ecommerce platform like Shopify, it's crucial that your ecommerce accountant understands how revenue and fees are paid, guides you in permission levels, and comprehends the reports available from Shopify.

Recording income received from Shopify into your bank account and pulling a payouts report each month are vital steps. Additionally, the recording of Cost of Goods Sold (COGS) and automated integration with A2X simplifies the process of managing Shopify books.

Shopify pays out on a "daily" basis, and managing sales on a cash basis is common. Access to accounts for merchant processors, like Paypal and Stripe, is also necessary for properly recording fees as COS expenses.

If you require help setting up Shopify accounting, bookskeep's SmartStart program can assist in setting up your accounting system, integrating bank and credit card accounts, and training you to manage your books. Alternatively, the SmartBooks program offers a done-for-you bookkeeping service.

For businesses looking to make data-driven decisions and increase profitability, accurate bookkeeping is essential. Engaging an experienced Shopify accountant can help streamline financial processes and provide valuable insights for future growth and financial planning.