Shopify Bookkeeping Insights to Aid Ecommerce Entrepreneurs

Earning profits is the primary responsibility of a store proprietor. You would prefer to allocate less time to spreadsheets. At the same time, you cannot ignore accounting because it is a vital part of running any business smoothly. The solution is to use tools like Shopify to facilitate bookkeeping.

Attention eCommerce Entrepreneurs!

Are spreadsheets killing your online store business? The process is going to be simplified for you by us. Shopify bookkeeping can be the ultimate fix to streamline your accounting and increase profits.

Of course, you want to make money as an eCommerce entrepreneur. But spending hours and days working with spreadsheets is not the way. It is time for a transformation. Shopify provides more than just an online store. You meet a friend who simplifies the bookkeeping process.

Shopify has a 10.9% market share in the United States and is ranked third among all eCommerce software options. In the whirlwind, online retail industry where every click has potential for a sale and interactions with customers can change fates!

As we head deeper into 2024, Shopify store owners will need to follow the best bookkeeping practices. It acts as the catalyst for strategic decisions, in addition to ensuring all transactions and tax obligations are met accordingly.

Keeping up a strategic distance from disarray. The more you know about how to work things related to ecommerce bookkeeping for Shopify, the better your odds of keeping that miscommunication under control (and those accounting costs down).

What Bookkeeping Means for a Shopify eCommerce Store

Around 1.7 million organizations worldwide use Shopify. Therefore, managing a shop or even Shopify shops isn’t feasible without proper financial documentation. Considering that, we will dig below the surface and explore a few key reasons why bookkeeping is crucial to the success of your Shopify eCommerce stores.

Bookkeeping and Accounting Importance in E-Commerce

Monitor your sales, expenses, and profit.

To help Shopify store owners monitor their sales, expenses, and profits with ease, effective accounting is significant. This allows owners to keep an honest tally of every transaction and get a good sense of their revenue streams, cost of products sold, marketing expenses (and requests), as well as the myriad of other operating costs they incur.

At present, business owners can learn about the items and services that are making a profit by inspecting sales information as well as taking note of and providing extra concentration on those areas. Supporting this, expense tracking helps in identifying key areas where cost-cutting can take place leading to increased profits. In the end, having a bookkeeper allows owners to know their financial performance and make real-time data-driven decisions to optimize operations.

Recognizing Patterns and Making Wise Business Choices

Bringing together all of your financial data (in this case accounting) can help a Shopify store extrapolate trends and patterns. This data allows owners to analyze seasonal changes, market trends, and customer behaviour.

Store owners can use these bookkeeping records to figure out which products sell in what month, so they keep their inventory and marketing strategies on lock because the knowledge of demand per period is highly valuable. Product offerings can be optimized and customer satisfaction increased too, by monitoring consumer preferences.

With easy access to all of their financial data, Shopify store owners can use this information as dyed-in-the-wool business intuition. The expansion of product lines, targeting new markets, or tweaking pricing strategies all require intense bookkeeping as the basic foundation for strategic planning and growth.

Financial Records: Tax Compliance and Reporting

A good number of Shopify stores do meticulous bookkeeping for the simple reason that they are required to comply with tax regulations, and reporting requires them to maintain thorough records. Store owners have kept accurate financial records, so they can quickly share the necessary information with their accountants or tax professionals at this time of year.

All your income, expenses, and even deductions can be tracked correctly with effective Shopify accounting. It ensures that all relevant details are in one place, making tax return computation and submission easier for users. Moreover, with accurate recordkeeping, the store owner can also be at peace and not worry about being penalized or making a mistake for an audit.

Ensuring a positive cash flow

Every business, whether Shopify stores or otherwise, will face the question of sustainability and growth—how you manage cash flow is one answer. By ensuring everything income and expenditure is recorded correctly through proper bookkeeping, this allows proprietary to see what exactly cash flow is in their business.

By having a Shopify Accountant onboard, owners can identify possible cash flow shortfalls to plan for lean periods or make informed decisions relating to inventory management and operational expenses when keeping an eye on money inflows as well as outflows. As a result, effective cash flow management helps businesses to either boost finances for further growth or navigate times of volatility to drive maximum financial solvency.

How to do Shopify Business Bookkeeping in 3 Different Ways

Strong bookkeeping is crucial for any Shopify business. By following best practices or hiring Shopify accountants, you should be able to optimise your financial management process and get insights into the performance of your store. In this document, write about the main steps for proper bookkeeping on Shopify.

Creating separate business accounts

Dedicated business accounts are crucial for your Shopify store to avoid mixing personal and account finances, as doing so can lead to severe headaches with managing tedious records of finances later on! He even had a business checking account and corporate credit card. When you mix your personal and business expenses, maintaining clean books becomes more difficult, mistakes are made in accounting or tax authority requirements may be breached.

Talk to a financial adviser about organizing your business accounts. They can point you in the right direction and help you choose which banking options for your Shopify business.

Monitoring sales and expenses

To keep the books for Shopify businesses effectively, you need to track your sales and expenses accurately. Use software such as QuickBooks or Xero to track all deliveries and dispatches.

Make sure your accounting software knows all Shopify orders by product name, price, and customer information (note when they were purchased) for sales. To avoid the manual error, do it by automating so that you can save time.

This also goes for your expenditures, which might include amounts spent on advertising as well as shipping and handling fees—don’t forget about the price of packaging supplies or software subscriptions related to Shopify too. Collect bills, receipts, or other records to prove these costs.

So, if the vendors are not invoicing for all the goods or services that have been paid by clients, the reconciliation of fees and payments should be analyzed with same-level accounting.

Whoops, but to have an accurate financial record, I also needed the pay stubs and fees reconciled. Reconcile your Shopify payments with how they hit the bank to verify that everything is matching.

Make sure your bookkeeping system records transaction fees correctly (i.e., Shopify subscription charges and payment gateway/marketing automation software). Reconciliations of payments and fees help you to spot discrepancies between figures, helping you process the most accurate data.

Inventory and COGS management are everything.

Companies selling physical products need to take the step of organizing their inventory as well as taking control over surgical aspects related to the cost of goods sold (COGS).

Monitor how much you are spending to procure or produce your stock and be certain that these costs find their way into the products sold during a specific period. This will help with the accurate tracking of your COGS, enabling you to gain a clearer picture of your gross profit margins.

Creating financial statements

Generating financial reports periodically is a must to know how good or bad your Shopify business is doing financially. Use your accounting software to get important reports like balance sheets, profit and loss statements, and cash flow statements.

These reports give you a snapshot of your revenue, expenses, assets, and liabilities so that you can make informed business decisions in the future. Also, analyzing these reports allows you to track your financial targets and figure out where things could improve or look for potential problems that need to be addressed.

Why do you need accounting software in a Shopify business?

When it comes to managing the financial aspects of your Shopify business, using accounting software can be a game-changer. To work everything on accounting software with your Shopify operations, you will need to be successful.

Seamless integration with the Shopify platform

One of the biggest benefits of using accounting software for your Shopify business is that it is seamlessly integrated between both platforms. Integration with specialized accounting software, e.g., QuickBooks Online or Xero, is something Shopify does pretty often straight off our website. The barrier to entry is also very low, because if you have an eCommerce shop and just 10 minutes, then that should be all it takes to get your data connected between the online store and accounting system.

Integrating your Shopify store with accounting software can eliminate the need for manual entry and ensure that your financial records are always up-to-date. With the two working systems seamlessly, you can get an exhaustive view of what your business is doing financially, and it reduces errors, saving you time talking to a bookkeeper.

Less Manual Errors and More automated Data Entry

It saves you time and eliminates the possibility of entering data from your Shopify store into spreadsheets or using antique accounting methods in error. The accounting module of the Shopify software pulls transaction data straight from your platform to remove human intervention, make it smoother in operation, and prevent manual errors.

Real-time, automated data entry captures your sales and other financial transactions (both income and expense-related) and refunds automatically. This will leave you to focus on growing your Shopify business because this automation saves time and increases bookkeeping accuracy.

Providing financial reports in real-time

You need business analytics for your Shopify store to understand how well your online shop is performing. With accounting software, you can generate real-time financial reports to get an immediate picture of your top-line and bottom-line, as well as profit margins, expense levels, and cash flow trends.

Simply type in a few keys and you can get all the reports—balance sheet, profit/loss statement, cash flow statement, etc. These reports give you a quick snapshot of the fiscal health of your business, make trends easier to spot, and let you track how well performances stick with objectives.

Promotion of tax preparation and compliance

Tax compliance for Shopify businesses is a lengthy and detailed process. Because accounting software can do the math that will help you remember these charges and produce experiences to submit for tax season.

With accounting software, you can easily store your expenses in categories, track sales tax, and run reports to help you file taxes specific to the needs of your business. It helps you follow your tax compliance duties on time and properly, helps reduce errors, and saves costs for doing taxes.

If we want to use Shopify Books, which will be the useful vantage of a virtual bookkeeping assistant?

As a Shopify owner, you’re often tenuously balancing many things, and bookkeeping usually isn’t quick to do right, so it just sits on the back burner until it’s too late. Fortunately, this is where a virtual accounting assistant can come in handy. In 2021, over 67% of business owners employed a virtual assistant. We shall dig deep into how an idea like a virtual bookkeeping assistant could transform the way you go through your Shopify bookkeeping and help in managing your finances all around.

Generating compass reports and insights

With a bookkeeper, you can have all-encompassing financial reports designed specifically with your business in mind. You also have access to schedules of your financials, including profit and loss statements, balance accounts, and cash flow statements. Our reports provide you with data to analyze your business and grow it or make decisions based on the financial status of your Shopify store.

Help in Filing and Tax Planning

A Shopify business calls for tax compliance. Besides overhauling your invoices, this is where a VA who offers tax preparation as well as compliance support—so you can spend time ensuring all data filed by uploading to the HMRC website/cloud accounts tends to have it (and legislation is adhered to in case there will be any ramifications). In addition to that, they can ensure your books and records are up-to-date, and they also help you reduce the chance of errors or missed deadlines since things would be organized properly, making it easier for someone else at tax time.

Providing ongoing bookkeeping assistance

Virtual bookkeeping assistant to help you with ongoing basic Shopify bookkeeping. They are here to help with any questions or issues that come up when it comes to bookkeeping. This ongoing support ensures your books are in order and that your accounting is handled correctly.

In conclusion,

With the below-mentioned steps in place, even Shopify eCommerce store owners can manage their financial inputs and outputs easily. Velan can provide virtual bookkeepers to help you streamline your tasks if you need versatile online bookkeeping services. Our virtual assistants are sure to help you streamline your business and keep an eye on the books.