Accounting helps you keep an eye on your finances and make sure that your decisions are based on the financial status of your company. Accounting is already challenging as it is, but no matter how complicated, you must try to learn it. You know that the task is essential for the success of your venture.
Part of learning accounting is also being aware of the challenges you may face. Knowing the roadblocks early will help you avoid them or be prepared in case you face them. We’ll also give you some software suggestions to help solve your problems.
Shopify Accounting Challenges
Let's go straight to the most complicated part, even more complex than learning accounting itself—the problems you’ll face. Note that these problems are common, so your chances of experiencing them are high. Yet, knowing them will lessen the fear and let you prepare ahead of time.
Errors, Automation, and Lost Documents
Individuals who manually input details from physical receipts and documents may commit mistakes. Worse, because the documents are hard copies, they easily get lost or destroyed. The problem of errors in the book can be rooted in a manual accounting system through the use of Excel sheets.
Lack of automation also means several Excel sheets containing various financial information about your business are collated. To put all details in one sheet, a rigorous process of adding formulas and rules occurs where human error may happen. This file may also be corrupted and unrecoverable because it is saved on one single computer.
Inventory Tracking and Management
Shopify has a built-in inventory management system that you can utilize to ensure that your products are in stock, that you have visibility on storage costs, and that you can optimize your fulfillment.
Although Shopify provides this valuable information, you can only make the most of it if you integrate it into your main accounting system. The integration lets you see how your Shopify inventory affects your business operations.
You can extract the data and collate it with your books on an Excel sheet. But again, this process is more error-prone than integrating Shopify inventory data into the accounting software you invested in.
Sales Tax Tracking
As an ecommerce seller, you need to study sales taxes. When applicable, you need to charge your customers with it as they check out. Shopify helps sellers like you by setting the sales tax and including it in the details customers see when they checkout. However, the platform does not collect nor remit these taxes. Those accounting tasks will be yours to handle.
It is a common mistake not to invest in accounting or tax software to help you with the computation, collection, and remittance. Doing it alone can increase the chances of wrong calculations and remitting the wrong tax amount.
Failure to get payment from customers on time or the inability to pay suppliers right away affects your cash flow. It is even more challenging when you are doing cash-based accounting, as you won’t get a complete view of your finances. You may spend more than you should, not knowing that there are pending costs you still need to pay. You may also become too thrifty, holding off on investing because some income is not recorded yet.
The root cause is not using accrual accounting. With manual accounting, you don’t get invoicing features that automate payment reminders for both your customers and your business, so you avoid losing out on income.
Accounting for Shopify: Doing It Right
The advantage of knowing the challenges you’ll face when doing your Shopify accounting is that you’ll have the chance to do it right. Aside from keeping in mind the problems you might face above, here are more tips on ensuring your Shopify accounting is done correctly.
Utilize Accounting Software for Shopify
The first correct step you can do for your Shopify business is to invest in accounting software. The software will allow you to track income and expenses. You won’t worry about tax season when you have this data.
You can also integrate the data Shopify provides in this central accounting tool to have all your business’s financial data in one place. You’ll get many solutions from software, like accrual accounting, invoicing, bank reconciliation, different payment gateways, and more! All of which are meant to automate your processes and avoid human errors.
Use Shopify-Available Accounting Tools
Shopify also provides inventory and sales tax data. Pick an accounting software compatible with Shopify to integrate the available information in the platform into your accounting tool. When integrated, the data from Shopify automatically goes into your accounting tool—categorized and organized. This process skips the hassle of using Excel sheets and zeroes out manual input. Hence, your data will always be updated and accurate.
Regularly Check Your Books
Though you won’t have to rely on manual input, to ensure that your data is accurate, make it a habit to check your books regularly. Add this task to your daily routine, so the details you need to check are manageable. You can also address discrepancies and fraud right away when you diligently check.
Generate Reports for Your Ecommerce Business
Finally, make the most of your accounting software by generating the following reports:
- Financial statements
- Bank statements
- Profit and loss statements
- Accounts receivables and payables
Make sure you always look at the numbers before making any decision about your Shopify store. Whether it’s about your purchasing arrangements for your inventory, or if you’ll scale your business, the financial data from an accounting report should be your guide. It will help you plan how to spend your profit wisely.
Your Accounting Software Options
You might have realized that many of the challenges mentioned above happen because of the need for more reliable software. Meanwhile, getting your Shopify accounting right means having an accounting tool to track and organize your business finances. You’re right on both counts! With that, here are some accounting software that integrates with Shopify to invest in.
Use QuickBooks so that you can handle your bookkeeping correctly. After signing up for a plan, QuickBooks will let you partner with a bookkeeper who will backtrack transactions if need be. From then on, your books will constantly be updated.
You can track your income and expenses, and these details get organized accordingly in the books. You won’t have any issues with manual data input as you can take pictures of physical receipts and documents to be included in your data pool.
The tool also handles bank connections, integrations to various payment gateways, invoicing, and payroll management.
Accrual accounting ensures you see income and expenses in a certain period instead of looking at your present-day finances. You’ll get this feature with Xero. You do not have to manually input financial data, as the software is an automation champion. You can send invoices with the “Pay Now” button to receive payments immediately. You can also make these invoices recurring for regular transactions.
Connect your bank accounts, credit card, and other payment gateways to the software, so all transactions in these channels are recorded. Have visibility of your Shopify inventory on Xero by integrating the data there. With complete financial data, tax season, and data reporting will be easier for you.
Sage50 cloud, previously known as Peachtree, is a reliable Shopify accounting tool for many reasons. To begin with, the tool handles your business accounting needs, from tracking your income and expenses and sending invoices, to monitoring time and projects.
This software is a step ahead by ensuring that even the human resource needs of a company are handled. If you grow your Shopify store with a bigger team, you can utilize this feature. Sage50 cloud also has construction and real estate-specific accounting features.
Shopify Accounting Software Assistance From Unloop Experts
We hope that what you’ve read has prepared you to face any Shopify accounting challenges head-on. You can use the tips on getting accounting right to ensure you’ll overcome challenges when facing them. And, of course, you can keep problems at bay by investing in an accounting software as soon as you launch your Shopify store.
If you need assistance in bookkeeping and accounting, or in using the tool you choose to invest in, know that assistance from experts is always available. We at Unloop can be your partner. We use the latest and most credible accounting software to keep our clients' books organized. We’ll do the same for you.
Give us a call now and let’s discuss our offers.